Written by Stephanie Limb

Like death and taxes, the return of legislators is a certainty. On Jan. 8, 2019, the gavel falls in the Texas house and sentate to announce the opening of the Legislature.

Assuming the session ends without the need for special sessions, lawmakers will return home May 27. In that time, they likely will pass more than 1,000 pieces of legislation. Last session, lawmakers filed more than 6,000 bills and ultimately passed more than 1,300. Yet, they are required to pass just one: a balanced budget to govern state revenue and spending over the 2020-2021 biennium.

But agreeing on that budget is no straightforward process, and spending decisions have significant implications for hospitals because of the budget’s role in Medicaid, trauma funding and other key issues.

In January 2019, Texas Comptroller Glenn Hegar will tell budget writers how much money they can spend for the 2020-21 biennium. Budget writers have reason to be cautiously optimistic. In July, Hegar issued a revised revenue estimate for the current budget cycle that was $2.67 billion more than budgeted. While seemingly a piece of good news, it is tempered by the fact that lawmakers from the 85th Legislature underfunded the Medicaid program by approximately $2 billion by underestimating cost and caseload growth. And Medicaid is just one of several state programs that were underfunded for 2018-19 and will need supplemental appropriations from budget writers in the 86th Legislature. An estimated $563 million is needed, for example, for TRS-Care and public education and anywhere from $1 billion to $3.6 billion for Hurricane Harvey-related expenses.

Another potential revenue source is the state’s Economic Stabilization Fund, better known as the rainy day fund. The fund is expected to have a balance of $11.85 billion at the end of 2019, the largest ending balance in the fund’s history. State statute sets a minimum balance for the fund; in 2018-19, the minimum balance was $7.5 billion. During the last legislative session, budget writers in the Texas House of Representatives proposed using $2.5 billion in rainy day funds, but their counterparts in the Texas Senate rejected that proposal, and conference committee budget writers agreed to use $969 million in rainy day funds for one-time purposes, including $459 million for new construction and repairs at state hospitals and other inpatient facilities and critical health and safety needs at state hospitals and state-supported living centers. A couple of lawmakers have indicated they hope to use the rainy day fund in 2019, but debate will center around for what purposes.

Budget writers also have to contend with the state’s constitutional spending cap on general revenue appropriations. The Texas constitution limits the rate of growth in spending to the estimated rate of growth of the state’s economy and limits appropriations to anticipated revenue received by the state. The exact cap for the 2020-2021 budget has not yet been determined. While lawmakers can vote to spend more than the cap, this is highly unlikely in this political environment.


Hawkins
“The budget is the most significant piece of legislation for Texas lawmakers,” said John Hawkins, senior vice president, advocacy and public policy at the Texas Hospital Association. “It reflects lawmakers’ political priorities, and Texas hospitals have to keep a vigilant eye on how Medicaid is portrayed to make sure it is funded appropriately to meet enrollees’ and providers’ needs.”

THE STATE BUDGET AND HEALTH AND HUMAN SERVICES

For 2020-2021, Texas Health and Human Services is requesting $69.3 billion in Medicaid-related funding, constituting 83 percent of total requested HHS funding. In its request, HHS forecasts Medicaid caseload growth at 1.1 percent by 2021; CHIP caseload growth is expected to be slightly higher at 4.5 percent by 2021.

In addition to the future funding request, HHS has requested an additional $1.7 billion in supplemental appropriations for Medicaid for the current 2018-19 budget.

The HHS budget request also prioritizes increasing inpatient mental health capacity by expanding the number of state hospital beds for individuals requiring inpatient psychiatric services. As of May 2019, more than 800 people were waiting for an available community bed. The budget also highlights the need to increase funding for Local Mental Health Authorities to expand access to behavioral health services and reduce wait lists for individuals seeking outpatient mental health services.


Wohleb
“Texas hospitals strongly support increased funding for inpatient and outpatient behavioral health services,” said Steve Wohleb, J.D., general counsel/senior vice president at THA. “Hospital emergency departments often are the only place individuals experiencing psychiatric crisis can get care, and finding a more clinically appropriate care setting can be challenging because of the lack of community-based resources.”

LAWMAKER CHANGES

On Jan. 8, the Texas Legislature will look different from sessions past. One of the biggest changes will be the absence of Texas House Speaker Joe Straus (R-San Antonio). Having served as speaker for 10 years and state representative for 12, Straus decided not to run for re-election in 2018. Long considered a thoughtful, moderate, business-minded leader, his retirement triggered an immediate frenzy of interested lawmakers throwing their hats into the speaker selection ring. Among them, Reps. Drew Darby (R-San Angelo), John Zerwas (R-Richmond), Phil King (R-Weatherford) and Dennis Bonnen (R-Angleton). As of this writing, only Darby and Bonnen officially remain in the running, and Bonnen reportedly has enough votes to secure the leadership role. The 150 members of the Texas House will take up the Speaker selection on the first day of the legislative session.

The Texas Legislature also will have fewer Republican lawmakers. Although still majority Republican, the Texas House of Representatives will have 12 fewer Republican lawmakers. The Texas Senate also will remain majority Republican with just one less senator, as Sens. Don Huffines and Konni Burton, both from the Dallas area, lost to their Democratic opponents but Sen. Carlos Uresti’s (D-San Antonio) seat went to Republican Pete Flores. Republicans in the Texas Senate maintain a large enough majority to be able to control the flow of legislation under the Senate’s rules.

