NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Senate Bills 431 & 401; and House Bill 641

SOURCES OF INFORMATION

LFC Files

Health Policy Commission

Public Regulation Commission

Human Services Department analysis not provided

SUMMARY

Synopsis of Bill

Senate Bill 711 amends the Medicaid Managed Care statute to require the Human Services Department to limit the increase in the cost per Medicaid recipient in Salud! contracts. The increase is not to exceed the average rate of increase in nationwide health insurance costs for the previous calendar year. The Superintendent of Insurance is responsible for calculating the increase using national indices and for notifying the Human Services Department of the rate increase for the previous year.

Significant Issues

Since the inception of the Salud! program, contract rates with Managed Care Organizations have been negotiated with little legislative input. In fact, in FY99, the Legislature appropriated sufficient general fund dollars to the Human Services Department to provide for a four percent increase in the Salud! contracts. Language was tied to the appropriation in General Appropriation Act specifying the legislative intent to limit the contract increases to four percent. Governor Johnson vetoed the language and the Human Services Department signed contract rate increases that averaged 6.7 percent. However, medical inflation for FY99 is projected to be 3.2 percent.

FISCAL IMPLICATIONS

Placing limits on contract rate increases has the potential to keep Medicaid costs down.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

Relates to HJM18 and SJM22 (Audit Medicaid Managed Care System), HB641 (Medicaid Managed Care Accountability Act), SB431 (Health Care Act), SB401 (Medicaid Reimbursement).

RLB/njw