MINUTES OF THE JOINT MEETING OF

      ASSEMBLY COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE

      AND

      SENATE COMMITTEE ON FINANCE SUBCOMMITTEE

      ON WELFARE, CHILD AND FAMILY, AND AGING SERVICES

 

      Sixty-seventh Session

      March 24, 1993

 

 

 

The joint meeting of the Assembly Committee on Ways and Means Subcommittee and the Senate Committee on Finance Subcommittee on Welfare, Child and Family, and Aging Services was called to order by Chairman Jan Evans, at 7:10 a.m., on Wednesday, March 24, 1993, in Room 352 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Meeting Agenda.  Exhibit B is the Attendance Roster.

 

 

ASSEMBLY COMMITTEE MEMBERS PRESENT:

 

      Mrs. Jan Evans, Chairman

      Mrs. Vonne Chowning

      Mr. David E. Humke

      Mr. Robert E. Price

      Ms. Sandra Tiffany

 

 

SENATE COMMITTEE MEMBERS PRESENT:

 

      Senator Raymond D. Rawson, Chairman

      Senator Bob Coffin

 

 

ASSEMBLY COMMITTEE MEMBERS ABSENT:

 

      None

 

SENATE COMMITTEE MEMBERS ABSENT:

 

      None

 

STAFF MEMBERS PRESENT:

 

      Mark Stevens, Fiscal Analyst

      Dan Miles, Fiscal Analyst

      Steve Abba, Program Analyst

 

 

NEVADA MEDICAID - PAGE 888

 

Chairman Evans welcomed Senators Rawson and Coffin.  She stated, due to the complexity of the issues to be heard, she and Senator Rawson had invited three guest panelists to participate in the hearing:  Ms. Denell Hahn, Director Clark County Social Service, Mr. Jim Miller, Chief Financial Officer, Washoe Medical Center, and Ms. May Shelton, Director, Washoe County Social Service.  She noted the hospitals and counties were very involved in decisions and activities relative to Medicaid services.

 

Chairman Evans acknowledged the efforts of the Department of Human Resources staff regarding Medicaid.  She indicated the subcommittee members were willing to work with the agency toward the goal of a successful program.  The subcommittees had taken a positive approach regarding the agency proposals.

 

Chairman Evans stated the hearing would begin with a discussion of the Medicaid budget, followed by a discussion of the provider tax and managed care.

 

Chairman Evans asked Senator Rawson if he had additional opening remarks.  Senator Rawson indicated he had nothing to add.

 

Ms. Myla Florence Administrator, Welfare Division, explained Human Resources Director Jerry Griepentrog-Carlin was unable to attend the hearing because he was in Washington, D.C., attending meetings regarding the proposed federal changes in medical programs.

 

Ms. Florence stated the Medicaid budget provided for medical services for people eligible under Title XIX of the Social Security Act, including eligibles under the Aid to Dependent Children program, Supplemental Security Income program, Medicare and several other federal programs.  Revenues were comprised of an appropriation from the General Fund, federal funding, county funding for long-term care and the provider tax (referenced as agency transfers in the Executive Budget).

 

Ms. Florence stated the agency projected a change in the provider tax revenue amounts currently appearing in the Executive Budget.  Agency transfers for fiscal year 1993-94 would be $59,400,000 rather than $58,900,000.  Agency transfers for fiscal year 1994-95 would be $61,337,000 rather than $60,837,000.  She said the agency was in the process of reconciling some budget numbers with the Department of Administration.  Those numbers would be submitted to the subcommittees once the reconciliation was completed.

 

Ms. Florence noted the federal government was considering a new formula for federal matching funds whereby federal/state participation would be a 50:50 ratio for all programs.  If the new formula was adopted, the Executive Budget would be impacted.  Proposed implementation of the new federal program was April 1994.

 

Ms. Florence referred to the maintenance budget beginning on page 889.  The first maintenance item provided for inflationary increases for non-institutional provider services.  Those increases averaged 5 percent and were based on the Consumer Price Index.

 

The second maintenance item related to demographic and caseload changes.  Cost increases were driven by fiscal agent charges, medical payments for the first and second prior years, the county indigent program and utilization review.  She noted disabled caseloads were increasing.  Increases for the Child Health Assurance Program (CHAP) were based on a projected 10 percent caseload increase.

 

Ms. Florence referred to page 891 of the maintenance budget which reflected the impact of federal mandates associated with the Medicaid program.  She explained the CHAP budget provided for mandated coverage of pregnant women and children at the rate of 133 percent of poverty for children under age 5 and at 100 percent of poverty for children over age 5 for children born after 1983.  The age group would be increased by 1 year each October through the year 2003 until all children to the age of 19 were covered.  The agency projected 16,718 eligibles in fiscal year 1993-94 and 18,389 eligibles in fiscal year 1994-95.  Additionally, the Family Support Act of 1988 required all states to implement an Aid to Dependent Children-Unemployed Parent program.  Nevada had no unemployed parent program prior to the federal mandate.  The current state program funded cash grants to individuals for up to 6 months and medical coverage for up to 12 months.  The agency projected over 3,000 eligibles in fiscal year 1993-94 and 3,916 in fiscal year 1994-95.  Further, the Family Support Act of 1988 increased the time for continued medical assistance after welfare ineligibility from 4 months to 12 months.  The agency projected costs of $5.7 million in the first year of the biennium and $8.4 million in the second year.

 

Chairman Evans noted the budget narrative reflected $8.9 million in the second year of the biennium.  Mr. Michael Willden, Deputy Director, Welfare Division, explained the budget narrative reflected ultimate payments or the amount to be paid over a 3-year period.  The budget figures reflected the actual payments for each year.

 

Ms. Florence continued her explanation of the maintenance budget.  She stated the Medicare Catastrophic Coverage Act of 1988 and the Omnibus Budget Reconciliation Act of 1990 expanded coverage for qualified Medicare beneficiaries (QMBs).  The agency projected a QMB caseload of 2,684 in fiscal year 1993-94 and 3,031 in fiscal year 1994-95 with associated costs of $12,816,796 and $18,781,785, respectively.

 

The nursing home reimbursement maintenance item was a result of a legal settlement with Hillhaven Nursing Home which required additional payment for long-term care under the provisions of the Boren amendment.

 

Ms. Florence referred to the enhancement budget beginning at page 895.  She said the first enhancement related to prenatal care for pregnant women--the "Baby Your Baby" program.  She explained the program was a public/private partnership to access federal funding for a multi-media outreach program, including an information hotline in the Health Division.  "Baby Your Baby" was modeled after a similar program in Utah and was intended to increase early prenatal care.

 

Ms. Florence noted the revenue item listed as General Fund was actually donations.  This program did not rely on General Fund monies.  Donations would be matched by federal funds to provide for the hotline and associated staffing.