WHAT DOES THIS MEAN FOR HOSPITALS AND HEALTH CARE POLICY IN TEXAS?

Texas hospitals have a number of priorities that require action in the 86th legislative session. Every session, health care has to compete for attention and resources against other issues, including transportation, water and public and higher education. The stakes are high for Texas hospitals. Medicaid reimbursement continues to be well below cost, despite rate enhancements. The number of uninsured residents is increasing, as is hospitals’ uncompensated care burden. Trauma care funding is uncertain. State funding of behavioral health care services and graduate medical education and other health care workforce education programs needs to be maintained. None of these issues are simple, but they all are important.

Health care also is highly politicized, and in every session there are bills introduced that deal with hot-button social issues. For example, there could be an effort to repeal the state statute, enacted in 1999, governing advance directives. With passage of Senate Bill 11 from last session limiting the use of in-hospital do not resuscitate orders, advocates for repealing the entire advance directives statute could be emboldened. Such repeal would eliminate the “046 process” that allows health care facilities to discontinue life-sustaining treatment 10 days after giving written notice if the continuation of life-sustaining treatment is considered non-beneficial care by the treating medical team and upheld by an interdisciplinary ethics committee.


Kroll
“Issues around end-of-life care have become increasingly contentious,” said Carrie Kroll, vice president, advocacy, quality and public health for THA. “Texas hospitals know their role at the end of life is sacred and take that responsibility very seriously. Making sure that public policy supports the rights of all patients to have their care wishes expressed and respected is a critical component of our advocacy.”

Two policy priorities for the 86th legislative session are of particular importance to THA and member hospitals because they have a significant impact on hospitals’ ability to deliver the highest quality care to all Texans:

PROTECTING MEDICAID AND SUPPLEMENTAL PAYMENTS

Medicaid reimbursement rates, on average, cover just 57 percent of inpatient hospital costs. In 2015, Texas hospitals secured a huge victory in obtaining state funding for a Medicaid rate increase for certain hospitals and services – trauma facilities, safety net hospitals and rural hospitals for outpatient services. This funding was maintained in 2017. Absent this funding, Medicaid reimbursement would cover an even smaller proportion of hospitals’ costs of providing care. Maintaining this funding in 2019 will be a major priority.

At the same time, because Medicaid reimbursement is well below cost, hospitals rely heavily on supplemental payments, including disproportionate share hospital payments and uncompensated care pool payments through the Medicaid 1115 waiver, to make up some of the shortfall between payments and costs. In 2016, Medicaid hospital payments through reimbursement for services provided and supplemental payments totaled $13.862 billion. However, only 38 percent of these funds came from Medicaid reimbursement. The remainder came from supplemental payments.

The future of these supplemental payments, however, could be in jeopardy if property tax caps become law this session. The non-federal share of hospitals’ supplemental payments is funded almost entirely by intergovernmental transfers from public hospitals in the state or local provider participation funds that assess a fee on hospitals’ net patient revenue. There is no state general revenue currently appropriated for DSH or UC payments in non state-owned hospitals. More than one-quarter of hospitals’ total Medicaid payments, or $3.6 billion, comes from intergovernmental transfers, and this contribution allows the state to draw down an additional $4.9 billion in federal matching funds.

Last session, efforts to limit local jurisdictions’ ability to collect property tax revenue failed, despite the governor calling a special legislative session to pass the property tax cap bill. Since then, political interest in capping local property tax rates has only increased.

MAINTAINING FUNDING FOR THE STATE’S TRAUMA HOSPITALS

Hospital care for trauma-related injuries — resulting from car crashes, assaults, falls or any of a number of other traumatic incidents — results in more than $348 million in costs for hospitals for which there is no source of third-party payment. The state currently provides some funds to offset a portion of these unreimbursed costs. Nearly all of these funds come from fines and penalties imposed on reckless drivers through the Driver Responsibility Program. However, the future of the DRP, and therefore, trauma care funding, is uncertain as efforts to repeal the program altogether have gained steam in recent legislative sessions.

The importance of this funding for the 283 Texas hospitals designated as trauma facilities, and the patients who depend on them, cannot be overstated. Whether the DRP or another dedicated funding source, THA has made protecting trauma funding a key priority for 2019.

THE UNKNOWN

While much of the Texas hospital industry’s advocacy for the upcoming legislative session is on protecting Medicaid and other hospital funding to ensure that access to care is secure, the legislative session is never limited to debates over funding priorities. There will be other legislation introduced that could change hospital operations and practices. Much of THA’s work is working with lawmakers to explain the likely impact on hospitals and patients of these legislative proposals and to forge compromise language to mitigate any potential negative impacts.


Shaw
“The 86th Legislature has major issues to tackle, and there is an added element of uncertainty because of the national political landscape,” said Ted Shaw, THA president/CEO. “It is not clear where health care will fit in or what will be a priority for the legislature. But, no matter the issue, Texas hospitals can rely on THA to be a clear voice for the interests of the entire Texas hospital industry.”

More information on these and other Texas hospital priorities for the 86th Legislature is available from www.tha.org/2019legislativesession.