MINUTES OF THE meeting
of the
Assembly Committee on Ways and Means
AND THE
Senate Committee on Finance
JOINT Subcommittee on K-12/Human Resources
Seventy-Second Session
May 13, 2003
The Assembly Committee on Ways and Means and the Senate Committee on Finance, Joint Subcommittee on K-12/Human Resources, was called to order at 9:11 a.m., on Tuesday, May 13, 2003. Chairwoman Sheila Leslie presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
Assembly COMMITTEE MEMBERS PRESENT:
Ms. Sheila Leslie, Chairwoman
Ms. Chris Giunchigliani
Mrs. Dawn Gibbons
Mr. David Goldwater
Mr. Lynn Hettrick
Senate COMMITTEE MEMBERS PRESENT:
Senator Raymond D. Rawson, Chairman
Senator Barbara Cegavske
Senator Bernice Mathews
Senator William J. Raggio
COMMITTEE MEMBERS ABSENT:
None
STAFF MEMBERS PRESENT:
Mark Stevens, Assembly Fiscal Analyst
Steve Abba, Principal Deputy Fiscal Analyst
Gary Ghiggeri, Senate Fiscal Analyst
Lila Clark, Committee Secretary
Susan Cherpeski, Committee Secretary
BUDGET CLOSINGS
HEALTH CARE FINANCING AND POLICY
HCF&P, NEVADA MEDICAID, TITLE XIX (101-3243)
EXECUTIVE BUDGET PAGE HCF&P-11
Chairwoman Leslie recognized Steve Abba, Principal Deputy Fiscal Analyst, Fiscal Analysis Division, Legislative Counsel Bureau, and asked for an overview of the budget account. She advised the Subcommittee the decision units would be taken one at a time because there were so many.
Mr. Abba refreshed the Subcommittee members with an update on the Medicaid situation as it was last reported at the meeting of April 23, 2003. At that time, the division had just finished the Medicaid Payment Projection (MPP) analysis, which was used as a model for projecting Medicaid costs for the upcoming biennium. The information presented at that hearing, based upon a rerunning of the MPP, indicated there was a potential shortfall due to caseloads and a number of other issues in The Executive Budget of approximately $54.4 million for FY2004-05. Of that amount, $24.1 million was General Fund. The primary reasons for the increased costs were due to the following:
In addition to the caseload costs per eligible issues, there were several other areas where changes had occurred since The Executive Budget had been developed. Those were in the areas of the two budget reduction cost containment initiatives, decision modules E-600 and E-601, based upon changes primarily in the area of the implementation of the preferred drug list and maximum allowable cost (MAC) pricing. The savings would not be generated as anticipated in The Executive Budget, which resulted in a savings reduction of approximately $6 million over the biennium.
Mr. Abba said that based on the MPP analysis and the changes to the cost containment initiatives, the last information received indicated there would be a potential shortfall of $11.7 million in state funds for FY2004 and $18.4 million in FY2005.
Having completed that short overview, Mr. Abba noted that when the body of the Medicaid budget was discussed with all the decision units, there were a number of reductions that could be made that would eliminate most of the additional costs that had been discussed at the meeting of April 23, 2003. The full analysis had not been completed, but there would be slight savings in FY2004 and a slight increase of approximately $2-3 million in FY2005. Some of the decisions that the Subcommittee may make would affect those numbers.
Mr. Abba explained that staff had identified nine major closing issues for the Subcommittee to consider. The first issue was rate increases in three decision modules – M-101, E‑350, and E-351. Decision unit M-101 was the decision module referred to as mandatory rate increases for non-discretionary providers, generally a pharmacy, and also included hospice increases. Mr. Abba said the change that had occurred in the decision unit reflected the increase for the Health Maintenance Organization (HMO) reimbursement rates that were not included in The Executive Budget. That change would increase the cost to decision unit M-101 by $8 million in FY2004, which included $4 million in state funds and $22 million in FY2005, of which $9.7 million was in General Fund dollars. Those rate increases would go into effect in July 2003, and the contracts had already been dispersed to the HMO providers indicating they would receive the 6.9 percent rate reimbursement increase.
Mr. Abba referred to decision unit E-350 and said this decision unit provided rate increases for discretionary providers identified by the division as critical providers. The portion of the cost associated just with Medicaid was for rate increases for therapy services, which included speech therapy, occupational therapy, and physical therapy. The cost associated with that increase was $354,000 in FY2004 and $930,000 in FY2005. The other funding in this decision unit would be transferred to the Mental Health and Developmental Services Division for rate increases that had been approved in their various budgets.
Decision unit E-351 included $7 million over the biennium, continued Mr. Abba, for discretionary rate increases for other critical providers and services the division stated had not been included in its strategic planning process. Those would include rate increases for the Economic Opportunity Board for transportation services, air ambulance providers, and the majority of the rate increase was for dental services, both orthodontia and dental services for children. The division had proposed to increase orthodontia rates to 80 percent of usual and customary charges that were currently reimbursed at 60-70 percent for comprehensive care. The second component of the increase, and the largest part of the overall increase in the decision unit, was the proposal to increase dental rates for the 15 highest utilized dental codes for children. The division indicated Medicaid utilization for dental services had been studied by the Centers for Medicare and Medicaid, and there was concern expressed regarding access to dental services for children. The division indicated they felt that the recommended rate increases would help with that access issue.
Mr. Abba summarized those were the three primary issues under rate increases.
Chairwoman Leslie thanked Mr. Abba and asked for comment from the Subcommittee. Senator Rawson referred to the rate increases and reiterated the state portion was $4 million. Chairwoman Leslie added that although the amount was not included in The Executive Budget, she understood that it should have been. There had been some confusion with the actuary because those were the mandatory nondiscretionary rate increases that should have been in The Executive Budget.
Mr. Abba advised he understood the HMO rates were determined by an actuary the division had under contract. That may have been a timing issue and the division might want to explain further why the increases were not placed in The Executive Budget. Mr. Abba understood the actuarial rates were available late December or early January, and it was too late for inclusion in the budget. Actuarial rates were also developed for the Nevada Check Up program, and as the Subcommittee might recall, there was some significant reduction based on the actuarial rates in that account. Those rates were not included in The Executive Budget and was an adjustment made by the Subcommittee when they closed the Nevada Check Up budget.
Charles Duarte, Administrator, Division of Health Care Financing and Policy, Department of Human Resources, commented that Mr. Abba had accurately reflected the timing issues that affected the division in terms of getting the rate adjustments into The Executive Budget. The actuarial estimates for rate increases were received from Medicaid and Nevada Check Up after The Executive Budget was complete. He agreed with the Chairwoman that the increases should have been in the budget.
Senator Rawson suggested that a motion be made on the budget account. Senator Raggio interjected that he must make a disclosure that he served as a member of the Board of Directors of Sierra Health Services, which operated an HMO. He said he would vote on the budget because it would not personally affect him, but he did want to make the disclosure.
SENATOR RAWSON MOVED TO CLOSE THIS PART OF THE BUDGET WITH THE RATE INCREASES INCLUDED IN DECISION UNITS M-101, E-350, AND E-351.
ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.
Senator Cegavske asked for an explanation as to what the Subcommittee was voting on. Chairwoman Leslie advised the Senator that the motion was only in reference to rate increases. The motion included approving the M-101, E-350, and E-351 decision units as outlined by staff. Those were the HMO rate increases that should have been in The Executive Budget, and the discretionary rate increases in E-350 that had been discussed, approved, and closed as part of the Mental Health and Developmental Services Division budget. Decision unit E‑351 was the additional discretionary rate increases for the critical providers.
THE MOTION CARRIED. (Assemblywoman Gibbons was absent at the time of the vote.)
