HHSC proposes Medicaid provider rate cut
of 1-2 percent starting Sept. 2010

posted 02.18.10

Physicians who treat Medicaid patients could see a 1 to 2 percent cut in their Medicaid payments if the state adopts recommendations submitted by the Texas Health and Human Services Commission this week. HHSC’s proposal comes in response to a January request by the Governor, Lieutenant Governor, and House Speaker for all state agencies to examine their spending and present a 5 percent budget reduction for 2010-2011.

The proposal reduces payment for most children’s medical services by 1 percent, adult services by 2 percent, and Medicaid managed care services by more than 2 percent, totaling $98.5 million in savings, or almost one-third of the HHS budget reduction plan.

The scrutiny on state spending stems from a decline in sales tax, which accounts for more than half of all state revenue. In the first four months of the current fiscal year, state sales tax revenue was down 12.9 percent from last year. Looking ahead, state leaders project that Texas could face between a $12-billion and a $17-billion shortfall going into the 82nd Legislative Session. Even more dire, HHS Executive Commissioner Tom Suehs told members of the Texas Hospital Association this week that the state could face an $8- to $10-billion shortfall to maintain current services in the Medicaid program for the next biennium, according to a story in political news magazine Quorum Report.

The last time the state faced a deficit of this size, Medicaid provider rates were cut significantly. They remained stagnant for years until the 79th Legislature in 2007 boosted rates back to pre-2003 levels. Even with this action, Medicaid payment rates still lag far beneath the cost of providing care to Medicaid patients, and experts fear that further cuts may drive more physicians away from the program. Survey data from the Texas Medical Association showed that in 2000, 67 percent of Texas physicians accepted new Medicaid patients, but in 2006, that number dropped to 38 percent. Following the rate increases implemented in 2007, the number of physicians accepting new Medicaid patients rose to 42 percent in 2008.

At a hearing on Feb. 11, HHSC leadership presented their 5 percent budget reduction plan, which would cut $304 million in general revenue spending throughout the four agencies that make up the commission: the Department of Assistive and Rehabilitative Services, the Department of Family and Protective Services, the Department of State Health Services, and the Health and Human Services Commission.

Of the four agencies, the Department of State Health Services took the biggest hit because of its size and because of a list of exemptions that took 72 percent of the HHS budget off the table. Exempted from cuts were benefits or eligibility for Medicaid, the Children’s Health Insurance Program, and foster care programs, and reductions in eligibility staffing. Of the remaining funds available, HHSC leaders began by trimming administrative costs from travel budgets, equipment and furniture, and salaries from unfilled staff positions and reduced salaries for new hires.

Some especially difficult cuts affect 285 children with special health care needs who would remain on the waiting list for services in 2011, a savings of approximately $3.5 million. Also, the proposal eliminates 200 beds at four mental health hospitals, which would save $27 million at the expense of 1,400 fewer patients served this biennium.

Commissioner Suehs stressed that these decisions were not made lightly, and that the plan is a draft that outlines options for the Legislative Budget Board’s consideration. Now that state agencies have submitted their budget reduction proposals, the LBB will make a final decision within the next few weeks on which cuts will take effect Sept. 1, 2010.