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F I S C A L I M P A C T R E P O R T

SPONSOR Jennings

ORIGINAL DATE

LAST UPDATED

02/27/07

HB

SHORT TITLE Medicare Part B Rate Reimbursement

SB 985

ANALYST Weber

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

$4,627.1 $2,155.5 $6,782.6 Recurring General

Fund

$11,472.9 $5,344.5 $16,817.4 Recurring Federal

Medicaid

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

SUMMARY

Synopsis of Bill

Senate Bill 985 requires the Human Services Department (HSD) to reimburse for physicians,

dentists, optometrists, podiatrists and psychologists at rates no less than the payment rate for

Medicare Part B services.

Additionally, HSD must adjust the rate at the beginning of each state fiscal year beginning on

July 1, 2008, by an annual percentage, taking into consideration factors that affect the cost of

providing service, including increases in medical liability premiums and office overhead. In

addition, all reimbursements shall include gross receipts tax.

The bill would also eliminate language that allows Medicaid managed care organizations the

flexibility to negotiate rates paid to providers.

FISCAL IMPLICATIONS

There would be a substantial fiscal impact as noted in the ESTIMATED ADDITIONAL

OPERATING BUDGET IMPACT

above.

Senate Bill 985 – Page

2

SIGNIFICANT ISSUES

HSD analysis indicates that to raise Medicaid payments to Medicare rates for the first year would

require a total of approximately $16,100,000 ($4,627,140 in state general fund and $11,472,860

in federal matching funds.)

If the annual increase, based on provider increased costs, is 5% in FY08, it would increase

Medicaid expenditures approximately $7.5 million more than in the first year ($2,155,500 in

state general fund and $5,344,500 in federal matching funds).

Medicare rates have been very unpredictable, with the federal government often blocking

scheduled cutbacks or increases.

OTHER SUBSTANTIVE ISSUES

The presence of a statutory annual increase could hamper the Legislature’s ability to develop

appropriation priorities, particularly in lean revenue years.

POSSIBLE QUESTIONS

Why is only this limited group of providers offered the increase and mandated annual increase.

MW/nt