 

Ms. Tiffany questioned whether there was an error in the Executive Budget or if the donations were to be deposited into the General Fund.  Ms. Florence stated the revenue should be reflected as donations.

 

Senator Rawson inquired where the donations were coming from.  Ms. Florence replied the donations were based on agreements with NBC television affiliates, private corporations, Humana Hospital, Washoe Medical Center, Summa Corporation and the Kiwanis Club.  Overall donations totaled approximately $800,000; however, the total amount was not required to operate the program.  The balance would be used in the production of documentaries and broadcast time.

 

Senator Rawson noted a bill relating to a teratogenic hotline had been introduced in a previous legislative session; however, funding had not been available.  He questioned whether this program would serve a similar purpose.  Ms. Florence responded the "Baby Your Baby" hotline was quite different.  The only similarity between the two programs was they both provided referrals to sources of care.  The teratogenic hotline would have provided information regarding the medical implications of adverse reactions to chemical substances during pregnancy.  The "Baby Your Baby" hotline would not provide such a technical level of information.

 

Senator Coffin asked if there was a long-term commitment on the part of the donors.  Ms. Florence said the television stations had made a two-year commitment, which generally was the duration of similar media campaigns.  She said such campaigns were typically so successful that they expanded into other outreach areas such as adolescent health care or preschool children.

 

Senator Coffin said such programs generally had a drifting attention span.  Ms. Florence responded she did not know if it was a drifting attention span as much as saturation of the target population to the optimal extent of making a positive intervention.  She noted the media had found a comfortable niche by merging their public service obligations with community health issues.

 

Senator Coffin expressed concern that the attention of the program sponsors would shift.  He stated this was a good program.  He inquired whether the state was prepared to carry on with it beyond the two years.  Ms. Florence answered the state's obligation was only to the extent there were sufficient donations to sustain the program without a General Fund investment.

 

Senator Coffin asked if the state should be providing funds to ensure the continuance of the program and in fairness to the citizens of the state who might come to rely on it.  Ms. Florence responded the Health Division intended to evaluate the effectiveness of the program and, based on the results of the evaluation, might request additional funding in the 1995-97 biennium to continue it.

 

Senator Coffin requested a schedule of program costs in order to determine which costs the state might choose to assume at the termination of the sponsorship agreements.  Ms. Florence indicated the information had been provided in the Health Division budget as well as in a work program submitted to the Interim Finance Committee.

 

Ms. Florence stated the next enhancement item was the Moms program.  This program represented expansion of the existing Moms program and provided intensive case management services to high-risk pregnant women to improve their pregnancy outcomes.  She noted 10 percent of pregnancies of Medicaid-eligible women resulted in low birthweight babies but the rate of low birthweights for babies delivered to women in the Moms program was only 5.2 percent.

 

Ms. Florence reported the enhancement budget provided for seven additional case managers and two additional management assistants in the first year of the biennium and three additional case managers and one additional management assistant in the second year.

 

Ms. Florence pointed out the program was estimated to realize a savings of approximately $317,000 in the first year of the biennium and $362,000 in the second year.  The program was first instituted in 1990 and had demonstrated positive results thus far and was worthy of expansion.

 

Ms. Florence referred to page 897.  The next enhancement item was the nursing facility waiver.  The intent of this budget was to divert long-term care patients from intermediate care facilities into adult group care facilities.  The agency submitted a waiver to the Health Care Financing Administration (HCFA) March 12, 1993, in order to obtain federal participation in the program and proposed to initiate transfer of patients on a limited basis before June 30, 1993.  Thereafter, 150 patients would be transferred in fiscal year 1993-94 and 250 patients would be transferred in fiscal year 1994-95.  Case management services would be provided by the Aging Services Division under the CHIPS program.  The agency projected net overall savings to the state as a result of this waiver of $1.2 million in the first year of the biennium and $2.2 million in the second year.

 

Ms. Florence noted the subcommittee for aging services requested a survey of care facilities to ascertain their current willingness to participate in the program.  60 facilities had indicated they were able to provide beds for transfers and were willing to accept Medicaid reimbursement rates.

 

Senator Rawson asked what the actual program expenditures would be.  Ms. Florence replied aging services costs would be $150,957 in the first year of the biennium and $241,036 in the second year.  Supplemental payments to patients would total $281,979 in the first year of the biennium and $491,283 in the second year.

 

Ms. Florence explained other enhancement items were tied to the Mental Hygiene and Mental Retardation Division budget on which the subcommittees had previously heard separate testimony.

 

Ms. Florence next referred to the CHIPS enhancement on page 899, which would provide for increased staffing in the Division of Aging Services associated with caseload growth and the adult group care transfer waiver.  Funding in the first year of the biennium represented phase-in costs but costs in the second year were projected at approximately $250,000 in addition to current claims system costs.

 

Ms. Florence said the next enhancement item related to the Mental Hygiene and Mental Retardation Division budget and provided for two additional six-bed ICF/MR facilities in southern Nevada in fiscal year 1993-94 and one additional six-bed facility in northern Nevada in fiscal year 1994-95.

 

Ms. Florence reported the school medical screening program enhancement represented an initiative to increase urban school districts' abilities to provide services to Medicaid eligible children.  The program would access federal funds matched by local school district funding and would provide early periodic screening diagnosis and treatment services (EPSDT) on school sites and related therapies identified as medically necessary.  The program was modeled after the current program operated by the Special Children's Clinics which provided funding for physical therapy, occupational therapy, speech therapy and psychological services.  It was estimated, based on a consultant's study, there were 19,000 in special education statewide, including approximately 15,000 in Clark County.  She said the program could be a win-win situation for the school districts insofar as enhancing their ability to serve the special education population.

 

Chairman Evans questioned whether the program would eventually be expanded beyond Washoe and Clark Counties.  Ms. Florence said it would be desirable to expand the program to the rural areas once it was established in the urban areas.

 

Ms. Florence stated the final enhancement item related to the drug utilization review program mandated by the Omnibus Budget Reconciliation Act of 1990.  The budget enhancement was to fund the drug utilization review committee recently approved by Interim Finance Committee approval.  The committee was to establish criteria for reviewing utilization of prescriptions and to provide education to physicians and pharmacists.  The recommendations of the committee would be carried out by contract pharmacists on staff.

 

Senator Rawson noted the bulk of expenditures was for long-term care and there had been no drug utilization review in that area.  He asked what areas would be impacted by the drug utilization review program.  Ms. Florence replied this funding would bring the committee together to establish standards for review, to identify warning signals of over prescribing drugs, improper dosage levels, drug interaction, etc.  There had been limited review by contract pharmacists on staff but this program would greatly enhance those activities.

 

Senator Rawson inquired whether the consultant staff would assume full responsibility for the program.  Ms. Florence replied the program represented a two-pronged effort.  The consultant pharmacists would work with the committee to establish review standards and provide physician and pharmacist education.  Additionally, fiscal staff would perform audits of pharmacies.