* * * * *
Chairwoman Leslie asked Mr. Abba to provide an overview of item 2, caseload increases. Mr. Abba explained decision unit M-200 reflected the caseload adjustments from the MPP analysis and added significant cost to the projected budget enhancements that needed to be addressed by the Subcommittee. The MPP analysis indicated the caseload would increase the Medicaid budget by approximately $24.1 million over the biennium and $10.7 million of that would be state funds. The primary reasons for the increase were the issues related to not including the costs for the non-citizen population group within The Executive Budget, and the Temporary Assistance to Needy Families (TANF) and Child Health Assurance Program (CHAP) population issue related to the cost per eligible rate increase for that population.
Since that time, continued Mr. Abba, there had been a number of modifications that could be made to decision unit M-200, which would basically reduce that $10.7 million increase to approximately $700,000, and the rate of increase would be reduced. The reasons for the change were basically technical in nature, and included the adjustments the Subcommittee already made for the TANF caseload population when closing the TANF budget. Additionally, staff worked with the division and made some adjustments for the caseload for the non-citizen group, which reduced caseloads as well as cost. Adjustments were also made to the cost per eligible rate for the CHAP population. The adjustments that had been made would reduce the M-200 decision unit, projected to increase by $10.7 million, to approximately $700,000 over the biennium.
Mr. Abba advised that decision unit M-200 also included six new positions that were recommended in various areas of the division. Staff had reviewed the justification provided by the division and would recommend approval of five positions. One position, a Health Coordinator position was recommended for elimination based upon additional information regarding how the division intended to use that position.
SENATOR RAWSON MOVED TO APPROVE ITEM 2 AS RECOMMENDED BY STAFF.
ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.
THE MOTION PASSED. (Assemblywomen Giunchigliani and Gibbons were absent at the time of the vote.)
* * * * *
Mr. Abba said the next item was decision unit M-501, the Health Insurance Portability and Accountability Act of 1997 (HIPAA) and the Medicaid Management Information System (MMIS), and included the costs identified by the division for HIPAA compliance as well as MMIS development. There would be a number of changes, if approved by the Subcommittee, to decision unit M‑501 based upon newer information. Mr. Abba advised that as the Subcommittee would recall, the division had been attempting to reduce their claims inventory in order to accelerate the implementation of the MMIS system. Claims inventory would have to be reduced to 10,000 claims when it transitioned from the current fiscal agent to the new contractor for fiscal agent services of First Health.
The budget was predicated on a claims inventory of approximately 100,000 claims beginning on July 1, 2003. Mr. Abba said the claims had actually been reduced to approximately 50,000 at this point in time, so that would provide for a significant decrease in FY2004 costs for the decision unit. As a side note, Mr. Abba explained the cost for the claims inventory had increased the division’s supplemental appropriation request for FY2003, which was passed out of Assembly Ways and Means on May 12, 2003.
Decision unit M-501 also included the modifications with the transition to First Health as a fiscal agent. There were a number of single source contracts that the division currently had in place that would be eliminated because First Health would take over the responsibilities. Mr. Abba said that the other major reduction in that decision unit was the projected cost savings for the implementation of the pharmacy point of sale (POS) service system. It was estimated that the point of sale system would actually save approximately 5 percent of total pharmacy costs. Those savings had not been calculated into The Executive Budget, and they were approximately $2.3 to $2.5 million each year, which would be a General Fund savings.
SENATOR RAWSON MOVED TO APPROVE ITEM 3.
ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.
THE MOTION CARRIED. (Assemblywomen Giunchigliani and Gibbons were absent at the time of the vote.)
* * * * *
Mr. Abba called attention to decision unit E-425 and explained it implemented a new program recommended in The Executive Budget called the Health Insurance for Work Advancement (HIWA) program or the Medicaid Buy-In program. As the Subcommittee would recall, Mr. Abba said the Department was involved in a study as a result of S. B. 207 of the 71st Session to determine if that particular program could be administered on a non-cost basis. The Department reported to the Interim Finance Committee during the interim that operating on a non-cost basis was not possible, so the additional costs for that program had been recommended in The Executive Budget.
Mr. Abba provided the Subcommittee with the eligibility criteria that a committee working with the Department had recommended for the HIWA program. The eligibility criteria had been reviewed in detail, so Mr. Abba said he would not add anything further. Of particular issue, however, was new information that had been received in the past several weeks. The division had indicated the HIWA program, if approved, could not be implemented and operational until April 2004. The Executive Budget was predicated on the program becoming operational in October 2003. The primary reason the program could not be implemented in October was there were a number of technology issues which must be addressed. The division had provided a chart which displayed the implementation time frames for technology improvements as well as the state planned changes which needed to be approved for the HIWA program.
To summarize, Mr. Abba said with the delayed implementation date, there would be a $1.8 million savings in General Fund dollars over the biennium due to that delay, which was primarily a result of slower phase-in of individuals who would be eligible for this program. For the Subcommittee’s consideration, Mr. Abba had included a couple of different options for the HIWA program, which were both predicated on a start date of April 2004.
The first option would be to retain the eligibility criteria as recommended by the Department and the advisory committee that helped to develop the program, as well as what had been included in The Executive Budget. The premium rate would be increased to 7.5 percent versus the 5 percent of combined earned and unearned income included in The Executive Budget. That action would increase the premium rate from approximately $83 to $125.59 per month. Mr. Abba indicated it was estimated that only 25 percent of the population would have enough income to pay a premium, so there was not a lot of money built into the decision unit for premium revenue. The federal Ticket to Work program regulations allowed premiums to be set at 7.5 percent.
Mr. Abba advised the second option would include the same eligibility criteria as option 1, with the exception of counting household income as part of the eligibility criteria. The eligibility criteria approved by the committee reviewing that program only counted income of the individual. The division had provided information that if the income criteria included household income as part of the eligibility determination process, there would be approximately a 13 percent reduction in caseload. If that option were approved, explained Mr. Abba, and assuming the April 2004 start date, there would be a General Fund reduction of approximately $2.7 million over the biennium and the reduction was primarily because there would be a lower caseload.
Mr. Abba noted the decision unit displayed four positions that would be responsible for administering the HIWA program. Those were actually existing positions that were paid through the Ticket to Work grant. The division indicated that only two of those positions would be necessary, but they did request the other two positions be funded with federal dollars, as they currently were, until the grant expired at the end of FY2004.
Senator Rawson questioned if both those options would begin in April 2004, to which Mr. Abba answered affirmatively.
Chairwoman Leslie commented the Subcommittee had felt strongly in the past about approving the HIWA program. She had some concern about option 2 where the household income would be counted. She did not want people to be in a position to have to divorce in order to qualify for the program. She was less concerned with increasing the premium to 7.5 percent, especially since that would only affect 25 percent of the people who would otherwise be eligible.
Senator Rawson asked if the start date was delayed until July 1, 2004, what percentage difference would that make and if the savings would be the same as in option 2. Mr. Abba explained that based upon information provided by the division, assuming the April implementation date, the first year cost would be approximately $196,000 in General Fund dollars. If the date was deferred to July, there would be an immediate savings of $196,000. There would also be a savings in the second year of the biennium because the “ramp-up” of caseload would be slower because of the three-month deferral, although Mr. Abba was unsure how much that would be. The immediate savings would be $196,000 in General Fund dollars in the first year.
Chairwoman Leslie recognized Jon Sasser of Washoe Legal Services, who said there were very high expectations for this program. If the program had been cost-neutral, it would have started last year and now the state was faced with another year, making a two-year gap. That would be very disappointing to the community, but Mr. Sasser added he understood the financial crisis the state was facing. He also had the same concerns as the Chairwoman about the option counting family income. The premium would certainly hurt some folks, but it was the less onerous of the two options.
