OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sSB-1

AN ACT CONCERNING THE HEALTHFIRST CONNECTICUT INITIATIVE.

OFA Fiscal Note

State Impact: See below

Municipal Impact: See below

Explanation

This bill makes various changes to the Department of Social Services' (DSS) health care programs. The quantifiable costs of these changes are $1,147,175,000 in FY08 and $1,216,335,000 in FY09. The majority of these costs would be reimbursable at varying levels by the federal government, as detailed below.

Section 1 requires DSS to amend the state Medicaid plan to include foreign language interpreting services. The cost of this change will be dependent upon the structure of the service included in the state plan amendment. Estimates of providing this service have ranged up to $4,700,000 annually for face to face interpreters. These costs would be reimbursed 50% by the federal government under the Medicaid program.

Section 2 expands eligibility for parents of children enrolled in the HUSKY A program from 150% of the federal poverty level (FPL) to 185% FPL. The Office of Fiscal Analysis (OFA) estimates that this will add an additional 9,700 clients to the program when fully annualized, at a cost of $23,500,000 in FY08 and $31,300,000 in FY09. This estimate includes the rate increases implemented in section 12 of the bill. These costs would be reimbursed 50% by the federal government under the Medicaid program.

Section 2 also requires DSS to increase the Medicaid medically needy income limit to 185% FPL. This change is expected increase Medicaid eligibility by 43,200 individuals, at a cost of $214,700,000 in FY08 and $227,500,000 in FY09. These costs would be reimbursed 50% by the federal government under the Medicaid program.

Section 2 also eliminates certain cost sharing requirements for parents in HUSKY A. As this policy was never implemented, this provision has no fiscal impact.

Section 3 of the bill requires DSS to increase outreach and maximize enrollment of eligible children and adults in the HUSKY programs. Increased outreach will result in increased administrative costs, the extent of which is dependent upon the outreach mechanisms used. Should such outreach efforts succeed, additional enrollment in these programs would result in additional state costs.

Section 4 requires boards of education to provide HUSKY outreach materials to parents and guardians of students at the beginning of each school year. There is no increased cost for these boards as the information would be disseminated through the existing practices for school notices. DSS will incur administrative costs to prepare the materials for the approximately 562,000 students in 1,000 separate schools. Should such outreach efforts succeed, additional enrollment in these programs would result in additional state costs.

Section 5 requires DSS, in consultation with the Department of Public Health, to establish and implement a multi-year, statewide public information campaign to promote HUSKY enrollment. DSS must solicit bids from private organizations to design and operate the campaign. This will result in significant increased costs to DSS, the extent of which will depend upon the scope and design of the campaign. Should such outreach efforts succeed, additional enrollment in these programs would result in additional state costs.

Sections 6 and 7 require DSS to establish a centralized unit responsible for processing all HUSKY (both A and B) applications. This change is expected to streamline the application processes for HUSKY A and HUSKY B, and will provide eligible clients with more continuous medical coverage. DSS will incur additional administrative costs to centralize these processes, but may also incur offsetting administrative savings through a reduction in unnecessary reapplications.

Sections 7 and 27 also re-establish the continuous eligibility policy for children in the HUSKY plan. Assuming the rate increases included in section 12, this change is estimated to cost $2,800,000 annually. These costs would be reimbursed 50% by the federal government under the Medicaid program. The bill also establishes a continuous eligibility policy for adults in the HUSKY programs. This change is estimated to cost approximately $925,000 annually. Based on current federal policy, it does not appear that these funds will be federally reimbursable.

Section 8 increases eligibility for the State Administered General Assistance (SAGA) to 100% FPL. OFA estimates that this increase will serve an additional 22,000 individuals, at a cost to DSS of $105,000,000 in FY08 and $111,300,000 in FY09. Should the General Assistance Managed Care program under the Department of Mental Health and Addiction Services receive a proportional increase, the total cost of this expansion would be $160,100,000 in FY08 and $169,700,000 in FY09. These estimates assume that the current service structure and benefit package in the SAGA program remains in place.