 

Mr. Humke asked if all special education certified children would be eligible for the services provided by the school medical screening program.  Ms. Florence indicated the program would only provide services to special education children who were already Medicaid eligible.

 

Mr. Humke questioned whether the school medical screening program was federally mandated.  Ms. Florence replied the state was not mandated to enter into this type of arrangement with the school districts.  The mandate was to increase services to EPSDT eligible children up to 40 percent.  This program would enable the state to achieve compliance with that mandate.

 

Mr. Humke expressed concern the program was being foisted on the school districts.  He noted the school districts had complained about having to provide social services.  Additionally, this type of program could identify the special education population as different than the mainstream population.  He expressed his opinion the school districts might then tend to force those different students away from the educational process.

 

Ms. Florence noted Clark County School District had initiated discussion regarding the program.  She stated in other states--notably, Maryland--the educational systems had accessed federal funding to expand their ability to provide services to special needs children.  She said she believed the school districts did attempt to mainstream special education students as much as possible and this program would not change the way the school districts would be providing services other than to provide an additional funding stream to increase therapy hours available, etc.

 

Mr. Humke stated he respectfully disagreed with Ms. Florence's position as it related to the northern Nevada schools with which he was familiar.

 

Ms. Florence noted the summary on page 401 reflected a total budget of $405,386,587 for fiscal year 1993-94 and $487,937,243 for fiscal year 1994-95, which represented increases each year of 14 percent and 20.4 percent, respectively.  Those increases were consistent with estimated caseload increases.  New positions associated with the budget were dedicated to prenatal care and to the Moms program.  She explained the agency would be developing improved performance indicators pursuant to the subcommittees' request for more output oriented information.

 

Senator Rawson asked if the budget totals included for prior years' spending.  Ms. Florence responded the agency was in the process of making some budget reconciliations with the Budget Division.  The overall dollar amounts for current year expenses were correct; however, in some cases figures had to be adjusted to reflect current, first prior year and second prior year.

 

Senator Rawson noted the Legislature had to pick up $16 million in this budget.  He asked if the $16 million was included in the budget totals.  Mr. Willden answered the $405 million in fiscal year 1993-94 and the $487 million in fiscal year 1994-95 included amounts for current year medical payments in 1994, first prior year payments (in 1993 and 1994) and second prior year payments (in 1992 and 1994) and amounts for current year payments in 1995.  The Executive Budget figures did not reflect amounts to be paid in the next biennium.  The $405 million and $487 million did not address underfunding of $19.4 million for expenses currently being incurred which require funding in the 1993-95 biennium.

 

Ms. Florence indicated the agency anticipated carrying forward some provider tax revenue and using projected managed care savings to deal with the shortfall.

 

Senator Rawson asked the amount of expenditures to be paid in the 1995-97 biennium.  Ms. Florence said the agency was projecting slightly over $7 million in provider tax carry forward.  Matching federal funding would bring the amount to approximately $14 million.  In addition, it was estimated approximately $700,000 unexpended funds would be carried forward and matched with federal funds.  The net shortfall would then be approximately $2 million.

 

Senator Rawson noted those estimates were based on the assumption the provider tax would be successful.  He asked if there were other obligations extending into the next biennium.  Mr. Willden stated services incurred in fiscal year 1993-94 would not be completely paid until 1996.  The 1994 expenses to be paid in 1996 were projected to be approximately $4.8 million.  The 1995 expenses to be paid in 1996 were projected to be approximately $86 million.    The 1995 expenses to be paid in 1997 were projected to be approximately $5.9 million.  Ms. Florence added those projections did not contemplate proceeds from managed care.  In addition, the three-year payment schedule would not apply under managed care because more costs would be paid up front.

 

Senator Rawson asked what other states used this type of reimbursement system.  Ms. Florence answered this was the normal billing procedure.

 

Chairman Evans noted testimony during the joint committee hearings had indicated the time schedule for an automation program was too short.  She asked Ms. Florence to provide to the subcommittees an indication of what a more appropriate time schedule might be.  Ms. Florence agreed to do so.

 

Ms. Florence introduced Mr. Chris Thompson, Chief Health Care Financial Analysis Unit (HCFA), Department of Human Resources, to brief the subcommittees on the provider tax proposal.

 

Chairman Evans asked Mr. Thompson to provide a summary of the Medicaid system currently in effect, the reasons for the proposed changes to the current system and a description of the proposed system.

 

Mr. Thompson distributed an information packet labeled Managed Care/Provider Tax Presentation (Exhibit C).  He directed the subcommittee members' attention to page 9 of Exhibit C, which showed the impact of the fiscal year 1992-93 program.  He said the concept of the provider tax program was to provide funding from hospitals and other health care providers to make up the state portion of Medicaid payments and then return that funding to the providers with enhanced federal participation.  He noted in 1991 there had been a significant effort on the part of the federal government to ensure the state governments would maintain their portion of Medicaid and not force all payment obligations onto the federal government.  The program established for the 1991-93 biennium was comprised of two taxes.  The first tax was on hospitals.  Approximately $75 million was raised in fiscal year 1991-92 and $85 million was projected in fiscal year 1992-93.  The hospital tax revenue was used to fund disproportionate share payments to the hospitals and a slightly enhanced Medicaid rate for hospital costs.

 

Chairman Evans asked for a definition of disproportionate share.  Mr. Thompson replied disproportionate share referred to a mechanism allowed by federal law to pay enhanced payments to hospitals which served a large number of Medicaid and/or indigent inpatients.  The federal laws had always permitted the states great flexibility in defining disproportionate share.  Nevada defined disproportionate share as any hospital which served in excess of 1 percent of its overall patient load as Medicaid patients.  The average for the state was nearly 7 percent.  There was no requirement that a disproportionate share hospital had to provide a higher level of care than the state average.  Additionally, until 1992 there was no cap on how much money a state could spend for disproportionate share.  Therefore, states used this mechanism because they could pay as much money as they chose to any hospital and receive federal matching funds.  In fiscal year 1991-92 Nevada paid $71.2 million in disproportionate share.  One-half of that amount was matching federal funds.  In fiscal year 1992-93 Nevada would pay $80.5 million in disproportionate share, one-half of which would be federal matching funds.

 

Mr. Thompson said under the current program the state was allowed to collect the provider tax and at the same time hold the hospitals paying the provider tax harmless from losses resulting from insufficient disproportionate share payments.  The state would make hold harmless payments from the state-only fund for the difference between the amount of provider tax paid and the disproportionate share payment.