Senator Raggio said he would support option 1. That was a program the Subcommittee wanted to implement and there were high expectations in the community. The group involved in that process had been very patient while the Legislature developed something that was workable and feasible. Option 1 would only include the two positions, as Senator Raggio understood.
Chairwoman Leslie asked about the start date and suggested that it be in April, not July. Senator Raggio suggested the program start in July. The Chairwoman was concerned that if a July date was established, would it really mean the program would start on July 1, 2004.
SENATOR RAWSON MOVED TO APPROVE OPTION 1 OF DECISION UNIT E-425, WITH A START DATE OF JULY 2004, AND INCLUDE TWO OF THE FOUR REQUESTED POSITIONS.
THE MOTION WAS SECONDED BY ASSEMBLYWOMAN GIUNCHIGLIANI.
THE MOTION PASSED. (Senator Mathews and Assemblywoman Gibbons were absent at the time of the vote.)
* * * * *
Mr. Abba addressed decision unit E-426, the Stop Loss Measure for the County Match program. Basically, the decision unit provided General Fund dollars in the amount of approximately $2 million over the biennium to ensure there was sufficient funding in the Medicaid budget for those counties who were unable to meet their financial obligations under the County Match program. The proposal was for the state to pay for long-term care expenditures, regardless of whether a county was responsible for the payment, if the county had collected and spent property tax proceeds up to eight cents for long-term care expenditures under the County Match program.
The only issue Mr. Abba wished to bring to the attention of the Subcommittee was, if General Fund dollars were provided, it would become an ongoing obligation of the state in the Medicaid budget. There were several modifications that could be made to this decision unit, based upon some new information on caseloads and calculations that were made to determine the cost of that decision unit. There would be a savings of approximately $169,000 in state funds over the biennium.
SENATOR RAWSON MOVED TO CLOSE DECISION UNIT E-426 WITH STAFF RECOMMENDATIONS.
THE MOTION WAS SECONDED BY ASSEMBLYWOMAN GIUNCHIGLIANI.
THE MOTION CARRIED. (Senator Mathews and Assemblywoman Gibbons were absent at the time of the vote.)
* * * * *
Chairwoman Leslie referred to item 6, elimination of the CHAP assets test. Mr. Abba explained decision unit E-432 recommended approximately $11.5 million over the biennium; $3.9 million in General Fund dollars for the additional caseload that was anticipated for the elimination of the CHAP assets test, which was a current eligibility requirement for Medicaid.
Mr. Abba indicated the Subcommittee had received a tremendous amount of testimony and was very familiar with that program. There were a couple of new issues that he would like to bring to the Subcommittee’s attention that had changed based upon the MPP analysis. There was a projected savings in the Nevada Check Up budget that had been built into a like decision unit that the Subcommittee did not address in closing the Check Up budget, pending their decision on the Medicaid CHAP assets test decision unit. The savings projection in the Nevada Check Up was approximately $500,000 in state funds. Based on new information regarding caseload, that reduction was now estimated at $410,000 over the biennium.
Additionally, continued Mr. Abba, the Subcommittee, in reviewing the Welfare Field Services budget, indicated that the 13 additional eligibility workers needed to determine eligibility for the additional caseload would be based on the decision made on the CHAP assets test and the Medicaid budget. He reminded the members that staff had recommended those 13 positions be approved if the CHAP assets test was eliminated. There would be a ramp-up in the first year of the biennium for caseload; the average caseload was 617 individuals per month in the first year of the biennium, that increased to 2,140 individuals for FY2005. Based upon the MPP analysis, Mr. Abba said if the CHAPS assets test decision unit were approved, there could be a General Fund reduction of approximately $290,000 over the biennium. That would be primarily due to a reduction of the maternity rate paid to managed care providers.
Chairwoman Leslie clarified that the decision unit was in The Executive Budget, but the state would save $289,000 because of the revised caseload. Mr. Abba said that was correct, along with the reimbursement change with the HMO providers.
Senator Raggio inquired if the CHAP assets test was not eliminated, would the General Fund savings be $3.9 million over the biennium. Mr. Abba noted the cost for the CHAP assets test in General Fund dollars was approximately $3.9 million in the Medicaid budget. There was also the additional General Fund dollars built into the Welfare Field Services budget of approximately $431,000. The savings would be in the Check Up budget of $410,000, which was basically “a wash” between the cost of the eligibility workers. If the CHAP assets test were not eliminated, there would be a savings of approximately $3.9 million over the biennium. Chairwoman Leslie said if that was the case, the Nevada Check Up program would have to be put back in the budget. Mr. Abba agreed.
Senator Rawson advised there was concern about that decision unit. Throughout the interim, a great deal of time had been spent looking at that issue. He wondered if there was an appetite in the Subcommittee to phase the program in the second year and eliminate the first year. Senator Rawson said he felt that more than half of the positions could be eliminated if the Subcommittee took that route. Six of the 13 positions could be approved, and phase them in through the second year. Senator Rawson said he was willing to discuss the matter because he knew there were people who really wanted to see the program happen.
Assemblyman Hettrick reiterated that he could not support elimination of the CHAP assets test. He understood Senator Rawson’s suggestion to move that part of the budget into the second year of the biennium. However, the CHAP assets test ultimately ended up in the base budget and must be funded sooner or later. Mr. Hettrick said he understood the intent and the desire to do good things for people, but he personally could not do so.
Assemblywoman Giunchigliani pointed out this session the committees were agonizing over things where a recommendation and a policy change had been made last session and deferred to this session. Now the Subcommittee was again deferring the issue. She understood the budget was tight and many cuts had been made wherever they could be made, but the decision unit was absolutely necessary and it must be recommended in some way. She felt the Subcommittee should commit to the policy decision made in 2001.
Chairwoman Leslie asked how Ms. Giunchigliani felt about Senator Rawson’s idea to phase the program in and start it during the second year of the biennium, therefore, more than half of the eligibility workers could be cut because the program would begin in the second year. However, the Chairwoman pointed out that Mr. Hettrick was correct that the program would continue in the next biennium and it would be in the base budget. Ms. Giunchigliani agreed it was a start.
Senator Mathews inquired what would happen in the first year of the biennium under Senator Rawson’s scenario. Chairwoman Leslie noted the program would not be eliminated in the first year, but it would start July 1, 2004. This would allow some General Fund savings in the first year. She indicated her agreement with Ms. Giunchigliani that the policy decision had been made last session, it was in the budget, it was eliminated through budget reductions, and the Governor placed the program back in The Executive Budget this session. Clearly, there was strong support in the Executive Branch. Chairwoman Leslie indicated she would like to see the program started.
Senator Cegavske commented she would not be supporting the recommendation of the Subcommittee or either of the Chairmen.
SENATOR RAWSON MOVED TO PHASE IN THE PROGRAM IN THE SECOND YEAR. HE ALSO MOVED TO APPROVE SIX POSITIONS THAT WOULD BE PHASED IN DURING THE SECOND YEAR, RATHER THAN STARTING WITH SIX POSITIONS.
Chairwoman Leslie explained there was a motion to eliminate the CHAP assets test the second year of the biennium.
ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.
THE MOTION CARRIED ON THE ASSEMBLY SIDE AND THE MOTION FAILED IN THE SENATE.
Chairwoman Leslie asked if the members wished to make a separate motion on the Assembly side.
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO APPROVE WITH THE DELAY IN START DATE.
ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.
THE MOTION CARRIED ON THE ASSEMBLY SIDE WITH ASSEMBLYMAN HETTRICK VOTING NO. (Assemblywoman Gibbons was absent at the time of the vote.)
