The Joint Subcommittee of Senate Finance and Assembly Ways and Means on
K-12, Human Resources was called to order at 8:30 a.m., on Tuesday, May 4, 1999. Senator Raymond Rawson presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List.

Ms. Jan Evans, Chair

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Parks

None

Senator Raymond Rawson, Chairman

Senator Bob Coffin

Senator William Raggio

Senator Bernice Mathews (Excused)

STAFF MEMBERS PRESENT:

Chairman Rawson stated the subcommittee would be closing budgets for the Welfare Division of the Department of Human Resources.

Steve Abba, Senior Program Analyst, said Myla Florence would present new information contained in the subcommittee’s closing list, including correspondence from John P. Comeaux, Director of the Department of Administration, to Senator William Raggio and Assemblyman Morse Arberry Jr. There were several new recommendations for the Nevada Operations Multi-Automated Data Systems (NOMADS), including a one-time appropriation of approximately $9 million.

Myla Florence, Administrator of the Welfare Division, explained Governor Guinn had been engaged in a lengthy NOMADS fact-finding effort over the previous 4 to 6 weeks. The Governor conducted meetings with state staff, District Attorney staff, contractor staff, quality assurance vendors, and had met with federal representatives on April 11, 1999, April 12, 1999 and April 19, 1999 through April 21, 1999. In addition, the Governor had made numerous phone calls to various parties and had reviewed a great deal of documentation and history associated with the NOMADS project. She thought he had reviewed the material from all perspectives of interested parties and came to several conclusions.

Ms. Florence explained the Governor concluded counties should not participate in penalties and had made that very clear. He had also indicated that, in order to avoid full penalties in FY 2001 and beyond, investments were needed that were not included in the recommended budget. The Governor recommended funding for areas that had not been previously considered through the history of the NOMADS project. In addition, the Governor concluded the state must assume control of the project and minimize dependence on contractors, which federal representatives had strongly recommended, as well. For those changes, the Governor requested a one-time appropriation for $9,013,548. The largest portion of the appropriation would be for penalties and disallowances that were still being debated with federal representatives. The net penalties, assuming full implementation of NOMADS in September 2000, would be $2,027,337, which assumed in FY 2001, approximately $2,365,447 in penalties would be returned to the state. Also, there were contractual disallowances still under discussion with federal representatives, which would amount to $1,379,262, in the worst-case scenario. All together, the net penalties and disallowances totaled just over $3.4 million.

Ms. Florence said based on discussions with the end users (district attorneys), the Governor recommended investment in areas previously unfunded. She characterized his recommendation as the "investment-to-completion plan." The Governor recommended new funding for training, which had been developed by state staff. While the quality of the training was very good for Phase I, the same division resources used for training were also needed for end-user support and testing. Under the Governor’s plan, state staff could be better utilized on-site with end users, which had been a strongly-expressed need by the Welfare Division staff and District Attorney staff.

Ms. Florence stated $5.6 million was targeted toward the conversion effort. In order to achieve certification, all child-support cases must be entered and operating in NOMADS. To achieve the September 2000 implementation, district attorneys had indicated a need for additional resources to assist with case preparation, data entry, and related aspects, such as validation of financial information before data entry. Of that $5.6 million, approximately $1.9 million would be from the General Fund.

Because Nevada was one of eight states that had not achieved certification, under federal rules, an independent verification and validation study, which was very different from a quality assurance rule, must be completed through the duration of the project. An independent verification and validation process was an intermittent review of the remaining life cycle of the project. The independent study submitted a report to state and federal agencies at the same time. The reports would be submitted concurrently to the federal partners funding the NOMADS project and the state. That effort was estimated to cost $650,000, of which $312,130 would be General Fund monies. The quality assurance component would be the ongoing independent verification of project status, estimated to cost approximately $700,000, of which $420,175 would be General Fund monies.

Additionally, Ms. Florence stated, during the April 1999 meetings, federal representatives indicated it was typical for the Legacy system to be operating for at least 1 year at the same time NOMADS operated. Therefore, the plan included $764,400 for maintenance of the Legacy system, for not only the mainframe, but the district attorney Legacy systems, as well. That had been a comfort to local district attorneys, who had feared as soon as NOMADS was implemented the Legacy system would be turned off, potentially resulting in a loss of information, should anything catastrophic occur.