 

Senator Rawson requested a more detailed breakdown of revenue sources and expenditures than was shown in Exhibit C.  Mr. Thompson stated he would have to defer the request to the Welfare Division insofar as how the money was spent.  HCFA had ensured the additional funds created by the Medicaid program funded increased caseloads beyond those budgeted, new services required by the federal government and enhanced payments to hospitals.  Senator Rawson inquired whether Mr. Thompson was satisfied the state use of federal funds complied with federal guidelines.  Mr. Thompson replied he was satisfied the state had used the federal funds appropriately.

 

Ms. Florence noted on March 19, 1993, the Welfare Division had submitted to the joint committees a detailed report of revenue sources and expenditures for fiscal year 1991-92 and projections for fiscal year 1992-93.

 

Senator Rawson asked if the differences in the current program and the new program were enumerated in the March 19 report.  Ms. Florence indicated the report responded only to the current program.

 

Mr. Thompson continued his testimony.  He noted during the current biennium the hospitals had contributed $165.1 million.  The state then made disproportionate share payments back to the hospitals of $78.1 million in state monies plus $78.1 million in federal matching funds for a total of $157 million.  Additionally, the state made hold harmless payments to the hospitals in the amount of $35 million.  As a result, the hospitals benefitted in the amount of $26.9 million.

 

Mr. Thompson stated in addition to the hospital tax, there was a tax on all other providers.  The tax rates varied, depending on the services provided, but other providers were taxed only on Medicaid revenues to assure no other providers would be harmed by the program.  The difference between the enhanced rate and the amount previously paid would be taxed.  In that way all physicians and other providers would receive the same reimbursement as they were previously receiving but the higher stated tax rate enabled the state to receive more federal funding for the program.  The enhanced rate increases generated $36 million during the current biennium which the state could pay back using only $18 million of state money.

 

Mr. Thompson referred to page 10 of Exhibit C which reflected changes in federal regulations affecting the Medicaid program.  The first problem was the disallowance of hold harmless provisions guaranteeing hospitals would receive their total contribution back.  Secondly, the tax had to be broad-based and generally redistributive.  That is, a tax on hospitals had to be applied to all revenue of those hospitals and a tax on physicians had to be applied to all revenue of those physicians.  This change did not significantly impact the Medicaid program as it related to hospitals because the hospital tax was based on a portion of total revenue.  However, the tax on non-institutional providers was based solely on Medicaid revenues and was no longer allowable.  In order to continue the tax on non-institutional providers, total revenues would have to be taxed and doing so would create a massive new administrative burden on the state to collect and process the revenue information.  It would also create disparity among the non-institutional providers.

 

Senator Rawson inquired whether the new tax would be levied only on the hospitals.  Mr. Thompson responded affirmatively.

 

Senator Rawson questioned whether the tax would be on non-Medicaid revenue.  Mr. Thompson explained the tax would be on all hospital revenue except Medicare revenue.  Medicaid revenue would be taxed.  Medicare revenue was excluded from the tax in order to make the tax as fair as possible to the hospitals.  Additionally, outpatient revenue would be taxed at a approximately one-third the rate of the inpatient revenue tax.

 

Senator Rawson asked if rural hospitals would be included in this program.  Mr. Thompson indicated the federal regulations allowed the state to exempt certain groups within a class.  For example, rural hospitals could be exempted.  The proposed new program would exclude rural hospitals of under 50 beds from the tax.  He explained hospitals which had provided non-emergency obstetric services prior to December 1987 but had subsequently discontinued those services were specifically prohibited from receiving disproportionate share payments.  Some rural hospitals fell into this category.  The new program would have no effect on those hospitals.  Rural hospitals which were currently allowed to receive disproportionate share payments would pay the provider tax through their hospital taxing districts, which would make an intergovernmental transfer to the state equal to one-half of the disproportionate share payment to be made back to them from the state.  Thus, the hospitals which were allowed disproportionate share payments could continue to receive those benefits.  The projected benefit to those hospitals was approximately $1.2 million to $1.4 million over the coming biennium but there would be no significant overall impact to the state.

 

Senator Rawson asked if Mr. Thompson was comfortable the proposed program would provide equal taxation.  Mr. Thompson said he was comfortable the providers would be taxed equally.  The program identified a group of providers responsible for paying the tax and was no different from other taxing programs in that respect.

 

 

Senator Rawson noted hospitals which served very few Medicaid patients would pay a greater portion of the tax from non-Medicaid revenue than would hospitals which served more Medicaid patients and were likely to challenge the program as a result.  Mr. Thompson said he appreciated Senator Rawson's concern.  The new program had been designed to limit the impact on any of the hospitals in the state.  The disallowance of the hold harmless provision made the construction of the program more difficult but it was projected the hospitals which would lose money would not lose a significant amount of money.  Further, any adverse impact of the new program could be limited by the proposed managed care program and the agency's ability to influence admissions to specific hospitals.

 

Senator Rawson stated he was baffled by this portion of the program.  Under a managed care concept, providers had to be able to negotiate with patients, which meant having a single source or few sources in order to realize the best price.  He asked if the state or a contractor would be conducting the managed care program.  He said requiring a contractor to influence admissions in order to balance the tax burden would essentially eliminate the bargaining factor which made managed care successful.  Mr. Thompson said the managed care program would be contracted out.  The concept provided different areas where managed care providers could realize savings.  The most significant area was through case management--ensuring patients received treatment at lower, less expensive levels of care (e.g., preventative treatment) rather than allowing illnesses to progress to the point of requiring more expensive levels of care.  The primary savings from managed care would be derived from managing patients.  In addition, it was generally accepted that the savings a managed care provider would realize were generated from contracting with individual hospitals.  However, in southern Nevada, particularly, most contracts were not exclusive, requiring members of individual health plans to access only one hospital.

 

Senator Rawson said he was concerned about the small hospitals which could not meet the competitive prices of the larger hospitals.  The two aspects of managed care which contributed to cost savings were controlled utilization and purchasing power.

 

Mr. Thompson noted Medicaid rates were competitive with managed care rates so while there was the possibility of some savings through negotiations, those savings would not be significant.

 

Senator Rawson asked if the provider tax could develop into a strict tax without the repayments to providers.  Mr. Thompson responded a simple tax on providers without repayments would simplify the structuring of the Medicaid program.  However, it was the position of the administration that the state would attempt to balance the payments from and to providers to the extent allowable under federal law.

 

Senator Rawson questioned whether it would be more fair for the state to pay for the services performed for the state.  The disproportionate share money could be given to the providers who were actually treating the Medicaid patients.  Mr. Thompson stated the program hinged on the enhanced disproportionate share payment which was limited by a fixed cap until the state moved to 12 percent of total Medicaid expenditures.  It was currently running at approximately 20 percent.

 

Senator Rawson asked if the new program was an elaborate way to accomplish the same goals as the current program (to hold providers harmless) which had been disallowed by the federal government.  He said the budget had to be stabilized with a dependable, unchallengeable program and perhaps it would be preferable to simply fund the program with a provider tax.