In response to a comment by the Chairwoman, Mr. Abba explained that with the Subcommittee’s action, there may be an additional position or two that would be eliminated in the Welfare Field Services budget. Those positions were transitioned in as caseload came online. Therefore, there might be only five positions rather than six, but staff would make the necessary adjustments.
Senator Rawson recalled the last vote and asked if the Senate had not approved anything or had they approved the Governor’s recommendation. He suggested a vote be taken on the Senate side.
SENATOR RAWSON MOVED TO NOT APPROVE THE GOVERNOR’S RECOMMENDATION TO ELIMINATE THE CHAPS ASSET TEST IN ITEM 6.
THE MOTION WAS SECONDED BY SENATOR CEGAVSKE.
Chairwoman Leslie explained that the motion would leave the CHAP assets test in The Executive Budget, but it would put an obstacle in place so that people could not get Medicaid. That was not what the Governor recommended, but it would currently remain status quo. Senator Raggio agreed with the summary.
THE MOTION CARRIED UNANIMOUSLY ON THE SENATE SIDE.
* * * * *
Mr. Abba said decision unit E-452 was fairly small but included some additional General Fund dollars in the second year of the biennium. The decision unit would provide some additional levels of care for adult day health care providers beginning in the second year of the biennium. It would make available additional reimbursement to allow adult day health care providers to provide more supervision to adults in the areas of medical and restorative care that were currently not compensated. The services included intensive restorative nursing, therapies, blood glucose testing and insulin injections, and assistance with eating and incontinent care. Mr. Abba noted there was an anticipated offset in the area of individuals not going into skilled nursing facilities, which made the decision unit a wash in terms of cost, with the exception of the appropriation recommended in the second year.
SENATOR RAGGIO MOVED APPROVAL OF DECISION UNIT E-452.
ASSEMBLYMAN GOLDWATER SECONDED THE MOTION.
THE MOTION CARRIED. (Senator Mathews and Assemblywoman Gibbons were absent at the time of the vote.)
* * * * *
Chairwoman Leslie referred the Subcommittee to item 8, additional slots for the physically disabled waiver program. Mr. Abba explained there were two decision units that increased the waiver slots for the physically disabled waiver program, E-455 and E-456. There were no eligibility differences between the individuals who qualified for those slots in both decision units. There was a waiting list of approximately 114 individuals at the present time. Decision unit E-455 included 70 additional slots, which more specifically addressed the requirements of S.B. 174 of the 71st Session. Those were individuals who needed additional levels of care and S.B. 174 required they be provided with immediate assistance.
Mr. Abba indicated the 90 slots recommended in E-456 would address the individuals who did not necessarily come under the S.B. 174 guidelines, but were still on the waiting list. Both decision units would basically take care of the projected waiting list for the upcoming biennium. Mr. Abba pointed out the division anticipated a normal waiting list of approximately 50 individuals, based upon normal processing of the individuals into the waiver.
Mr. Abba advised the members the division had adjusted their caseload standard for case managers in terms of the number of clients that each case manager would be responsible for, and the caseload had been adjusted from a 1:30 ratio to a 1:37 ratio. The caseload standard would allow for the elimination of four of the five case manager positions recommended over the biennium. The one position still recommended would come online in the second year.
Mr. Hettrick pointed out he could support decision unit E-455 because it was mandated through S.B. 174. However, beyond that, he felt the Subcommittee should be prudent and do what they had promised to do. Chairwoman Leslie asked for clarification in that Mr. Hettrick would support E-455, but he would not support E-456, upon which Mr. Hettrick agreed. She asked Mr. Abba to explain the difference in cost.
Mr. Abba noted that E-456 included 90 slots; the General Fund component would be approximately $61,000 in the first year and $784,000 in the second year. The big increase resulted when the division looked at the total of 160 slots and transition of those slots on a quarterly basis, 30 slots per quarter. The slots projected to come online in E-456 were heavily weighted in the second year of the biennium.
Chairwoman Leslie understood that E-455 represented the S.B. 174 eligible slots and E-456 would be the same type of people in terms of their physical disabilities and the services they would get, but they were not at the eligibility level required in S.B. 174. Mr. Abba agreed and explained those people did not meet the criteria of the bill, but they were Medicaid eligible and would qualify under the physically disabled waiver.
The Chairwoman asked if someone from the division could explain the eligible slots in a little more detail. She understood the eligibility, but if E-456 was not approved, what would that mean for those disabled people.
Charles Duarte, Administrator, Division of Health Care Financing and Policy, explained that E-455 would fund 70 waiver positions that would meet the functional criteria established under S.B. 174. Basically, those were individuals who had a higher level of functional need than other individuals who the division believed could be on the waiting list. The remaining 90 slots would still meet the intermediate level of care, or nursing facility level of care, but they could be classified as less in need. Those individuals could continue to receive services if they were Medicaid eligible, but many of them were only eligible for Medicaid as a result of the waiver, so would not become Medicaid eligible for any services available through the state plan, such as personal care aid services. Those people would have to wait for any funding to become available, or they and their families would have to spend down to the level that would allow them to come into the Medicaid program.
Chairwoman Leslie commented, as she understood Mr. Duarte’s testimony, the disabled person would not receive personal care and attendant services. What she was really looking for was what kind of services those people would not be getting if the decision unit was not approved.
Mr. Duarte responded that primarily those people would go to the personal care aid services and other types of home and community-based support services to stay out of an institution. The difficulty was twofold – one, it would push those individuals into Medicaid at a point when they were eligible for nursing facility care. The second option could push the funding of those services to the County Match program so the counties would have to pick up the cost of care for those people once they reached the institution. Someone would end up paying for those services once the person was no longer able to stay at home. Chairwoman Leslie thanked Mr. Duarte and said his explanation was very helpful.
SENATOR RAWSON MOVED TO APPROVE DECISION UNITS E‑455 AND E-456.
ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION CARRIED WITH ASSEMBLYMAN HETTRICK VOTING NO. (Senator Mathews was absent at the time of the vote.)
* * * * *
Chairwoman Leslie called attention to item 9, budget reductions and cost savings initiatives, decision units E-600 and E-601. Mr. Abba explained he was combining the two decision units, which were both budget reduction and cost containment issues. As noted in the overview, there had been a number of modifications, primarily to decision unit E-601, which would reduce the General Fund savings that was anticipated over the biennium by approximately $6 million. The primary reason was the delay in the implementation of the preferred drug list.
In decision unit E-600, Mr. Abba noted there was one change. He referred to a table in the closing sheets, the highest utilized current procedural terminology (CPT) codes, which were standard procedural codes that doctors used to align procedures for reimbursement, and said as part of decision unit E-601, there was also a component that dealt with the rate of reimbursement reductions for physicians. In the table, that component of E-601 had been included with the decrease in highest utilization CPT codes. The savings were based on a May 2003 implementation and reflected a combining of those two decision components within those two decision modules. The proposal to reduce the highest utilized CPT codes was based upon an analysis completed by the division to apply the 100 highest utilized CPT codes and the reductions would vary across the board. The primary area targeted for reduction would be in the area of surgery and radiology. In those areas, there would be an approximate savings of $3 to $3.4 million each fiscal year.
Mr. Abba added there was another component of decision unit E-601, and that was reducing the overall CPT codes from current rates to approximately 90 percent of the Medicare rate. In doing that, there were a number of “puts and takes.” Some CPT rates would actually go up, a number of the CPT reimbursement levels would go down for the net reductions displayed in that decision unit. He indicated the division had previously testified that obstetrical services would be held harmless from any reduction in reimbursement levels. The projected savings, if rates associated with their services had been reduced, were approximately $1.8 to $1.9 million.