Two other areas of the one-time appropriation request pertained to the Graphic User Interface (GUI) front-end modification of the NOMADS system, at some point. The GUI modification was to make the look and feel of the system much like personal computers, with icons and help modes, in order to make the system much more user-friendly to the end users. The Clark County District Attorney feared in the overall discussion of the system, those necessary modifications, in addition to the navigation component, might get lost during the biennium. The Governor had assured the Clark County District Attorney the state was committed to addressing those modifications, following certification. The GUI front-end modification and navigation would be an enhancement following certification to be achieved during the biennium, at a cost of $200,000.

Ms. Florence explained the Department of Information Technology (DoIT) had difficulty recruiting and retaining programmers, particularly in the NOMADS area, primarily because the programming language used by NOMADS was not state-of-the-art. The Governor was sensitive to the issue and had proposed a plan for retaining DoIT staff within the project with a bonus. He further recommended funding for a highly-technical Project Executive with experience developing large systems.

Ms. Florence stated, in summary, the issue was to try to "stop the bleeding" with regard to potential future penalties. The issue of scrapping NOMADS and starting a new program had been examined from numerous perspectives, and counsel of the quality assurance vendor and federal representatives had indicated that was not a viable option.

Ms. Evans said the subcommittee was delighted with and greatly appreciated the Governor in his initiative in helping to sort out the issue and put together what appeared to be a workable plan. For the first time, she felt there was a "roadmap." She explained district attorneys had been exceedingly concerned about the complexity of the NOMADS project and had felt larger counties could manage the complexity, while smaller counties would be not be able to follow the complexity of the project’s 900-page manual. She stated a regionalization plan had been proposed, but had not been mentioned by Ms. Florence and asked her to address the smaller counties’ dilemma.

Ms. Florence replied that issue had not yet come to closure. Currently, the Douglas County District Attorney was still examining the practicality of regionalization. Other rural counties were not certain they wanted to relinquish control and some counties indicated they wanted to implement NOMADS, then make the decision whether or not to regionalize. The current Douglas County proposal would have the existing funding and staff the county put into the program remain, and be managed by the state, if that decision was made. There would not be a fiscal impact the first year of the biennium, and potentially, not even in the second year of the biennium. Mr. Doyle had indicated the county might be willing to work through the biennium assessing how a regional concept could be best organized. She thought there was merit in regionalization because NOMADS was very complex and best lent itself to functional divisions between locate, establishment, enforcement, and collections. The Welfare Division wanted to work with rural district attorneys as the project moved forward. She thought rural district attorneys would find that proposed support could mitigate the current experience and resolve some of their concerns. Clearly, with more on-site support, it could be determined whether there were other ways to reconfigure outside of the functional areas that would improve the users’ experience with NOMADS.

Ms. Evans said NOMADS was planned to be certified in September 2000 and asked if that was done, how much the Federal Government would reimburse the state. Ms. Florence replied the state would be reimbursed 90 percent of the 2000 penalty. Ms. Evans said the situation with local governments sounded tentative and asked how the plan would provide sufficient oversight and monitoring of the project’s progress at the local level, because all 17 counties were needed to make the project work. She wanted to know if there were safeguards in the plan to make sure the program was functional at the local level. Ms. Florence replied there were several considerations regarding the issue. First, training funding would provide for recurrent training because rural counties needed more on-site recurrent training that was currently not offered. Second, the quality assurance vendor would be responsible for assessing roll-out and local jurisdictional experience with the system. The on-site support that would be provided as a result of freeing up people from the training effort would also assist in working with local entities. The Welfare Division would be available and supportive to each area that was rolled out with state resources, and finally, conversion funding should assist in making that happen faster, as it was a currently a very tedious process.

Chairman Rawson asked Mr. Abba to concisely state what decisions the subcommittee needed to make on the Welfare Administration budget (Budget Account 3228). Mr. Abba explained he thought the subcommittee could proceed closing the Welfare Administration budget. There was one decision unit left in the budget to close—decision unit M-581, which concerned NOMADS funding for the upcoming biennium. He thought the budget could be closed because the payment of penalties and enhancements to complete the project would be forthcoming in legislation. Decision unit M-581 provided approximately $28.3 million over the biennium for the NOMADS project. A majority of that funding was provided for contractor support and to reimburse DoIT for computer facility and system programming charges. The contractor support included in the budget provided for approximately 90,000 hours of contractor time over the biennium. The Welfare Division currently estimated it would have a need for at least 136,000 hours of programming time to address currently-known NOMADS fixes and any NOMADS fixes that would come out of the code Phase II development that the division was currently testing, as well as any modifications to NOMADS that had to take place for the welfare reform requirements, which would have to be fixed into the system by September 30, 2000. The division felt the recommended contractor support and the DoIT programmer time available through the 28 positions would be sufficient to address the programming modification needs.

Mr. Abba said there were three decision points the Fiscal Analysis Division felt the subcommittee needed to consider to close decision unit M-581. The first decision was whether to approve the additional funding for contractor support and the DoIT reimbursement. There would be some modifications to the DoIT reimbursement levels, based upon the approval of the DoIT cost allocation plan, which should reduce costs because there was a larger base of state agencies to absorb some of the DoIT charges. Additionally, there had been one technical modification in FY 2000, which reduced state funds in the amount of $167,869. The modification was reasonable since The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) allowed NOMADS modifications to be eligible for federal child support reimbursement at an 80 percent match versus the 66 percent match included in The Executive Budget. The second decision point was whether to approve the $160,000 reimbursement to DoIT for the NOMADS Project Executive position. The Welfare Division would pay for the position, which would be housed in the DoIT. He did not know whether the position would be a classified or unclassified position. The third decision point concerned a letter from Mr. Comeaux, which indicated the Welfare Division would recoup approximately $2.3 million in penalties paid in FY 2000 from the Federal Office of Child Support. The letter indicated if those monies were recouped, the NOMADS General Fund support in FY 2001 could be reduced by that amount and offset with Federal Child Support monies. He thought the subcommittee needed to receive clarification from Mr. Comeaux before the budget was closed.

John P. Comeaux explained it was intended to use the anticipated refund of 2000 penalties in 2001 to reduce General Fund support for NOMADS in 2001, as was stated in the letter.

Mr. Goldwater asked if the Governor received any assurances that, exclusive of penalties, maintenance, and operating, this would be the last money put into NOMADS project development. Ms. Florence said she had found no system was ever done, particularly in a human services organization. There were always federal rule changes and state legislation that required programming modifications. Meeting certification and the welfare reform requirements would be accomplished under the plan, but there would always be modifications. Mr. Goldwater said for $100 million, the project ought to be pretty close to being completed. He said he was inquiring about assurances from the vendor that if the plan was approved, the project would be completed. Ms. Florence said the vendor had indicated a willingness to leave key personnel on the project for 1 year. Those people had been identified and were in the process of determining their availability. She believed the Governor had discussions with IBM executives to secure their commitment. Mr. Goldwater asked if there had been memorandums of understanding or anything concrete. Mr. Florence replied there was currently nothing in writing.

Ms. Evans asked Ms. Florence how secure she felt with the proposed plan and the timetable and whether there was anything else the subcommittee needed to know about that could impede efforts to reach closure on the NOMADS project. Ms. Florence said the Governor had indicated the plan was not just a one-time effort for him and felt he was responsible as well, as the plan made substantial recommendations in areas that had previously not been considered. She felt under the Governor’s leadership and the Welfare Division’s dedication, the proposed plan would complete the NOMADS project. However, there were areas that were not under state control. There needed to be continued district attorney cooperation and willingness to convert cases. She believed the plan was achievable, but it would not be easy because the system was not easy. The alternative was to continue escalating penalties, which was not palatable.

Ms. Evans asked what would be the total amount of the Welfare Administration budget, given the amount built into the budget, and adding all costs presented that morning, should the subcommittee choose to approve them. Ms. Florence replied it was approximately $37 million. Ms. Evans said $100 million had already been spent and the subcommittee was discussing approving almost an additional $40 million. She told Ms. Florence she needed to keep the subcommittee informed because if the project did not hit its marks, the Welfare Division, DoIT, Mr. Comeaux, and the subcommittee would all be held responsible. The proposed project was the end point for implementation of NOMADS. Ms. Florence said the federal funding partners for the project shared Ms. Evans’ sentiments and pain that the system had taken an extraordinarily long time to develop. If a project of that size was developed in the future, it would be handled very differently. Her justification for the enormous amount of money spent on the NOMADS project was that over $500 million in benefits and Medicaid eligibility costs would be processed through NOMADS every year. Clearly there was a need for a system that had rich functionality to process complex benefit and distribution issuance. The process of independent verification and validation process would also produce critical reports throughout the biennium. She would be happy to report to the Interim Finance Committee (IFC) on the outcome of those reports. Ms. Florence assured the subcommittee no one wanted the process to end more than she.

Mr. Goldwater said he appreciated the efforts of Ms. Florence and stated the Governor’s commitment was tremendous. He agreed there were no guarantees, but there needed to be assurances and a level of understanding from the vendors beyond what there had been. There needed to be something in writing because the legislature was responsible for spending the state’s money, as was the Governor. Ms. Florence said she would communicate that to the vendors.

Mr. Abba explained Budget Account 3238 had been held over the penalty issues, and could now be closed. There were a two minor technical adjustments to the budget. The first adjustment would transfer back the mediation grant to the Child Support Enforcement program. The mediation grant had been recommended in another budget account that would also be closed—the Collection and Distribution Account, Budget Account 3238. The second technical adjustment was to reauthorize authority for the Child Support Enforcement program to pursue the software and some NOMADS interface modifications for the central disbursement unit. The IFC had approved funding for that activity during the current fiscal year. Unfortunately, that had not been completed so the division requested the reauthorization of funds to allow that to occur in FY 2000.

Mr. Abba said the primary closing issue, decision unit M-583, in Budget Account 3238 was whether to continue the funding to complete the development and implementation of the State Disbursement Unit (SDU). In December 1998, the IFC approved the initial outlay of funding to initiate the development of the project. PRWORA required all states to have a central point for distributing child support collections. Most states had various ways of doing that, and Nevada proposed to contract with Clark County for the central disbursement unit. The funding in the decision unit provided for the contract support, reimbursement, operational support, and staff for Clark County to operate the program. The decision unit would also fund the continuation of one position that had been approved for the Welfare Division by the IFC in December 1998. Staff’s recommendation was to approve the funding in decision unit M-583.

Mr. Abba called attention to decision unit E-351, which requested a new Deputy Attorney General for the Attorney General’s office for the Child Support Enforcement program. A.B. 158 concerned primarily the Division of Child and Family Services (DCFS) and modifications in adoption and foster care statues. A.B. 158 was comprehensive and had passed out of the Assembly. During testimony on A.B. 158, Attorney General Frankie Sue Del Papa indicated the Attorney General’s office would need additional legal support to process the anticipated workload. Ms. Del Papa also indicated the Attorney General’s office would be willing to restructure the office and use the position provided by E-351 to handle some of the additional workload. Fiscal Analysis Division staff recommended approving the position in Budget Account 3238. The Attorney General’s office might have to realign Attorney General staff within the Department of Human Resources to accommodate some of the extra workload of the DCFS statutory changes. The cost for that position, if it was not borne strictly by child support would be funded in the cost allocation plan in later years.

Ms. Evans stated Mr. Dini, who was not present, was the sponsor of A.B. 158. New federal legislation required an accelerated pace for the permanent placement of children in the foster care system, and to speed up adoptions. The testimony indicated A.B. 158 would increase workloads, and the position was more than justified.

Mr. Abba explained with the approval of the funding for the State Disbursement Unit (SDU), all child support collections would be distributed through a central site. It was necessary to establish a separate budget to process the volume of collections and to meet the 2-day timeframe requirement to get the collections to the district attorneys. The Collection and Distribution Account would accommodate that type of activity. Mr. Abba noted the technical changes in the account had been addressed in the discussion of Budget Account 3238. The mediation grant was an administrative activity that was more appropriately reflected in the Child Support Enforcement budget. In closing that budget, the monies for the program were retained within the Child Support Enforcement program. The offset was needed to delete the monies out of the Collection and Distribution Account, Budget Account 3239.

Chairman Rawson said the subcommittee would be discussing new Medicaid issues since the subcommittee’s last hearing on the Medicaid budget and asked Mr. Abba to present the issues. Mr. Abba said the closing list included a memorandum from John P. Comeaux, Director of the Department of Administration, regarding some changes that should be considered in closing the Medicaid budget. Janice Wright, Deputy Administrator of the Division of Health Care Financing and Policy, would discuss each modification requested.

Ms. Wright said the first issue concerned the revised caseload, which runs through February 1999, from the Welfare Division. The Division of Health Care Financing and Policy had used that information, along with the most recent cost information from the Blue Cross and Blue Shield fiscal agent, and had developed a modification to the Medicaid Projection Program (MPP). There were cost increases that had occurred and changes had occurred as a result of long-term-care facility estimates from the Health Division. There were adjustments made in the Medicaid participation requests from the Health Division, the Aging Services Division, the Division for Child and Family Services, and the Mental Hygiene and Mental Retardation Division. Those adjustments totaled an adjustment in the Medicaid Budget for the revision of approximately $7.5 million in FY 2000 and approximately $26.5 million in FY 2001, of which the General Fund portion was approximately $5 million in FY 2000 and approximately $12 million in FY 2001.

In addition, Ms. Wright continued, there were several issues pertaining to questions raised at the last Medicaid hearing. The first issue regarded the University Medical Center (UMC) settlement. A settlement had been reached and The Executive Budget recommended the inclusion of the adjustments to accommodate the settlement. The first adjustment was approximately a $3 million adjustment, $1.5 million in each year of the biennium. In the settlement there had been an agreement that UMC had over $8 million in Medicaid-reimbursable Graduate Medical Education (GME) costs for the period of 1994-1999. Clark County would transfer $2 million into the Intergovernmental Transfer Account and Medicaid would match those dollars. There would be some adjustments in the Intergovernmental Transfer Program budget, Budget Account 3157. There would be a rate adjustment for GME and for Trauma Level I rates. That adjustment was contained in decision module E-134. Changes were made in the caseload that would accommodate the Medicaid adjustment for the $2 million portion of that, which was already in the budget and was being recommended to go forward to make that accommodation.

Ms. Wright explained another issue raised in the last hearing was the business process reengineering study, which had been ongoing. There were two modules built into the adjustment. E-136 included the advancement of the point of sale pharmacy costs. The other module was in Budget Account 3158, which was already closed, and would require the staffing for the business process reengineering ongoing project, which was one of four options that had been presented to staff. The first alternative option was a point of sale stand-alone pharmacy module. The second alternative was a stair-step approach to the Medicaid Management Information System (MMIS) and the point of sale would be the first step of that. The advantage over the first alternative was that 90 federal funding could be acquired. The third alternative, which would take the least amount of time, proposed to use the MMIS and make the point of sale pharmacy the priority within that, but both would be developed at the same time and would be ongoing. The third alternative would require an additional five positions: the existing positions that had been working on the business process reengineering project and an additional information systems specialist position. There was currently no information systems specialist, which had been noted as a deficiency in developing a large program. There were two modules built into the proposed budget: one in Budget Account 3243 and one in Budget Account 3158 for the staffing needs.

In addition, Ms. Wright explained, there was a staff request that was not in the original budget, which pertained to caseloads. The caseload provisions that had been adjusted would require staff that was not originally included. The positions would be two Full-Time Equivalencies (FTEs) in FY 2000 and four additional FTEs in FY 2001. Two Medicaid Services Specialists III would be added in the first year (one in Carson City and one in Las Vegas), and in the second year two Medicaid Specialists III (one in Carson City and one in Las Vegas) and two Medicaid Specialists II (one in the central region and one in Reno). Those positions were driven solely by caseload and were to accommodate the additional Pre-Authorizations (PARS) , the additional Pre-Admission Screening Annual Resident Review (PASSAR) and other administrative functions.

Changes occurred to caseloads in different categories, which also drove different costs-per-eligible. While the largest increase in caseload concerned the Child Health Assurance Program (CHAP) increases, the disabled caseload, which was a far costlier category, had increased, as well. There had also been increases in the cost-per-eligible in the aged category and the disabled category, which had been a material increase. Therefore, the actual amounts in the revision for the Medicaid budget reflecting $5 million in FY 2000 and $12 million in 2001 were driven as a result of those caseload increases, which were a combination of the number of people and the increase of cost-per-eligible.

Ms. Wright stated one of the other components of caseload that was very important was the long-term care facilities. The Division of Health Care Financing and Policy had gathered the most recent information on all facilities from the Health Division’s Bureau of Licensure and Certification and had made adjustments as a result of more recent information as to when the facilities would open. For every facility with an opening date, that had been backed off by another 6 months. There seemed to be delays when individual entities came to the Division of Health Care Financing and Policy and stated when the facilities would be opened. She had found that was an area of possible of over-projection, so the amounts of the number of beds that would become available by the 6-month period had been reduced. The number of beds that would be filled by Medicaid clients had been phased in. In the first to the third month, approximately 20 percent of those beds would typically be filled by Medicaid-eligible clients and had then gone up to ultimate filling of the beds, recognizing 100 percent of the beds were never filled by Medicaid clients. Typically 62.7 percent of the beds were filled with Medicaid clients in a free-standing facility, and in a hospital-based facility, 71 percent of the beds were filled by Medicaid clients.

Long-term care changes also impacted staff. As a result of the increase in long-term-care beds, the division had additional home-based and community-based waiver administration, prior authorization issues, long-term-care bed review, and the PASSARs. For those reasons, the additional two positions in FY 2000 and the additional four positions in FY 2001 were needed. The Division of Health Care Financing and Policy had been working closely with Fiscal Analysis Division staff to establish a reasonable percentage for the individual staff that would be federally funded. She believed the most reasonable adjustment in ratios had been met and would continue to review that in the coming years because there was a higher federal match for the positions where technical and skilled duties were performed.

She believed the accommodations that had been addressed in The Executive Budget had been provided to Fiscal Analysis Division staff in a memo from the Budget Division. The memo recognized there had been adjustments that needed to be made. However, there were some additional issues to be discussed, which were not contained in the memo. One of those issues was the Division of Training, Employment and Rehabilitation (DETR) Waiver, which was originally discussed in the Medicaid budget meetings. There was no provision for those adjustments in The Executive Budget, as the revisions had been addressed in Medicaid. There were several options for the subcommittee to consider, which she believed were not contained as priorities in The Executive Budget.

Another area to be considered was the issue of rates. There were no adjustments for the increases in rates that had been discussed by the industry and the Division of Health Care Financing and Policy in earlier hearings. She was prepared to present information on the issue if the subcommittee wished.

Chairman Rawson asked Ms. Wright to discuss the Independent Choices Waiver. He stated he had prepared a budget for 25 clients at 55 days in the FY 2000 and 365 days in FY 2001, which he calculated to cost $185,000 in FY 2000 and $1,048,000 in FY 2001, of General Fund that would be matched by federal funds. The total would be $2.6 million. He proposed that budgets be established for 25 clients, but would not cap the number of clients that could be treated for that, because he thought the clients could be treated at a lesser cost than what was being budgeted. His concern was that the subcommittee had fought for the program the previous year and put in $500,000 and it was never implemented. Although the program was not a priority in the Governor’s budget, the issue needed to be addressed. Essentially, people were being treated in nursing homes when they could be treated in less restrictive environments. The subcommittee realized that every bed opened in a long-term-care facility could potentially be filled by other patients. If the program was capped at 25 people and allowed the program to treat as many people as possible, he thought there would be assurances the subcommittee could determine, in the next legislative session, what the costs would be in the future.

Mr. Goldwater said he would be asking questions proposed by Ms. Evans, as she was presenting a bill before another committee. He said Ms. Evans noted the total biennial cost for the Division’s Priority 1 (home health agencies and personal care aides) was $5 million, and asked how that amount was derived and whether that was half state funded. Chairman Rawson said the subcommittee would come back to that issue.

Chairman Rawson asked the subcommittee to address the Independent Choice Waiver for the Office of Community Based Services (OCBS) and asked if anyone would like to make a motion. Mr. Goldwater asked Chairman Rawson to wait until Ms. Evans returned to address the waiver for the (OCBS). Chairman Rawson said he would do so.

Chairman Rawson asked if the subcommittee needed to make a decision on the settlement between the Department of Human Resources and the University Medical Center (UMC). Ms. Wright said that was contained in what was recommended by the Budget Division, and was contained in the Medicaid budget that had been presented to Fiscal Analysis Division staff.

Chairman Rawson asked Mr. Abba to succinctly state the issues on which the subcommittee needed to vote, starting with the new Medicaid issues. Mr. Abba said staff had wanted Ms. Wright to discuss the new issues, as the subcommittee had not yet been presented with that information. There was no motion recommended by staff, because staff was still working with Division of Health Care Financing and Policy on several issues that related to the new caseload projections. He thought staff could make recommendations when the subcommittee closed the Medicaid budget.

He stated Ms. Wright had mentioned the MMIS proposal, which only reflected the cost for the acceleration of pharmaceutical claim payments in FY 2001. It did not reflect the cost for development of an MMIS system. At the last hearing, the Business Processing Reengineering (BPR) contractors that were working with the division indicated the total development cost for an MMIS system was $25.6 million. If it was a certified MMIS, the state would be eligible for a 90 federal enhanced reimbursement rate. The state cost for that system, over the life of the development, would be approximately $2.6 million. The BPR contractors also indicated once the system was operational they anticipated an ongoing operational cost of $11.2 million. The state was eligible for a 75 percent match, so the ongoing cost to the state would be approximately $2.8 million.

In previous hearings the subcommittee had expressed interest in rate increases. The Executive Budget, aside of the pharmacy providers that were mandated to receive a rate increase, did not include rate increases for any other providers that participated in the Medicaid program. He noted the closing sheets presented information on the projected cost of providing a rate increase for all providers. Staff presented the cost for a 1, 2, and 2.5 percent increase. The costs shown in the closing sheets would be 50 percent state-funded and 50 percent federal Title XIX funded.

In addition, the subcommittee had asked the division to review the various provider groups and indicate to the subcommittee which provider groups were more in need of a rate increase to continue providing services for the Medicaid program. The division categorized provider groups into nine priority areas and projected costs if a rate increase was provided. For example, as raised by Mr. Goldwater, the division’s Priority 1 included home health agencies and personal care aides, which would cost approximately $5.1 million over the biennium if the rate increase was provided. The state would pay 50 percent of that cost. The division calculated the amount based on its current rate methodology. For example, for personal care aides, the rate would be increased from $9.25 per hour to $14.50 per hour.

Ms. Wright stated that would be a 40 percent increase in rural areas and a 20 percent increase in urban areas. The calculation was made because no home health agencies would provide Medicaid service in the rural areas.

Mr. Goldwater asked if the numbers were calculated using the division’s current rate plus an arbitrary percentage increase. Mr. Abba stated the nine priority groups were further broken down in Exhibit C, which listed each provider group by priority number and also included costs for rate increases, based on current methodology used by the division. Mr. Abba stated Fiscal Analysis Division staff had prepared the breakdown so the subcommittee could present any questions to staff before staff brought the issue back in a closing package. Chairman Rawson asked the subcommittee to give staff direction so closing documents could be prepared. Mr. Abba said staff could provide the subcommittee, in closing documents, various options based upon the additional information on priority groups.

Chairman Rawson said, for the closing documents, he would like staff to prepare options on the Independent Choice Waiver, from the 25-person cap. There was concern about the Olmstead case, in that the state might be forced to accept everyone in the state if the state received a waiver. He said he had an opinion stating that was not the case, and the state had a right to cap enrollment.

Mr. Abba said another issue raised in previous hearings was the County Match Program. The Executive Budget currently recommended that the state’s obligation and the counties’ obligation for paying long-term care costs remain at the current payment levels. A proposed Assembly bill would increase the state’s obligation. For closing purposes, the subcommittee might wish to replenish the Institutional Care Fund. Chairman Rawson said he did not know whether the subcommittee would want to increase the fund, which was a $300,000 fund, of which, half had been spent. He thought it would be appropriate to bring the fund back up to the replenished level. Mr. Abba stated staff would prepare that in the closing document.

Senator Raggio stated he did not think there was one issue presented that the subcommittee, individually or collectively, did not want to support. He was concerned that in approving costly, necessary services, including add-ons, priority list placements, and NOMADS funding, the subcommittee faced a difficult solution in finding funding. The total cost for all proposed programs exceeded any available funding. He asked staff to total the cost of all proposed programs and said the subcommittee needed to prioritize which programs could be appropriated funding, as difficult as it might be. Some action the subcommittee had taken, and some it would like to take, would have to be revisited.

Chairman Rawson agreed and asked staff to prepare a simplified closing document that included key elements.

Mr. Goldwater asked staff to keep subcommittee members informed throughout the process and Chairman Rawson said highlights for that meeting would be produced as soon as possible.

There being no further business before the subcommittee, Chairman Rawson adjourned the hearing at 10:15 a.m.

RESPECTFULLY SUBMITTED:

Christina Alfonso,

Committee Secretary

APPROVED BY:

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Senator Raymond Rawson, Chairman

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Assemblywoman Jan Evans, Chair