 

Mr. Thompson responded the question was a policy issue for the Legislature to consider.  The agency was looking for guidance from the Legislature.  He noted from a policy standpoint, the program had been developed to limit the impact to any of the provider taxpayers.  The alternative was to impose a real tax of $47 million.

 

Senator Rawson asked if the proposed tax was a real tax.  Mr. Thompson responded the provider tax was real in the sense there would be no loopholes built in to allow it to be considered anything other than a real tax.  However, the amount of the tax plus $21 million would be returned to the providers and in that sense, it was quite different from other taxes which were paid into the state General Fund and paid out for overall state programs.

 

Senator Rawson said the attempt to return the excess to the providers was precisely what made the program weak since it might not be accomplished in a fair or consistent way.  Further, he did not think a health maintenance organization could function under the conditions the state was imposing.  He said he was not satisfied the proposed program was a workable mechanism but the Legislature would certainly look at it and give it a fair chance.

 

Mr. Thompson stated prior to the new federal legislation, there was no cap on disproportionate share payments.  The federal government had now imposed a cap equal to the amount of payments in federal fiscal year 1991-92 ($73.5 million).  That was the amount to be paid out in each of the next two federal fiscal years.  He noted the disproportionate share payments for fiscal year 1993-94 totaled only $68.3 million.  Since the current program was maintained for the first three quarters of federal fiscal year 1992-93, the fourth quarter payment had to be limited.  Subsequent payments would total $18,390,000 per quarter.

 

Mr. Thompson indicated the fourth change in the federal law was to disallow the practice of imposing the tax on Medicaid revenues only.  This was the reason the state could no longer tax providers other than hospitals.  Chairman Evans questioned why the tax was not renamed a hospital tax rather than a provider tax.  Mr. Thompson said it could be called a hospital tax.

 

Mr. Thompson stated the last change in the federal law was the specific allowance of intergovernmental transfers.  Intergovernmental transfers were not previously utilized as a funding mechanism.  The proposed program included intergovernmental transfers to a large extent.  Local government funds would flow through the state system so payments to hospitals could be made as Medicaid payments and be eligible for federal matching funds.

 

Mr. Thompson referred to page 11 of Exhibit C, a projection of how the proposed program would function.  He noted over the coming biennium the hospitals would pay $78.7 million in taxes, which was less than half the amount paid in the current biennium.  The money could no longer be paid back as a state-only payment.  However, disproportionate share payments would be made and as a result, hospitals as a whole would receive $147.7 million.  Additionally, the counties would pay $46.5 million over the coming biennium and the hospital tax districts would pay $1.1 million.  Total revenue was projected to be $126.3 million.  Net benefit to all hospitals would be $21.4 million.

 

Mr. Thompson indicated the $126.3 million would be used to pay $73.6 million in disproportionate share back to the hospitals and $2 million--plus a possible federal match of $1 million--to the counties.  $3.6 million would remain for state administration costs and a reserve.  The total benefit to the state would be $47.1 million to be used for Medicaid purposes which would be matched by federal funds for a total of $94.2 million for Medicaid services.

 

Chairman Evans indicated there was a question from Mr. Miller.

 

Senator Coffin said he was not aware the guests would be asking questions.  He objected to them doing so because they were contestants in the dispute and it was improper for them to ask questions directly.  The right to ask questions should be reserved for the elected officials.  He would prefer the guests provide information to the subcommittees from the witness table.  He said it was intimidating for the state employees to be questioned by county employees.  He noted if he had been aware of this arrangement prior to the meeting, he would have objected at that time.

 

Chairman Evans noted this was not an adversarial hearing but a discussion regarding the provider tax and managed care.  The Speaker of the Assembly and the Chairman of the Committee on Ways and Means had agreed to the guests sitting with the panel to ask questions.  She noted this format was used frequently during interim studies.  The guests would not vote on any issues; however, they would enter into discussion.

 

Chairman Evans suggested the guests be allowed to provide their questions in writing to subcommittee members who could then read the questions.  Senator Coffin said he would like to hear the guests ask their questions.

 

Senator Rawson suggested the guests ask their questions through the chair.

 

Chairman Evans called for a five-minute recess.

 

Chairman Evans reconvened the hearing.  She explained, due to Senator Coffin's concerns regarding the hearing format, the guests would sit at the witness table and they would be allowed to ask questions of witnesses through the chairman.

 

Mr. Miller noted concern on the part of the hospitals about the provider tax.  The current tax was seen as a temporary measure and the hospitals questioned why the program was continuing.  He asked, through the chairman, whether the combination of taxes raised plus the federal matching funds reduced the amount of money the state contributed to the Medicaid program, and, if so, by how much.

 

Mr. Thompson replied over the current biennium there had been significant increases in the Medicaid budget.  All monies used were used for the stated purposes of funding increased caseloads and increased payments to the hospitals.  He noted the Medicaid budget  was, for the most part, spared from the largest portion of budget cuts.  Exact figures could be provided by the Welfare Division.  Chairman Evans requested those numbers from the Welfare Division.

 

Ms. Hahn commented during the last session of the Legislature the state was faced with a $25 million shortfall in the Medicaid budget.  It was her understanding $70 million was raised to cover the shortfall in fiscal year 1991-92 and $80 million was raised in fiscal year 1992-93.  She asked, through the chairman, why, with a $70 million contribution toward a $25 million shortfall, the Welfare and Medicaid budgets had to be reduced.

 

Mr. Thompson answered while over $160 million was raised from the tax, the tax program created significant additional expenditures, including $150 million disproportionate share payments and $35 million in state-only payments.  The net benefit to the state was $70 million.  However, that amount was almost entirely consumed by caseloads significantly higher than projected which resulted from the depressed economic conditions of the state.  The $25 million county contribution included in the budget was in lieu of the monies to be raised from shifting responsibility for long-term care to the counties.

 

Chairman Evans asked if part of the $70 million would be carried forward.  Mr. Thompson responded approximately $7 million would be carried forward.

 

Ms. Hahn commented the premise of the shift of long-term care to the counties was the counties would save a large amount of money.  She noted, at least in the Clark County budget, the savings did not occur and, in fact, Clark County overspent in those budget categories.

 

Mr. Miller stated while it appeared the hospitals benefitted substantially from the provider tax and federal matching money, Washoe Medical Center had received none of the projected $3 million disproportionate share payment in fiscal year 1991-92.  The $3 million was paid instead to hospitals in southern Nevada.  He noted Washoe Medical Center presently received approximately two-thirds of cost for Medicaid patients and did not receive any substantial increase in payments by way of the provider tax to support Medicaid patients.