Continuing, Mr. Abba said most of the cost containment initiatives had not been implemented, with the exception of life skills training, which had been implemented and the division had already realized savings from that cost containment proposal. Without going through all the initiatives, Mr. Abba said the division had provided additional information on personal care aide (PCA) services which projected the number of hours that would be reduced based on the division’s analysis of current levels of services and the new function assessment tool they would use for providing PCA services.
There was one component of E-601 that Mr. Abba wished to draw to the Subcommittee’s attention, the preferred drug list (PDL). He said there was some additional information based on recent events. The original decision unit had contemplated savings beginning in July of 2003. That date had been adjusted for a number of reasons and the implementation date for the PDL was now projected to be January 2004. To coincide with the PDL, the division had also proposed to delay the implementation of the maximum allowable cost pricing cost containment initiative to January as well. Those were both pharmacy related initiatives and they would go hand in hand based upon the latest implementation date.
Mr. Abba advised the division had provided information on the PDL which indicated they intended to hire a PDL manager and would solicit bids for those services. Also, a physician and therapeutics committee would be established. At one point, the division had indicated they were contemplating using the drug utilization board. He said the division had also provided information that the following drug classes would be excluded from the PDL: atypical and typical anti-psychotic medications; anti-HIV/AIDS drugs, including protease inhibitors, anti-retrovirals; anti-seizure medications, immunologic medications; anti-diabetic medications; and anti-hemophilics.
Mr. Abba disclosed there would be costs associated with establishing a PDL, and those costs would include the contract cost for the PDL manager, the cost for the physician and therapeutic committee, as well as the maintenance costs for the PDL and the negotiating costs that the PDL manager would be compensated for negotiating supplemental rebates. The reduction in savings for the PDL was $4.2 million, which was approximately $1.4 million General Fund. With the delayed implementation of maximum allowable cost (MAC) pricing, the estimated savings had been reduced by approximately $1.8 million, $834,000 in General Fund. All the other components of E-601 were basically the same as originally proposed.
Chairwoman Leslie recognized Larry Matheis, Executive Director of the Nevada State Medical Association. Mr. Matheis explained the meeting on the proposed changes in the payment system occurred only last Wednesday, May 7, 2003, when physicians had a chance to review the changes. He was concerned about two things being done by the division. One was the change from the California relative value system that had been in place for 30 years to update the Nevada system by adopting the resource based relative value system (RBRVS) that was used for Medicare. The RBRVS introduced a lot of procedural codes that were not available at the time the California system was developed. The medical association had to move quickly to interpolate those procedural codes.
The second concern, continued Mr. Matheis, was to adopt the Medicare fee schedule and then adopt as a multiplier a percentage of that fee schedule for each of the codes, which was where the problem entered. Under normal circumstances, 80-85 percent of Medicare was used for those codes. With reference to obstetrics, 128 percent of Medicare was being paid now. The reason was quite simple, opined Mr. Matheis, there were very few babies delivered by Medicare recipients. There also were very few children who were served under Medicare.
Mr. Matheis said the system had been developed over the last eight or nine years by the federal government to take care of Medicare coverage, but in going to this new system, it undervalued certain things that were not very important in the Medicare system. The new system would increase the valuation of primary care, which was why primary codes had gone up with the changeover, but the system really devalued surgical specialty codes. That was where the problem arose, just as with obstetrics, those were tremendous reductions for the pediatric surgical codes, 50 percent in some cases and more. Virtually every pediatric sub-specialist in Las Vegas attended the hearing last week. Those were not easy people to get out of the clinic, out of the office, or out of the hospital. The doctors came because they expressed significant concern that they would not be able to see Medicaid patients. Mr. Matheis felt strongly that concern must be relayed to the Subcommittee. The Nevada State Medical Association recommended that the division not abandon the transition to the new system, but that the division look specifically at the impact on the availability of pediatric specialty, and secondarily on the other surgical fields. Primarily, it was felt that the pediatric specialty should have a different modifier so that the impact was not so great. Mr. Matheis was concerned about the situation where there would be a probable loss of availability.
Chairwoman Leslie thanked Mr. Matheis for his testimony and asked if the division would like to briefly respond to those concerns.
Mr. Duarte believed that Mr. Matheis’ representation of the need to change from a California-based relative value system to a more widely used resource-based relative value scale as used by Medicare was accurate. The reason the division made the change was that it was incorrectly valuing many of the services, particularly surgical and radiologic services. A study had been provided to the Subcommittee previously, of which Mr. Matheis was familiar, which was conducted of the Medi-Cal system where they hired a consultant to study Medicaid reimbursements across the nation. They found Nevada was number one in the nation for the amount paid for surgical services.
Chairwoman Leslie observed the study had been previously discussed in the Subcommittee and asked Mr. Duarte to specifically address Mr. Matheis’ comments about the pediatrics specialty. Mr. Duarte indicated he was unsure what the fiscal impact would be because the division did not necessarily break-out pediatric services separately. The division’s public commitment had been to monitor pediatric access to medical and surgical sub-specialty care. Upon the Chairwoman’s request, Mr. Duarte agreed he would look into the issue as it would be a federal requirement for the approval of the state plan change. The state did not want to lose pediatric surgeons.
SENATOR RAWSON MOVED TO CLOSE ITEM 9 WITH STAFF RECOMMENDATIONS.
THE MOTION WAS SECONDED BY ASSEMBLYMAN GOLDWATER.
THE MOTION CARRIED. (Assemblyman Hettrick was absent at the time of the vote.)
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Chairwoman Leslie requested that Mr. Abba continue with the closing report and review a Letter of Intent to be directed to the division. Mr. Abba said that in closing the Division of Aging Services budget, the Subcommittee approved the additional slots for the Adult Group Care waiver, which included a component of slots for an assisted living option within the waiver that had not yet been developed. That decision unit was not listed under major issues because it had already been approved. However, staff was requesting the Subcommittee approve a Letter of Intent for the division to come before the Interim Finance Committee (IFC) with their proposals on the assisted living option, including service proposals and reimbursement for those services so the IFC would have a full understanding of the cost of that particular option within the Adult Group Care waiver.
Mr. Abba commented the only other closing issue he would like to point out to the Subcommittee was item 3, where a number of technical adjustments were made to decision units E-910, E-911, and E-912 that adjusted the federal match participation rates, and provided a savings of approximately $2.5 million in FY2004 and $3 million in FY2005.
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO APPROVE THE LETTER OF INTENT AS DESCRIBED IN ITEM 2 OF OTHER CLOSING ISSUES, AND INCLUDE THE TECHNICAL ADJUSTMENTS IN ITEM 3.
SENATOR RAWSON SECONDED THE MOTION.
THE MOTION CARRIED. (Assemblymen Hettrick and Goldwater were absent at the time of the vote.)
BUDGET CLOSED
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HCF&P INTERGOVERNMENTAL TRANSFER PROGRAM (101-3157)
EXECUTIVE BUDGET PAGE HCF&P-38
Mr. Abba stated The Executive Budget included the revenue producing abilities of the Intergovernmental Transfer Program as it currently existed. For the upcoming biennium, the state benefit that would accrue to the Intergovernmental Transfer (IGT) budget was estimated at $17.5 million for FY2004 and $18.2 million for FY2005, and the participating hospitals would receive a net benefit of approximately $20 million.
As the Subcommittee would recall, Mr. Abba said the IFC approved the upper payment limit program at their meeting of February 18, 2003. Without going into the details of the program, Mr. Abba explained the net benefit the state would realize from that program had not been accounted for in The Executive Budget. The closing adjustments brought in additional IGT money and the reserved net benefit the state would realize from that program was approximately $4.9 million in FY2004 and $6.2 million in FY2005. Again, those benefits had not been allocated in any manner, except reflected as reserves in a closing document.