This section further directs DSS to seek a federal waiver to enroll SAGA clients within the Medicaid program. Currently, the state receives federal reimbursement for a portion of SAGA hospital costs under the Disproportionate Share Hospital program. A waiver enrolling SAGA clients into Medicaid would enable the state to receive a 50% reimbursement on all SAGA medical costs. The impact of this would depend upon the conditions of the federal waiver. Should the state be able to enroll all SAGA clients in Medicaid while retaining the current program structure and benefits, the additional federal funds would basically offset the SAGA expansion costs noted above. However, as the Medicaid benefits package is richer than the SAGA package, and is provided on a full entitlement basis, the federal government, if they choose to accept such a waiver, may require the state to make significant changes to the SAGA program. Therefore, the net impact of this proposal is not known.

Sections 9 and 10 expand Medicaid coverage for pregnant women from 185% FPL to 300% FPL, and require DSS to seek an SCHIP waiver for this expanded population. OFA estimates that this expansion would cost $5,000,000 in FY08 and $5,300,000 in FY09, assuming the rate increases implemented in section 12. These costs would be eligible for 50% federal reimbursement (65% if the federal government approvers the SCHIP waiver).

Sections 11 and 12 increase Medicaid rates. Section 12 specifies that DSS shall reimburse providers of medical services under the Medicaid program at the rate that is paid under the Medicare program. Although the bill does not specify, it is assumed that rates for both HUSKY and the Medicaid fee-for-service program will be increased.

It should first be noted that DSS does not directly reimburse medical providers under the HUSKY programs. The Department pays a capitated rate to managed care organizations (MCO's), who then reimburse medical providers in their systems. Secondly, given the disparate populations served (HUSKY is predominantly women and children, while Medicare serves the elderly and disabled), there may not be Medicare rates that correspond with HUSKY rates. Also, rates paid by the MCO's to providers in their system are not available as they are considered proprietary.

Assuming that DSS was to implement the provisions of this section by increasing the rates under Medicaid fee-for-service, the behavioral health partnership and the capitated rates paid to the HUSKY MCO's, OFA estimates that this would cost approximately $711,000,000 in FY08 and $753,700,000 in FY09. Of this increase, $326,700,000 in FY08 and $345,800,000 in FY09 is attributable to the HUSKY programs. As stated above, exact comparisons between current HUSKY rates and Medicare rates are not possible. Based on data included in the Office of Health Care Access' 2005 Annual Report on the financial status of Connecticut's hospitals, it would require a 38% Medicaid rate increase to match the hospital rates paid under the Medicare program. As reliable data does not exist for rate comparisons, OFA used this 38% rate increase as a proxy. The increases cited above would be eligible for federal reimbursement under the Medicaid and SCHIP programs, which would generate estimated General Fund revenue of $357,200,000 in FY08 and $379,100,000 in FY09.

Section 11 also requires that the reimbursement to dental providers under the HUSKY program be equal to the 70th percentile of the normal and customary fee, as defined by the National Dental Advisory Service Comprehensive Fee Report. Based on the latest such fee report, OFA estimates that this increase would cost $27,000,000 annually over the current HUSKY dental expenditures. It would represent a $20,000,000 increase over the Medicaid to Medicare rate increases calculated above. These costs would be reimbursed 50% by the federal government under the Medicaid program. The bill also requires DSS to assess access to dental services and report to the General Assembly by December 31, 2008.

The rate increases included in sections 11 and 12 of the bill may lead to increased access to services as provider may be more willing to serve HUSKY and Medicaid clients. Should this be the case, it is likely that the MCO's would seek a future increase in their capitated rates to compensate for this change. It is not known what this increased utilization may be. However, any increased utilization in either the HUSKY or Medicaid fee-for-service programs will result in significant increased state costs. For example, a 5% increased utilization for all services would result in increased costs of $118,000,000 annually.

Section 13 requires the DPH to establish an on-line license renewal system for physicians, nurses and dentists by 10/1/07. The agency will incur an FY 08 cost of approximately $3,700,000 to implement an on-line license system by this date. This includes:

One-time costs of creating a platform necessary to support the new licensing system

$1,200,000

One-time costs of purchasing and customizing a web based licensure application and database system

$1,500,000

One-time consultant charges related to staff training

$724,000

Department of Information Technology (DoIT) hosting fees

$180,000

Software license/maintenance fees

$50,000

Conveyance Fees (re: processing credit card payments)

$60,000

Total – Year 1 Costs

$3,714,000

An FY 09 cost of $410,000 would be incurred, associated with ongoing DoIT hosting, license/maintenance, and conveyance fees as well as second year consultant charges ($120,000). Commencing in FY 10, costs would fall to $290,000 annually as the consultant services would no longer be required.

It should be noted that HB 7077 (the Governor's recommended FY 08 – FY 09 Biennial Budget), includes $1,170,000 in FY 09 to support costs of initiating implementation of an on-line licensure system.

Sections 14 and 15, by requiring insurance policies that cover dependent children to provide coverage until the age of 30 (regardless of educational status), will result in increased health service costs to the state as an employer beginning in FY 09. Under the bill, certain employees will maintain the more costly family coverage for longer than currently permitted. Data related to coverage of adult children to age 30 is not readily available from the Office of the State Comptroller (OSC), so a cost estimate cannot be determined at this time. To the extent that the dependent coverage required under the bill is not currently provided under a municipality's employee health insurance policy, there would be increased costs to provide it that cannot be determined.

Section 16: The Department of Public Health will incur an approximate cost of $750,000 to contract with eHealth Connecticut to develop a statewide health information technology plan. Additional indeterminate costs would be incurred to further develop and/or implement standards, protocols and/or pilot programs.

Section 17 requires DSS to inventory all disease management programs implemented under the HUSKY, SAGA and Medicaid programs. DSS must report the findings of this inventory to the General Assembly by January 1, 2008. This will result in a minor administrative cost to the agency.

Section 18: The DPH will incur a one-time cost of approximately $30,000 in FY 08 to compile an inventory of all public and private disease management programs, other than those administered by the DSS, by 1/1/08.

Section 19: It is anticipated that representatives of the DPH and DSS can participate in the activities of the panel to evaluate health insurance coverage policy alternatives within each agency's normally budgeted resources.

Section 20 of the bill would result in a cost to the Office of the Healthcare Advocate (OHA) for additional staff resources to create and maintain a website for consumer health care information. OHA would require a technical consultant to design and create the website. Costs would only be in FY 08, since existing staff would maintain the website, as needed.

Detailed costs appear in the table below:

Item:

FY 08

Consultant

$25,000

Licensing & access fees

$10,000

Total

$35,000

Since the bill requires these provisions to be implemented within available appropriations, the agency would have to redirect existing resources in order to comply.

Section 21 requires that employers allow employees to make health insurance premium payments with pre-tax dollars. As this is the current practice for the state as an employer, there is no fiscal impact.

Section 22 requires the Ad Hoc Committee to Improve Health Care Access through School Based Health Centers to meet at least quarterly, and report annually, to the Public Health and Education Committees. No cost is anticipated to result, as members are not entitled to reimbursement for expenses.

Section 23 requires any newly constructed school based health center (SBHC) to have a separate entrance, on and after 10/1/07. It is anticipated that resulting local costs, if any, will be factored into the decision making process of local education authorities or municipal officials when evaluating proposed SBHC development. Since the state does not routinely provide financial support for SBHC related capital costs, no state fiscal impact is anticipated.

Section 24 appropriates $2,500,000 to the DPH for FY 08 to expand and operate SBHC's in priority school districts and areas (federally) designated as health professional shortage areas, medically underserved areas or with a medically underserved population. A potential municipal revenue gain would ensue to the extent that eligible communities receive a portion of this funding.

Section 25 appropriates $500,000 to the DPH for FY 08 for grants to community-based health centers to provide transportation assistance to patients.

Section 26 appropriates $2,000,000 to the DPH for FY 08 for grants to community-based health centers for infrastructure improvements.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.