 

Chairman Evans asked if Mr. Miller was concerned about the actual outcome of the proposed tax over the coming biennium.  Mr. Miller indicated several hospitals had questions relative to the proposed tax.  He said his understanding of the present tax was a hospital which served many Medicaid patients would not receive the same average disproportionate share pool reimbursement as a hospital which served very few Medicaid patients.  He asked, through the chairman, if that was indeed the case.  Mr. Thompson indicated Mr. Miller's calculations were correct insofar as the disproportionate share payments were concerned.  There was a stratification downward.  Hospitals would receive less for the last patient served than for the first patient served.  This formula was devised to provide as much federal matched money as possible back to the hospitals with low Medicaid utilization and, therefore, have to pay less state-only money.  Hospitals would receive full credit for a day for the first patient served.  After 8 percent Medicaid utilization was reached, only 15 percent of the day would be calculated.  Overall, the payments for patients for the first 4 to 6 percent of the utilization would reimburse the tax.  The net benefits to the hospitals were reflected in the highest level of utilization.

 

Mr. Miller stated shifting patients from a high utilization hospital to a low utilization hospital would result in the hospital  serving the fewer Medicaid patients receiving a disproportionately large increase in the disproportionate share payment.  He said he understood the disproportionate share pool was capped at the fiscal year 1991-92 level.  He asked, through the chairman, where the additional money for the disproportionate share payments would come from.  He added there would be a considerable incentive for the hospitals serving few Medicaid patients to take on more patients at the expense of the hospitals who would probably continue to serve the majority of Medicaid patients, placing the disproportionate share payment and payments for indigent patients at risk.

 

Mr. Thompson indicated many of Mr. Miller's statements were true.  The program was balanced by the relative utilization of hospitals.  Some shifting was projected to occur.  He noted indigent utilization was not included in the current formula.  It was included in the proposed formula to provide some stability to the overall calculations.  Further, while small shifts in utilization would impact the larger hospitals, as utilization increased there was less of an incentive for continued increase in utilization.

 

Mr. Thompson explained the agency had been working with Washoe Medical Center as well as the other hospitals to make the formulas on the tax side and the disproportionate share side as equitable as possible to all parties.  The agency was continuing to work toward that goal.

 

Chairman Evans stated she was glad to hear the agency was working with the hospitals since the Legislature did not typically engage in those types of discussions.

 

Ms. Hahn stated Clark County had been working with the Department of Human Resources for several months and would like to see the proposal work and benefit the parties.  She noted, however, it was a departure from the current program for paying bills and providing services and the county wanted some assurance it would work before embarking on a two-year commitment.

 

Ms. Hahn pointed out the bulk of the intergovernmental transfers were projected to come from Clark County.  She noted University Medical Center would actually lose $6.1 million in disproportionate share payments over the biennium.  Washoe Medical Center was scheduled to gain $2.1 million.  She pointed out the inequity of the situation.  She asked, through the chairman, why this was the case.

 

Mr. Thompson said the reason the largest portion of the intergovernmental funding would be coming from Clark County was Clark County provided the funding to University Medical Center.  The proposed program attempted to take the money currently paid to hospitals and flow it through the state system in order to receive the federal match.  The numbers in the proposal were based on current county payments to hospitals.

 

Mr. Thompson noted under the current program University Medical Center was benefitting by approximately $17.5 million.  The state was benefitting by approximately $70 million.  Under the proposed program the state's benefit would be reduced to $47 million.  University Medical Center would also have to take a cut to $12.1 million.  He noted University Medical Center's percentage of total benefit was actually slightly more under the proposed program.  He noted Washoe Medical had suffered from the formulas used over the current biennium and projections had been higher than payments actually received.  The proposed program attempted to rectify this situation.  Net benefits projected were $12.1 million for University Medical Center and $3.1 million for Washoe Medical Center.  He said this four-to-one ratio was within the range of reasonableness.

 

Mr. Miller reiterated the potential risks associated with the proposed program.  Under the current program $3 million projected to be paid to Washoe Medical Center had actually gone to University Medical Center.  Washoe Medical Center was concerned this would happen again.  The new computations were complex and offered tremendous opportunity for movement of tax dollars paid in one part of the state to another part of the state and for the hospitals caring for the majority of patients not to receive reimbursement of their tax payments.  Without the hold harmless provision, there was no guarantee counties would be reimbursed their tax contribution.  In addition, reimbursement for indigent care was at risk.

 

Senator Rawson asked if there was a mechanism for adjusting rates or formulas during the biennium if a problem was discovered.  Mr. Thompson replied there was not much opportunity to adjust the tax formula.  Therefore, adjustments had been made to the disproportionate share formula.  Those adjustments were made in response to apparent inequities in the current program.  The agency intended to monitor the program and make any adjustments which were legally allowed in order to maintain an overall level of equity among all hospitals.  He noted tax rates were set based on the amount of money to be raised.  Adjustments to the rate would be made through the year to keep pace with fluctuations in costs in order to maintain the level of benefit to the hospitals as a whole.

 

Mr. Thompson noted the agency would continue to work with Washoe Medical Center and the other hospitals to make the formulas as equitable and resistant to changes in utilization patterns as possible.

 

Senator Rawson questioned whether collection of the provider tax was a function of the Department of Taxation.  Mr. Thompson responded the administrative burden of collecting the provider tax was not significant.  He said it would be best to keep this function within the Welfare Division because any assessment of the program's success was dependent not only on the tax information but also on the disproportionate share information and the benefits for the enhanced Medicaid rate.

 

Senator Rawson stated he was still concerned with a potential legal challenge to any portion of the new program which could be construed as establishing a hold harmless provision.

 

Mr. Price commented he agreed with Senator Rawson that tax collections should be handled by one area of state government.  He noted program assessments could still be made based on information received from the Department of Taxation.

 

Mr. Thompson said he had no problem with the tax collection function being moved to the Department of Taxation.

 

Senator Coffin expressed his appreciation to Chairman Evans and Senator Rawson for changing the hearing format.

 

Ms. Shelton noted the cap on federal matching funds could pose a problem for the Medicaid system.  Further, the proposed program was based on a projected 10 percent increase in caseload in each year of the biennium.  If those projections were exceeded the proposal should be revisited.  She asked, through the chairman, how that would be done.

 

Mr. Thompson responded the federal matching percentage would drop from 52.28 percent in fiscal year 1992-93 to 50.31 percent in fiscal year 1993-94.  He was unaware of any proposals at the federal level to reduce the percentage below 50 percent, which was the rate used in calculating provider tax rates.

 

Ms. Florence stated the 10 percent projected increase in caseload only applied to the CHAP program.  The overall caseload increase would be higher than 10 percent.

 

Ms. Hahn noted a recent Kaiser Foundation survey had found Medicaid caseloads had increased nationally at the rate of 27 percent in 1991 and 30 percent in 1992.  The counties were understandably nervous at the state's 10 percent projection and would like to know what would happen if the caseload increase exceeded 10 percent.

 

Mr. Thompson indicated the proposed provider tax program would not cover the entire increase in the Medicaid budget.  Approximately $69 million was required.

 

Senator Rawson and Senator Coffin left the hearing.

 

Chairman Evans asked the status of the provider tax bill.  Mr. Thompson responded the bill was being drafted.  Introduction would be held pending further discussions with the counties and the hospitals.  He expected introduction within a month or so.

 

Ms. Charlotte Crawford, Deputy Director, Department of Human Resources, referred to Exhibit C.  She noted pages 1 and 2 of Exhibit C depicted increases in Medicaid costs and caseloads over the past several years and projected through fiscal year 1994-95.  She stated the increases were significant and the time had come to look at new approaches for managing the delivery of medical care within the Medicaid program in order to achieve cost containment.

 

Ms. Crawford explained managed care provided comprehensive services under contracted rates.  She stated operating a managed care program for a Medicaid population was complex.  She referred to page 3 of Exhibit C, which delineated the complexities involved, including the characteristics of the Medicaid population and federal regulations.

 

Ms. Crawford referred to page 4 of Exhibit C, which provided a comparison of recipient populations and expenditures associated with those populations.  She noted recipient categories did not use Medicaid services in proportion to their representation to the overall Medicaid population.  For example, Aid to Dependent Children represented 73 percent of the recipient population; however, this group accounted for only 41 percent of medical services.  The disabled population represented 13 percent of all Medicaid recipients but accounted for over 34 percent of the medical services.

 

Ms. Crawford referred to page 4 of Exhibit C, a graph of retroactive and ongoing costs.  She explained Medicaid recipients were entitled to payments of medical expenses for three months prior to their date of application for eligibility.  Those costs could not be controlled by a managed care program.

 

Ms. Crawford stated federal regulations would place constraints on a managed care program.  The state would have to receive a waiver from HCFA in order to mandate enrollment in a managed care program.  Part of the conditions for receiving a waiver were to provide recipients a choice of at least two managed care plans in each geographic area.  Federal regulations also required that federally qualified health clinics must be protected and may serve Medicaid recipients and be reimbursed costs for those services even though a managed care program was in place.

 

Ms. Crawford referred to page 6 of Exhibit C.  She explained not all medical services could be included in a managed care program unless the state worked with a federal qualified or HCFA recognized health maintenance organization (HMO).  The services depicted at the top of page 6 were included in a clinic option and could be provided by any managed care group; however, only one of the services listed at the bottom of page 6 (hospital inpatient, hospital outpatient, long-term care or home health care) could be offered with the clinic option services unless the provider was a federally licensed or Medicaid recognized HMO.  The proposed plan would provide the clinic option services and hospital inpatient services.

 

Ms. Tiffany asked if the state was tracking federal managed care proposals.  Ms. Crawford said the state was watching federal events carefully but actual changes had not yet been formulated.  She noted the Director of the Department of Human Resources was currently in Washington, D.C.  She stated HCFA had indicated they were becoming more flexible in processing freedom of choice waivers.  In fact, the clinic option had previously been more narrowly restricted.

 

Ms. Crawford indicated there were also state constraints on designing a managed care program.  The Medicaid program imposed caps on state matching money which functionally limited the number of intermediate care facility beds for the mentally retarded.  All beds were currently filled and had been for some time.  Additionally, there was a long waiting list for those beds.  Under a managed care system, some of those individuals could potentially be moved into lower cost residential treatment facilities; however, any vacated beds would be filled from the waiting list immediately, which would expand rather than reduce Medicaid costs.  The program would have to be designed according to the impact on each program area.

 

Ms. Crawford stated the provider tax would have an impact on the managed care program because there would be a change in current utilization patterns.  Additionally, providers would be limited from entering into a sole source contract with a hospital.

 

Ms. Crawford said the state currently had a primary care/case management system whereby the primary physician coordinated care and controlled costs.  Currently three provider groups were providing services.  The Department of Human Resources and the Welfare Division conducted a comprehensive cost comparison of the fee for service Medicaid program and the primary care/case management program.  She referred to page 7 of Exhibit C which reflected the outcome of that comparison.  She noted average monthly fees for service were considerably higher than costs under the primary care/case management program ($183.24 versus $135.24).  However, when significant variables within the population and retroactive payments were controlled the costs for fee for service and primary care/case management were basically the same--$115.91 and $117.09, respectively.

 

Ms. Crawford stated the current program was a quality program which had created access and probably indirectly created savings by keeping physicians' costs down.  However, the Department of Human Resources did not believe it could move forward with the current program and achieve cost savings.  Therefore, it was necessary to consider a mandated, at-risk type of managed care program.

 

Mrs. Evans asked Ms. Crawford to explain what a mandated, at-risk managed care program was.  Ms. Crawford responded the Department of Human Resources was attempting to set up a system which would mandate that Medicaid recipients enroll in a managed care program.  The intent was to bundle various outpatient services and inpatient hospital services and place the provider at risk, meaning a capitated rate would be established.  The provider would procure and pay for all covered medical services for the Medicaid recipients.  The question remained how a provider could be put at risk for inpatient hospital services.  The agency would rely on guidance from the Legislature regarding the provider tax and whether Medicaid utilization and inpatient facilities remained at approximately the same distribution as it was currently.  She explained if providers were not allowed the freedom to negotiate hospital rates the managed care program would have to maintain the Medicaid hospital rate and encourage the provider to control admissions and length of stay within the hospital.

 

Ms. Tiffany inquired whether the managed care program would be open or closed.  Ms. Crawford said the intent was to set up a system in which an individual had to make a choice between the contracted providers.  Ms. Tiffany asked if the providers would be large organizations.  Ms. Crawford stated it would take a fairly large network to serve the number of Medicaid recipients in each geographic area.  No single physician would be able to provide the services needed.

 

Ms. Tiffany asked if the managed care program would include a gatekeeper provision whereby recipients were directed to services by the primary care physician.  Ms. Crawford said a gatekeeper function was inherent in the managed care program.

 

Mrs. Evans said the subcommittee was struggling to understand the substance of the program.  She asked Ms. Crawford to compare and contrast the current and proposed programs.  Ms. Crawford responded the current program represented a very small managed care system.  Medicaid clients in Reno or Las Vegas could voluntarily enroll with a managed care provider or they could choose to see a private physician who accepted Medicaid.  The proposal was to set up at least two managed care systems in each geographic area of the state and require Medicaid recipients to enroll in one of those systems.  If recipients failed to choose a provider one would be assigned to them.

 

Chairman Evans asked if any components of the current program would remain in the managed care program.  Ms. Crawford stated University Medical Center was currently providing a quality managed care program.  The department was seeking guidance from the Legislature regarding the type of role the university might continue to play.  She noted it might not be feasible to ask the university to assume the risk associated with becoming a managed care provider under the proposed system.  However, the university might affiliate itself with a federally qualified clinic.

 

Ms. Tiffany stated the university had previously testified they did not want to bid on the managed care provider contract nor would they subcontract to managed care providers.  She questioned why the university would not want to participate in this program.  Ms. Crawford said there were substantial reasons why the university would want to participate.  Mr. Thompson suggested the distinction the university was making was they did not want to assume the role of the lead organization and the associated risk.  He noted the program would not significantly impact an individual hospital such as University Medical Center in terms of how it provided care to Medicaid patients and was paid for that care.

 

Ms. Tiffany asked why the university would not want to respond to the request for proposals and what type of providers would want to respond.  Ms. Crawford said she could not speak for the university; however, there was a difference in being the managed care contractor which provided the comprehensive services versus being an inpatient participant which accepted Medicaid recipients.

 

Ms. Tiffany asked where savings would be realized.  Ms. Crawford replied research had indicated the greatest savings were from reducing admissions and shortening length of stay.

 

Ms. Crawford noted it was important not to have too many high medical users in either the fee for service federally qualified provider group or the managed care provider group.  It would be particularly disadvantageous to the state if many high cost users were accessing the federally qualified health clinics.

 

Ms. Crawford noted the timeline for the request for proposals appeared at page 8 of Exhibit C.  The waiver request to initiate the program for Aid to Dependent Children and related aid codes would be submitted to HCFA April 1, 1993.  Later a trailer waiver would add portions of the aged and disabled populations.  It was projected the Aid to Dependent Children portion of the managed care program would be fully operational by January 1994.  The remaining portions would become operational by July 1994.

 

Mr. Thompson stated the primary savings from the proposed managed care program would be realized through improved management of medical care--the gatekeeper approach--and increased access to lower levels of care.  Delayed care as a result of limited access to physicians willing to accept Medicaid payments often meant more expensive care.  He noted savings had been demonstrated in hospital inpatient costs.  The average length of hospital stay in Nevada was approximately six days.  The average length of hospital stay within the HMO population was under four days.  The reduction in length of stay was due to managed care and patient mix.

 

Mr. Thompson said some broad assumptions had been made in calculating projected savings.  Retroactive costs, costs for intermediate care facility beds for the mentally retarded and long-term care costs were not factored into savings calculations.  Five percent overall savings were calculated for the remaining fifty percent of the Medicaid budget with the understanding there may be greater savings in some areas such as hospital inpatient services and increased costs in some areas such as primary care physician services.

 

Chairman Evans asked Mr. Thompson to provide his calculations in writing to the subcommittees.  Mr. Thompson agreed to do so.

 

Chairman Evans also requested a draft of the request for proposal.  Mr. Thompson stated a copy of the request for proposal would be provided to the subcommittees.

 

Chairman Evans asked if there was any indication providers were willing to bid on the contracts.  Mr. Thompson replied several groups had shown interest.

 

Chairman Evans inquired whether bidders would be allowed to bid on portions of the contract.  Mr. Thompson said it was the intention to entertain bids only on a comprehensive basis.  However, individual bids would be let for each geographical location.  In fact, the program could go forth if there were bidders only in Clark County since the largest portion of the Medicaid population was in Clark County.

 

Ms. Tiffany asked if Medicaid patients would be required to make co-payments, if there were incentives for private enterprise to provide outpatient services and how drug and alcohol abuse treatment programs would be affected by the managed care program.  She indicated the answers could be provided to the subcommittees in writing.

 

Chairman Evans called for public testimony.

 

Mr. Jim Wadhams, representing the Nevada Hospital Association, distributed copies of issue papers on the hospital tax (Exhibit D) and the managed care program (Exhibit E).  He indicated the Nevada Hospital Association supported proper and adequate funding for Medicaid.

 

Mr. Wadhams said Mr. Miller had pointed out the risks of using complicated formulas to counterbalance incentives of care.  Mr. Wadhams noted at least four hospitals would be paying a net out-of-pocket tax under the proposed provider tax program.  Three additional hospitals could potentially be required to pay the tax.  Five hospitals could be dramatically impacted by negative fluctuations in their patient loads.  He stated the situation needed to be monitored closely.  He reminded the subcommittees of the state constitutional requirements regarding uniform and equal taxation and the gravity of imposing a tax on some hospitals and not others.  He also mentioned the uncertainty regarding changes at the federal medical level.

 

Mr. Wadhams noted projections for the proposed program were based on the status quo.  He suggested the status quo was an invalid basis for projecting the impact of the proposed hospital tax.  He stated the Nevada Hospital Association had concerns about the proposed programs but was prepared to provide technical assistance to the subcommittees.

 

Mr. Brooklyn Harris, Administrative Director, Ryan Malloy Endowment Fund, stated the Fund had sponsored 17 critically ill children over the past two years.  He requested legislation allowing medical assistance for children whose only qualifications for aid were terminal illnesses.  He also pointed out time was critical for terminally ill children and the Medicaid system often took several months to provide aid.

 

Chairman Evans stated she was aware the Medicaid system had provided a great deal of assistance to Ryan Malloy.  She noted there were federal government constraints on the program, however.

 

Ms. Florence said it was difficult for Medicaid staff to be confronted with cases such as Ryan Malloy's.  They were bound by rules and regulations in making determinations of eligibility.  A medically needy program would have to be a state funded program because such a program would not meet federal requirements.

 

Ms. Mary Ellen McCarthy, Nevada Legal Services, stated it was important to realize everyone was paying the costs of treating terminally ill children.  The people of Nevada needed to take responsibility for establishing a medically needy program which would cover those children.

 

Ms. McCarthy expressed concern about the proposed managed care program.  She said research did not indicate such a program would save money.  She distributed copies of informational articles regarding managed care (Exhibit F, Exhibit G and Exhibit H).  Nevada had not demonstrated the ability to provide the quality controls and quality assurance to ensure managed care providers would not be making profits at the expense of Medicaid recipients or would not bankrupt the system and leave the state.  She said funding for proper oversight was essential.

 

Ms. Frances Daugherty, Washoe Legal Services, expressed support for Ms. McCarthy's position.  She noted using managed care solely to contain costs could create excess problems because the financial risks borne by providers would lead them to underserve Medicaid recipients.  Other legislatures had been warned to use managed care as a means of more equitably distributing resources rather than to contain costs.  She questioned whether managed care would do what was necessary to control costs without very strict oversight.

 

Chairman Evans suggested the agency meet again with the subcommittees prior to introduction of the bill.

 

Chairman Evans adjourned the hearing at 11:00 a.m.

 

            RESPECTFULLY SUBMITTED:

 

 

                                   

            C. Dale Gray

            Committee Secretary

??

 

 

 

 

 

 

 

Assembly Committee on Ways and Means

Senate Committee on Finance

March 24, 1993

Page 1