Before discussing options dealing with the IGT reserve, Mr. Abba advised that in approving the Upper Payment Limit (UPL) program, in future years the state would incur an additional cost whenever rate increases were approved for those hospitals that fell under the UPL program. That was because the rate base for the hospitals would be higher. The division had acknowledged that the rate base would be higher and there was a mechanism that might help to mitigate that. For the current biennium, that would not be an issue because there were no rate increases built into the budget for hospitals. Staff suggested that a Letter of Intent be issued to the division to formally develop alternatives to help mitigate the impact of any future rate increases based upon the passage of the UPL program.
Mr. Abba commented that in the area of utilization of potential IGT reserves, as noted before, the additional UPL benefit had not been provided and had been placed in reserve. The reserve estimate at this time for FY2004, based upon the UPL program and the balance forward of reserves from FY2003, would provide a reserve of $9.1 million, and for FY2005, the reserve would be $15.9 million. Basically, that would be unobligated cash that would accrue in the account. As the Subcommittee might recall, in previous years the IGT had a very healthy reserve which had been spent down over the last several bienniums to address Medicaid costs. In FY2003, the reserve was spent down to approximately $3.6 million to take care of the projected shortfall.
Having said that, Mr. Abba pointed out there were some options the Subcommittee might want to consider regarding the projected reserve. The options revolved around using some of that reserve to transfer to Medicaid to offset General Fund expenditures.
For purposes of clarification of these minutes, the options included in the work sheet are as follows:
Option 1 – Leave the net benefit that will be realized from the UPL program in the IGT budget and allow the IGT reserve to increase to $9.1 million for FY2004 and to $15.9 million for FY2005. If necessary, the reserve could be accessed to offset potential shortfalls in the Medicaid budget for the upcoming biennium, as occurred during the current biennium.
Option 2 – Use a portion of the net benefit to fund Medicaid expenditures in lieu of state General Funds. For example:
· If the IGT transfer to the Medicaid budget were increased by $2 million for each fiscal year, state General Funds would be reduced by a like amount. The reserve in the IGT budget would decrease to $7.1 million for FY2004 and to $11.9 for FY2005.
· If the IGT transfer to the Medicaid budget were increased by $3 million for each fiscal year, state General Funds would be reduced by a like amount, and the reserve in the IGT budget would decrease to $6.1 million for FY2004 and $9.9 million for FY2005.
Option 3 – Increase transfers from the IGT budget in an amount that would reduce the IGT reserve to approximately $4 million for each fiscal year, which is the minimum level the division needs for cash flow purposes. This option would reduce state General Funds in the Medicaid budget by approximately $5 million for FY2004 and by approximately $6 million for FY2005.
Explaining options 2 and 3, Mr. Abba said the Subcommittee may wish to consider, for example, if transfers from the IGT budget were made to Medicaid in the amount of $2 million for each fiscal year, that would offset General Funds in the Medicaid budget by a like amount. A reserve in the IGT budget would be reduced to $7.1 million in FY2004 and $11.9 million in FY2005. If a $3 million transfer was made for each fiscal year to the Medicaid budget, again, the General Fund would be offset by a like amount and the IGT reserve would be decreased to $6.1 million and $9.9 million.
Mr. Abba said the division had indicated to him that they needed a cash balance in the IGT account of approximately $4 million. If the Subcommittee wished to bring down the balance in the reserve to approximate those levels, transfers in the amount of $5 million in FY2004 and approximately $6 million in FY2005 could be made to Medicaid, again offsetting General Fund in a like amount, and the cash reserves in IGT would be approximately $4 to $4.9 million over the biennium.
Chairwoman Leslie remarked that the formula for each year, at least, should be held in reserve. Senator Rawson agreed that the reserve should be retained, but there was tremendous pressure on the General Fund this session and it might make sense to transfer that money to save the General Fund obligation on Medicaid, which was a significant $11 million over the biennium.
Senator Rawson proposed option 3 should be adopted. Chairwoman Leslie commented that option 3 would leave a reserve of $4 million and use the balance of $11 million to offset General Fund in the Medicaid budget.
Ms. Giunchigliani asked what effect would this have on county hospitals. Chairwoman Leslie advised this was just the state’s net benefit. The state had realized an additional state benefit of $9.1 million in FY2004 and $15.9 million in FY2005 that had not been allocated. She was at ease with the reserve in the event something should happen in the next two years; however, she personally would like to see more than $4 million in reserve.
Mr. Abba clarified that option 3 would transfer $5 million and $6 million over the biennium and would leave the minimum level of cash reserve in the IGT budget, which was what the division felt was needed. The reserve would be approximately $4 to $4.9 million. At the present time, there was a projected balance forward from FY2003 into FY2004 of approximately $3.6 million. The division was required to use the remaining part of the reserve in FY2003 to offset the additional costs incurred for caseload, which basically reduced the supplemental appropriation of $11.6 million approved recently by the Assembly Committee on Ways and Means.
Mr. Goldwater recalled a significant reserve had been carried in that budget account in past years, and noted that the reserve had helped in the last budget cycle when funding was needed for caseload. He felt very nervous about carrying a low reserve in that budget account and it had not been done in quite some time.
Chairwoman Leslie asked Mr. Duarte to come forward to testify as to what would be the division’s comfort level on the reserve. Mr. Duarte indicated his preference for option 1, which would retain the state benefit to build the reserve back up. He reminded the Subcommittee that $4 million was necessary just to maintain cash flow, it was not necessarily a reserve, and represented approximately one week’s worth of General Fund dollars. Chairwoman Leslie acknowledged the division’s position was to build up the reserve for unforeseen Medicaid problems.
Debbra King, Administrative Officer, Division of Health Care Financing and Policy, explained the division expended approximately $18 million per week on Medicaid claims payments. Therefore, a one-week General Fund match was approximately $8 to $9 million. If there was a reduction to the option 2 level where the reserve would be approximately $7.1 million in FY2004, there would not be enough to fund one week of General Fund expenditures.
Mr. Goldwater called attention to his previous comment and said if the division was going to carry a low reserve, there was very little difference between $4 million or $6 million if it had a relative impact on the General Fund; the numbers were really quite small. He indicated his support for Senator Rawson’s suggestion of going with option 3 and leaving a $4 million reserve with IGT, because in practical terms, there was very little difference.
Senator Rawson added that the Rainy Day Fund had been spent and, in a way, that was a similar type of reserve account and it should be built up when possible. However, this was a time when all resources were being used. It was also possible to talk in terms of a programmed way to try to rebuild that reserve if the Rainy Day Fund was rebuilt. Senator Rawson indicated it was attractive to him to save the General Fund dollars.
Chairwoman Leslie asked if Mr. Abba would provide more input to the discussion about another option. Mr. Abba explained that when he reviewed the Medicaid budget, there were a number of “puts and takes” as the Subcommittee would recall, and based upon reductions in caseload and other factors, the additional cost that had been projected by the division in April 2003 would basically be eliminated with the exception of approximately $3 million in the second year of the biennium. The Subcommittee had made some other decisions which would reduce that amount, but for consideration, the Subcommittee might want to think about a transfer of approximately $3 million in the second year of the biennium to offset any additional General Fund increases that might have to be made for the caseload increases from the Medicaid Payment Projection (MPP) as well as the rate increases for HMO providers. At least that would provide a net wash overall.
Chairwoman Leslie agreed the last option described by Mr. Abba would be a prudent path to take. Otherwise, she felt the adjustments would have to be backfilled with General Fund dollars. Asking for clarification, the Chairwoman explained to Senator Rawson that $3 million of the $15 million reserve would be transferred to offset extra costs in the second year of the biennium.
Mr. Abba said if that action was taken, the first year reserve would still remain at $9.1 million and the second year reserve would be reduced to $12.9 million. Chairwoman Leslie suggested that action should be part of whatever the Subcommittee agreed to do, otherwise, General Fund dollars would have to be found. Clarifying for Ms. Giunchigliani, Mr. Abba had suggested a transfer in the second year of the biennium of $3 million to address a potential General Fund increase in the second year in the Medicaid program. That was not an option that had been identified on the worksheet. Option 3 would provide for IGT transfers in an amount that would leave the division with the $4 million cash balance they felt was necessary for cash flow purposes.
Senator Rawson proposed to transfer $3 million out of the reserve and leave the balance so a reserve of $4 to $5 million remained with the division. Chairwoman Leslie said the proposal made sense and that she agreed with Senator Rawson.
ASSEMBLYWOMAN GIUNCHIGLIANI MOVED TO APPROVE THE BUDGET BY TAKING $3 MILLION OUT OF THE $15.9 MILLION RESERVE IN THE SECOND YEAR OF THE BIENNIUM TO DEAL WITH THE ANTICIPATED ADDITIONAL MEDICAID COSTS.
THE MOTION WAS SECONDED BY SENATOR RAWSON.
THE MOTION CARRIED WITH SENATOR CEGAVSKE VOTING NO. (Assemblyman Hettrick was absent at the time of the vote.)
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Senator Raggio indicated for the record that he voted on this budget even though he was abstaining on S. B. 235, which was presently in the Senate Finance Committee.
Mr. Abba said after the last vote, a projected $9.1 million reserve would be left in FY2004, which would be brought forward into FY2005. With the transfer of the $3 million based on the action just taken, there would be an ending year FY2005 reserve of $12.9 million. If the Subcommittee wished to leave a balance of $4 million for cash flow purposes, it could vote on option 3, which would transfer $5 million in FY2004, and since the Subcommittee had already taken action on $3 million of the $6 million in reserve, an additional $3 million could be transferred in FY2005 or leave the cash balance reserve projected for FY2005 at the $3 million level.
SENATOR RAWSON MOVED TO LEAVE A $4 MILLION RESERVE IN THE IGT BUDGET IN EACH FISCAL YEAR FOR CASH FLOW PURPOSES AND TRANSFER THE BALANCE TO THE MEDICAID BUDGET TO OFFSET GENERAL FUND EXPENDITURES.
ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.
Mr. Abba wanted to ensure he understood the motion. It appeared the combination of the one action that had already been taken and the discussion that had just taken place would basically be to approve option 3, leaving a cash flow balance of approximately $4 million in the IGT budget for both fiscal years of the biennium. Chairwoman Leslie added the remainder would be used to offset General Fund in the Medical budget, to which Mr. Abba said was correct.
Senator Cegavske summarized that option 3 was being voted on as it appeared in the closing worksheet. Chairwoman Leslie agreed, but with the exception that $3 million had been moved out of the second year of the biennium to offset additional Medicaid costs. Senator Cegavske understood that there would be $5 million in FY2004 and $3 million in FY2005.
Mr. Abba explained the first action taken by the Subcommittee increased the transfer from the IGT reserve in the second year of the biennium by $3 million, which left a balance of $12.9 million in the second year; $9.1 million would remain in the first year of the biennium. He believed the Subcommittee was now discussing an action to reduce the reserve in the IGT budget to approximately $4 million each year for cash flow purposes, and make the transfers to the Medicaid budget to offset General Fund expenditures. In essence, those actions would be option 3 if they were not taken separately.
Chairwoman Leslie asked if any reserve would be built. Mr. Abba responded to both the Chairwoman and Senator Cegavske that under option 3, there would be approximately a $4 million reserve in FY2004, reduced from $5 million, and a $4.9 million reserve in FY2005, reduced from $6 million. The first action taken by the Subcommittee would transfer unobligated IGT revenues to Medicaid in the amount of $3 million to offset General Fund in the Medicaid account.
Ms. Giunchigliani added this would save General Fund dollars, it was just a matter of where those General Fund savings were placed. Chairwoman Leslie agreed and said this would fill the shortfall with $3 million that the Subcommittee had been unaware of, and the additional net benefit would go into the Medicaid fund to offset General Fund expenditures. Therefore, Ms. Giunchigliani observed, $11 million in General Fund had been saved, it was just a matter of dividing the savings differently.
The Chairwoman asked for input from Mark Stevens, Assembly Fiscal Analyst, Legislative Counsel Bureau. Mr. Stevens felt the Subcommittee understood the issues, but what needed to be decided was what level of reserve should remain in the IGT account. Based on option 3, it appeared that regardless of what had been decided before, there would be a reserve of $4 million in the first year, $4.9 million in the second year, and the difference between those reserve numbers and the $9.1 million in the first year and $15.9 million in the second year, would be utilized as a match for Medicaid funds, offsetting General Fund dollars in the Medicaid program. Chairwoman Leslie concurred.
Chairwoman Leslie asked if the Subcommittee was ready to vote on the motion.
THE MOTION CARRIED. (Assemblyman Hettrick was absent at the time of the vote.)
BUDGET CLOSED.
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WELFARE
HR, WELFARE ADMINISTRATION (101-3228)
EXECUTIVE BUDGET PAGE WELFARE-1
Chairwoman Leslie said this was a rather simple budget, there was only one closing issue and the Subcommittee was close to resolution. Mr. Abba said the only issue was decision unit M-200, which provided for 22 new positions over the biennium. Mr. Abba remarked that he would not itemize the positions, but he had discussed them in the closing sheets and referred to Exhibit C, a handout prepared by the division. Exhibit C prioritized the positions and provided a description of the duties and responsibilities that would be assigned to those positions.
Mr. Abba had worked with the division over the last several weeks and had suggested an alternative to the 22 positions recommended in decision unit M‑200. Staff was recommending the approval of 12 new positions based on the division’s priority list. The first 10 positions on the division’s priority list were recommended for approval by staff as well as position priorities 12 and 13. There were 10 positions staff was not recommending, including 3 Social Welfare Program Specialists, priorities 20, 21, and 22; two Quality Control positions, priorities 11 and 16; one Administrative Assistant, position priority 14; one Telecommunications Specialist, priority 15; one Account Technician, priority 17; one Computer Network Technician, priority 18; and one Information Systems Specialist, priority 19.
In making that recommendation, Mr. Abba explained staff took into consideration the additional resources that would support the division based upon the bi-functional duties of the 12 new positions that staff was recommending. New information was provided by the division that did not fully support or justify some of the positions. In addition, staff reviewed how critical the positions were and how essential they were to the division’s operation. Also reviewed was the effective date some of the positions came online, which was in the second year of the biennium. Mr. Abba summarized that was the major decision the Subcommittee needed to make.
The only other closing issues included 10 items that provided for some significant reductions in that account. Mr. Abba explained a reduction was made in decision unit M‑100 because there was a doubling of computer facility costs in decision unit M-100 and M-201. There was a reduction of approximately $700,000 in the first year of the biennium, and $833,000 in the second year. The second issue was a reduction in the cost for the Electronic Benefit Transfer system that was based on new information on caseload and per-transaction charges the division would be assessed. The savings were approximately $228,000 in FY2004 and $234,000 in FY2005.
Mr. Abba said the only other issue he wished to bring to the Subcommittee’s attention was decision unit E-301, which provided for the consolidation of the division’s information system category and the Nevada Operations Multi-Automated Data Systems (NOMADS) expenditure category. For the last several bienniums, the NOMADS costs were isolated in this account, however, NOMADS was now implemented and it was a matter of combining the division’s information systems to reflect operational costs, which was the recommendation supported by staff.
Chairwoman Leslie thanked Mr. Abba and concluded that the Welfare Division’s staff had worked with legislative staff and the division felt that the recommendation to not fund 12 new positions was a workable plan.
SENATOR RAWSON MOVED TO CLOSE WITH STAFF RECOMMENDATIONS.
THE MOTION WAS SECONDED BY ASSEMBLYWOMAN GIUNCHIGLIANI.
THE MOTION CARRIED. (Assemblyman Hettrick was absent at the time of the vote.)
BUDGET CLOSED.
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CHILD AND FAMILY SERVICES
HR, CHILDREN AND FAMILY ADMINISTRATION (101-3145)
EXECUTIVE BUDGET PAGE DCFS-1
Diane Comeaux, Deputy Administrator, Division of Child and Family Services, Department of Human Resources, introduced Jim Baumann, Administrative Services Officer IV, also with the Division of Child and Family Services. Mrs. Comeaux indicated during the Joint Subcommittee meeting on Friday, May 9, 2003, Assemblyman Hettrick questioned how there could be a $4.5 million decrease in federal funds and a simultaneous increase in General Funds for the Division of Child and Family Services (DCFS). In order to respond to Mr. Hettrick’s question, both the revenue and expenditure reduction in the division’s administrative account, as well as the overall recommendation to support the division’s child welfare costs, were reviewed. Mrs. Comeaux presented the Subcommittee with Exhibit D.
Referring to page 3 of Exhibit D, Mrs. Comeaux said the attachment reflected the summary of the General Fund recommendation in the DCFS administrative account. In looking at the adjusted base budget for FY2004 and FY2005, she pointed out the reduction in General Funds of $1,640,012 in FY2004 and $1,565,716 in FY2005, when compared to the appropriation for FY2003. This was offset in part with a General Fund increase in the maintenance and enhancement decision units of $1,338,246 in FY2004 and $1,388,377 in FY2005.
In response to Mr. Hettrick’s question, Mrs. Comeaux indicated that Mike Willden, Director of the Department of Human Resources, offered a suggestion that, in part, the funding differences were due to capped revenues. Mrs. Comeaux added that the change in the funding mix was apparent when comparing FY2004 and FY2005 adjusted base budgets to the maintenance and enhancement units. The funding mix for the adjusted base budget was approximately 36 percent General Fund, 63 percent federal funds, and 1 percent other. The maintenance and enhancement decision units were funded with approximately 62 percent General Fund and 38 percent federal funds.
Mrs. Comeaux referred to Attachment 3 on page 6 of Exhibit D, and stated there was a notation in the far right column designating those revenues that were capped. Attachment 2, on pages 4 and 5, reflected the revenue and expenditure adjustments to the Child and Family Administration account as recommended in the adjusted base budget. As indicated, the overall reduction to revenues and expenditures was $9,018,353 in FY2004 and $8,883,956 in FY2005, when compared to FY2003. That reduction was a combination of the reduction in staff and associated costs due to integration, the increases in grants, and the reduction of one-time expenditures. In addition to the General Fund reduction of 18 percent in FY2005 and 17 percent in FY2004, there were reductions in Title IV-B of 9 percent each year; Temporary Assistance to Needy Families (TANF) – 24 percent in each year; and Title IV-E – 48 percent in each year.
In balancing the revenues across budget accounts, continued Mrs. Comeaux, the division and counties had to look at what revenues each entity could earn with the least impact on the General Fund. For example, the TANF revenues were mostly earned through case management services, salary and operating, and placement costs. With a significant transfer of staff and services to Washoe and Clark Counties, TANF dollars were allocated to Budget Account 3142, Child Welfare Integration, to cover those costs. That situation also applied to Title IV-B revenue, which was earned primarily through case management services.
For the division’s administrative account, that allocation caused a disproportionate share in the reduction to the TANF allocation; roughly 79 percent in the overall allocation. Had the TANF allocation been reduced by approximately 47 percent, which was equal to the reduction in salary and operating, the TANF would have been decreased by only 14 percent in each year of the biennium, approximately $1.2 million, and the General Fund would have been decreased by roughly 28 percent in each year.
Mrs. Comeaux pointed out that because of the budgetary changes required to effect child welfare integration and the split of the division’s budget accounts, an overall analysis was needed of the revenues and the number of budget accounts. Calling attention to Attachment 3, page 6 of Exhibit D, Mrs. Comeaux said when looking at the overall revenues included in the division’s adjusted base budgets as compared to FY2002 actual budget, there was not a significant change in the percentage of General Fund and federal funds and other dollars. In FY2002, the General Fund allocation represented approximately 43.52 percent of the overall revenues, with 56.48 percent in federal and other funds. In FY2004, the General Fund represented 43.9 percent, with federal and other funds representing 56.10 percent. In FY2005, the General Fund represented 43.32 percent and the federal funds represented 56.8 percent.
In looking at Attachment 3, Mrs. Comeaux said it was important to note that those were only the division’s child welfare costs and did not include the cost of integration.
Chairwoman Leslie thanked Mrs. Comeaux and inquired of Mr. Hettrick if he had any further questions or concerns. Mr. Hettrick responded that the presentation was complicated and complete; however, it appeared the Legislature transferred the federal TANF money to the counties for child integration, and essentially made up the difference with General Fund dollars. Overall, when the percentages were compared they were the same, but the state was having to pay $4.5 million in General Fund dollars.
Mrs. Comeaux responded that while Mr. Hettrick’s comment was correct, when the money was put into the child welfare integration budget account, there was a reduction to General Fund, so the funds balanced out. If the TANF money was moved back into the administration budget, that money would have to be replaced with General Fund dollars in the child welfare integration account. All the budget accounts had to balance out.
Mr. Hettrick called attention to Exhibit D, and the paragraph which stated that had the TANF allocation been reduced by approximately 47 percent, the state would have saved $2.5 million per year or 28 percent. Mrs. Comeaux explained that was only in the Child Welfare Integration budget. Mr. Hettrick commented that was under the assumption that child welfare integration would have been funded with General Fund dollars. Either way, it would cost the state $4.5 million, to which Mrs. Comeaux agreed.
Chairwoman Leslie recalled at the last meeting of the Subcommittee, there had been discussion about holding action on closing issue 1 regarding child welfare integration because the budget had been held. The position of the Assembly was clear on that budget. However, since that budget had been held, she did not feel any action could be taken on the continuation issue of the child welfare integration.
There had been a motion, as the Chairwoman remembered, to approve items 2, 3, and 4, as well as the budget amendment that was discussed in other closing issues. Additionally, technical adjustments would be approved to save the General Fund $31,000 in extra expenses related to the Health Insurance Portability and Accountability Act (HIPAA). She asked for a motion to that effect.
Senator Raggio felt that items 1 and 4 would have to be held because they both related to child welfare integration, and the Chairwoman agreed.
SENATOR RAWSON MOVED TO APPROVE ITEMS 2 AND 3 AS WELL AS THE OTHER CLOSING ITEMS AND TECHNICAL ADJUSTMENTS.
ASSEMBLYWOMAN GIUNCHIGLIANI SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
BUDGET CLOSED.
* * * * *
Since there was no further business before the Subcommittee, Chairwoman Leslie adjourned the meeting at 10:59 a.m.
RESPECTFULLY SUBMITTED:
Reba Coombs
Transcribing Secretary
APPROVED BY:
Assemblywoman Sheila Leslie, Chairman
DATE:
Senator Ray Rawson, Chairman
DATE: