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Medicaid: Big and Scary, But Not Surprising

Budget writers have known for months—since they first saw the numbers—that Medicaid and various other insurance and health care programs were going to stink up the next budget and stain the current one. And they even had a fair idea about the size of the odors and the spots. They've been hearing about drug prices and premiums and caseloads for the better part of the last year. The numbers are big and even alarming, but the problem has been on the radar for a while.

Budget writers have known for months—since they first saw the numbers—that Medicaid and various other insurance and health care programs were going to stink up the next budget and stain the current one. And they even had a fair idea about the size of the odors and the spots. They've been hearing about drug prices and premiums and caseloads for the better part of the last year. The numbers are big and even alarming, but the problem has been on the radar for a while.

That said, the state does have a huge hole in its pocket, and estimates of its size keep changing. Think of it in three pieces: Money needed now, money needed later that has been budgeted, and money needed later that's not budgeted.

The emergency appropriations bill filed by Appropriations Chairman Rob Junell—the money needed now portion—doesn't even attempt to estimate the Medicaid shortfall. There is a place to plug in a number, but the number sitting in that place is a measly $1 million. The final amount hasn't been set, and estimates for it range as high as $606 million and as low as $350 million to $400 million.

The rest of that bill is more fleshed out. It would appropriate $45 million to cover federal matching rates that aren't as favorable as budgeteers expected. It would set aside $74.6 million for higher-than-budgeted prison operations and leases with counties for temporary prison space. And it would pump $35.7 million into the emergency prison pay raises that state leaders put in place last summer. Those three items total $155.3 million. Junell and others have been predicting the bill will total about $700 million when all is said and done, an estimate that puts Medicaid at about $550 million. Chances are they'll wait as long as possible to plug in a final number, but they want to get the bill moving.

Next comes the money needed later that's in the budget. The Legislative Budget Board included Medicaid increases in its proposed baseline budget for the 2002-03 biennium to cover, in those years, the same increases that would be covered for the rest of the current budget by the money in the emergency appropriations bill.

They did not budget enough money to cover other costs the health and human services agencies warned them about, including continuing (and breathtaking) increases in drug prices, insurance premiums, and the expected addition of something like 30,000 people to the Medicaid rolls. (They also didn't plug in money for an expansion of Medicaid suggested by a group of House members.)

If you think back, you'll remember that Junell, Senate Finance Chairman Rodney Ellis and others had said the state has about $300 million in spare change. That's their public estimate of what's left when the proposed budget is subtracted from the comptroller's estimate of available money, and when the $700 million emergency spending amount is subtracted from that. Junell confessed to the San Antonio Express-News a couple of weeks ago that the spare change total was closer to $1 billion. That's the sort of invitation to spending that budgeteers avoid. As one budget type put it, "Junell got off message, and [HHS Commissioner Don] Gilbert is helping him get back on message."

Even with the blowouts in Medicaid and other health and human services budgets, lawmakers have some money to spend. Because of dough tucked away in the LBB budget, start with about $1.5 billion in spare change. Subtract the $650 million Gilbert says will be needed but that isn't included in the current budget. Add in around $700 million that would be available if lawmakers go ahead with plans to squeeze more money out of the investment fund for public schools. That leaves well over a billion still in hand, and legislators expect/hope the comptroller will raise the estimate of available money.

Dueling Plans for Bigger Rolls

Rep. Glen Maxey, D-Austin, has collected more than 80 signatures in support of legislation that would make it easier to get on—and remain on—Medicaid. That's more than half of the members of the Texas House. The argument, made a couple of weeks ago, is that Texas still has a giant population of uninsured people who qualify for help. But the price tag could present a problem, especially in light of new budget estimates coming from Medicaid and the Children's Health Insurance Program.

And now there's a counter-proposal from the Texas Conservative Coalition that specifically says the expansions would cost too much and should be avoided.

The "price tag" label actually represents two problems. It would cost about $205 million in state money to get rid of face-to-face interviews and assets tests for Medicaid enrollees and to make it easier to stay on the rolls once you're there (something called continuous eligibility). The proposal could be jinxed simply because it's expensive and there's not a lot of money sitting around in bags.

Secondly, the already existing part of Medicaid is blowing the budget and lawmakers are losing whatever reverence they might have had for the program. They've known about the problems for some time, to be sure, but the estimates of what those problems will cost keep changing. Here's an example from the Senate Finance hearings the other day: The Health and Human Services Commission had numbers in November that indicated the average number of people receiving Medicaid in Texas in a given month would be 1,849,147. The proposed budget written up by the LBB put that number at 1,881,842. The February estimate, based on the latest numbers, is 1,910,037. The mushy numbers lower the confidence of the budgeteers, and adding more people to the program increases the impact of the mushy numbers. That said, more than half the House has signed off, and chances are good that they'll send a bill along to the Senate.

Now, however, comes a report from the Conservative Coalition that argues against the expansion. The report (which is available online ) recommends changing federal law to allow Medical Savings Accounts and also to make it easier to move kids now enrolled in Medicaid into the CHIP system. That second item would have a huge financial impact: For every dollar the state spends on Medicaid, the feds contribute under two dollars. For every dollar the state spends on CHIP, the feds contribute just under three dollars. Now they have to convince the feds to play.

TCC also wants to cap punitive damages on liability claims at nursing homes in an effort to hold down state payments to those facilities, and recommended a competitive rating system that would reward better homes with higher fees. They asked for a franchise tax break for businesses that buy long-term care insurance for employees. Like several other groups, they're promoting creation of purchasing pools for prescription drugs, under the idea that those prices could be held down if the state stacked up some bargaining clout by bundling different programs together.

Taking Workers for Granted

A fair amount of energy is being spent this session on different trade and professional groups that don't usually get so much attention. Teachers are often in the mix, but state employees are getting attention, prison guards are getting some notice, and now lawmakers are talking about helping nurses and employees at nursing homes.

Watch the nursing home arena for a budget idea similar to what was done in school districts two years ago. Some budgeteers want to give the nursing homes more money in a form that can only go to employee pay. The homes have complained that low reimbursement rates have forced them to cut both the number of employees and the pay those workers get, hobbling the homes' ability to provide decent care.

Texas has an acute shortage of nurses. Hospitals and other health care operations could immediately employ 27,000 more nurses. Nursing schools in Texas turned away 3,000 students in 1998 and 1999 for lack of capacity—they didn't have the room to teach them. The average age of nurses in the state is 44. Put those facts together and you get legislation that seeks to double capacity in the state's nursing programs, partly by spending about $28 million to add faculty and grow the schools.

Murmuring Among the Troops

Republican legislators in Texas, particularly in the House, are as nervous as a shower full of cats.

First, U.S. Sen. Kay Bailey Hutchison had the Texas reporters in Washington, D.C., over for breakfast a few days ago to tell them, if you cut through the fog, that she hasn't ruled out a run against Gov. Rick Perry next year. She says she hasn't made up her mind, which tells Republicans who haven't committed to Perry that they should keep their powder dry.

Second, U.S. Rep. Tom DeLay, R-Sugar Land, came to Austin to tell GOP lawmakers that he'll be the point man on congressional redistricting and that the rest of the Texas delegation (on the Republican side) will be working through him. And he gave the lawmakers a talk, telling them they should win clear majorities in the Texas House and Senate. The various accounts we got of his visit were interpreted as everything from "cordial" to "pep rally" to "war chants."

And a reporter with a Republican bent peeled off a scorching speech to a GOP club in Bryan that's notable mainly because of the currency it's getting among Republican lawmakers, particularly in the House. David Guenthner, managing editor of the Lone Star Report, blasted everyone from the Republican Party to Gov. Perry to Lt. Gov. Bill Ratliff, saying the folks in Austin are about to blow all of the GOP gains of the last several years and detailing how he thinks they did it. A sample: "After all the time and money folks like you have put in to control the levers of the redistricting process, do you consider no net gain in the Senate and a Democratic speaker an acceptable return on your investment?

If nothing else, legislative Republicans have taken a narrow majority in the Senate and control of all the statewide offices and turned it into something to complain about. More to the point, they're worried. Republicans are in the minority in the House, by six votes. Their majority in the Senate is skinny—one vote—and the committees named by Lt. Gov. Ratliff reflect that balance (to a much greater extent than House committees reflect the balance of partisan power). The redistricting committee in the Senate, in fact, has four Republicans and four Democrats on it. Top it with a governor who started his term with Tony Sanchez Jr. challenging him from the left and a potential Republican challenger, Hutchison, working the other side. It's made folks downright tense.

If you're a Texas Republican, your fundamental argument in redistricting is this: Republican legislative candidates got 58 percent of the vote in 1998, and so 58 percent of the Legislature should be Republican. That would be 87 seats in the Texas House and 18 seats in the Texas Senate.

There's plenty of room for Democrats to argue with that, as they will during the redistricting fight. But we point out the basic GOP premise to illustrate the frustration among that party's lawmakers right now. They believe they're in a Republican state and that they're unfairly being kept from drawing political districts that reflect that to the full extent they think it should.

Federal Campaign Reform and Texas Redistricting

Texas lawmakers (and their counterparts in 49 other states) are still grumbling over a federal law that forces them to file with the IRS or risk paying income taxes on some of the money in their campaign accounts. That requirement was part of a congressional attempt to regulate so-called "Stealth PACS," and the sponsors said they never intended to force local and state candidates around the U.S. to file with the tax folks. But they've never done anything to correct the problem, and for now, everybody has to file. That's prompted a couple of things here. It's one of the reasons Sen. Ken Armbrister, D-Victoria, says he filed a bill regulating the conversion of federal campaign funds to state races. (That's the bill that raised U.S. Sen. Hutchison's ire because it would prevent her from using her federal campaign war chest in a bid for Texas governor in two years.) And it motivated Rep. Jerry Madden, R-Richardson, to sponsor a House Resolution asking Congress to fix the problem.

Texas state and city and school candidates still have to file, but the efforts to get rid of the federal requirement might get some traction this year that wouldn't be possible at other times. The Texas folks are drawing political districts for the Washington folks, and the federales are unusually receptive to ideas that start down here.

A Campaign Finance Dogpile

And now there are three campaign finance proposals with low bill numbers in the House, including one that would limit the amount contributors can give. If nothing else, the numbers on House Bills 2, 3 and 4 contribute greatly to the Mojo on the proposals. That usually indicates support from the Speaker's office.

Also in the heap: Sen. Florence Shapiro, R-Plano, filed her own version of campaign finance in the Senate, got it referred to her State Affairs committee, and has it on the fast track. The Senate is in the race, after getting blamed two years ago for killing campaign finance reforms that were sent over late in the session from the House.

The new bill from Rep. Pete Gallego, D-Alpine, would cap the amount candidates can accept from individuals and PACs to $5,000 per year for House candidates, $10,000 for Senate candidates and members of the State Board of Education, and $25,000 for statewide officials. It doesn't include party committees. Gallego was the first to admit the limits are high and says he's just trying to start the debate. "The immediate challenge is to get 181 people in the Legislature to agree that there should be limits at all..." he said. He got immediate support from Reps. Debra Danburg, D-Houston, and Rob Junell, D-San Angelo. And Chief Justice Tom Phillips of the Texas Supreme Court spoke in favor of Gallego's legislation on judicial campaign reform. Much of what's in that bill was worked out by Phillips and other judges trying to reform their election system.

A side note: The Texas Ethics Commission got its budget cut by about $392,000, but not because anybody was trying to hang the folks who keep the campaign finance records. About three-fourths of the total came out of the computer budget, which was supposed to be a one-time expense. The folks at TEC are asking budgeteers to let them keep it, so they can maintain the system and so they buy a second system to back up all of the records.

—Rachel Goggan

Taxes on Taxes

The ban on taxing fees presented this week by Sen. David Sibley, R-Waco, would outlaw sales taxes on the government fees included in phone bills. That sounds like a slam dunk, but it would take $73.2 million out of the treasury at a time when budgeteers are scrambling for cash. Local governments would lose a total of $23.4 million—their share of the sales taxes on those fees.

The biggest fee of the bunch is the Texas Universal Service Charge, proceeds from which are used to put phone services in rural and other areas where they are expensive to install. Also on the list is the Telecommunications Infrastructure Fund, which is used in part to bring state-of-the-art telecommunications doodads to schools and hospitals. Phone customers pay $1.2 billion for the five fees on the list each year, then pay $96.6 million in sales taxes on top of that.

This has a Very Big Sibling. The state brings in $531.9 million annually from tobacco products and another $514.8 million on alcoholic beverage taxes. Most of those taxes get folded into the price to which sales tax is added later. That means, using some very sloppy math, that as much as $86.3 million in sales taxes are collected by applying sales taxes to excise on beers, whiskeys and smokes. Of that, $65.4 million would go into the state's accounts.

Apropos of nothing, Sibley got a bit of late and unexpected support from Land Commissioner David Dewhurst, who jumped in to say he agrees with the senator on cutting phone taxes. That's not within policy range of the General Land Office, but the state's tax collector, Carole Keeton Rylander, is Dewhurst's presumptive political opponent in two years and it gave him an opportunity to goose her. Both of those statewide officials are Republicans, and both have been considering bids for the lieutenant governor's office in 2002.

Hate Crimes

The committee debate over the hate crimes bill came only after the committee voted on legislation by Sen. Steve Ogden, R-Bryan, that would increase penalties for injuring a pregnant woman, and enhancing them further if the injuries resulted in the baby's death. It would also allow the mother and father of the unborn child to sue for damages.

After that bill passed by a 6-1 margin, the committee took up hate crimes. Ogden was part of the 5-1-1 majority that voted to move that bill on to the full Senate. Ogden told some reporters later that, in both cases, he was voting to give prosecutors more ways to prosecute.

He was alone among the three Republicans on the committee to vote for the hate crimes legislation. Sen. Teel Bivins of Amarillo voted No, and Sen. Todd Staples of Palestine, who was a House member until last year, cast the first Present Not Voting vote of his career. An aide said Staples, who voted against similar legislation in the House two years ago, was still considering the issue. One difference over the two years is that Jasper, where the James Byrd Jr. killing took place, is in Staples' Senate district. It wasn't in the House district he represented two years ago.

The bill that goes to the full Senate still includes the sexual orientation of the victim as one of a number of attributes that can define a hate crime. According to the sponsors, 42 other states have hate crime laws and 21 of them include that in the list of defined groups. But that's the issue that led to a standoff on the issue in the Senate two years ago.

Emergency DNA Legislation

And the first emergency issue of this governor's term in office is, drum roll, please.... DNA testing of convicted felons in cases where judges have questions about innocence. Gov. Rick Perry included that issue in a list of death penalty reforms he is pushing. The emergency status lets the Legislature vote on the issue during the first 60 days of the session; bills without that designation have to wait until after the second week of March. The other reforms on Perry's list are still working their way through the system: creation of a penalty of life without parole and state-set standards for attorneys appointed to represent indigents. Perry issued his first pardon almost a week before, to a Dallas man convicted in 1986 and recently proved innocent using DNA evidence.

Senators in Waiting, Miscellany

Update on Panhandle Political Positioning: After saying last week that he'd be interested in succeeding Sen. Teel Bivins, R-Amarillo, Rep. David Swinford, R-Dumas, says his interest falls off considerably if Bivins stays through the legislative session.

Swinford says rumors that Bivins might leave before the end of his term left some Panhandle folks worried about redistricting. His interest in the Senate seat, he says, is that a veteran lawmaker would get better results than a freshman in drawing the political maps. If Bivins stayed through the end of the session, that wouldn't be an issue and Swinford's interest would tail off rapidly. Bivins, for his part, has said only that he hasn't decided what he'll do, but Swinford says he's more confident now that the senator will stick around through the end of the session in June. Among the prospective candidates who are watching closely: Amarillo Mayor Kel Seliger, whose current term ends in May.

• Here's a potential food fight: Rep. Harold Dutton, D-Houston, has a bill that would require companies to let employees see their personnel files and would let them add information clarifying or disagreeing with the things they find there. The added info from employees would have to be included with the file whenever it's released to someone else.

• Oops. The Texas Republican County Chairman's Association is, like everyone else, getting used to the new org chart in state government, and on the names of the players. They're holding a tribute for Republican lawmakers and Lt. Gov. Bill Ratliff at the end of the month. They'd better be nice, because they misspelled the Lite Guv's name on the program, putting a "C" in the middle.

Political People and Their Moves

Winner of the Grand Marshall's Déjà vu Trophy is Mary Jane Wardlow, who is leaving the comptroller's office for the Lite Guv's office. Wardlow worked for the late Bob Bullock, and moved to the Senate post from the comptroller's office when he did, back in 1990. She left to work for Land Commissioner David Dewhurst in 1998, then returned to the comptroller's shop to work for Carole Keeton Rylander. Now she's in the press shop for Lt. Gov. Bill Ratliff...

Doyne Bailey, who has been executive director of the Texas Alcoholic Beverage Commission since 1994, is resigning that job. The former Travis County Sheriff was installed there by Gov. Ann Richards...

More Texans in Washington, D.C.: Mindy Tucker, one of the people who talked for George W. Bush when he was a candidate, finally lands as spokeswoman for the Justice Department. She worked for the State Department folks for a bit before making a final landing. David Smith, who was in Bush's appointments office in Austin, is going to work in the Interior Department. And watch for Clark Kent Erwin, who ran for Congress, served as assistant secretary of state and then worked for Attorney General John Cornyn, to show up in the State Department...

Marc Samuels, who had been lobbying on his own for various health concerns, has signed on with Hillco. He'll stay on health issues for the Buddy Jones/Bill Miller firm...

The American Association of Political Consultants is handing out Pollie awards for various kinds of advertising and other political work. The best hype deflator was for Best Use of Website for Persuasion: No winner. Austin-based Message Audience & Presentation won for direct mail, radio, and television spots for work done in a district judge race and for work in Michigan, for a statewide teachers group and for the statewide Democratic campaign there.

Quotes of the Week

Sen. David Sibley, R-Waco, on proposed legislation that would bar the state from collecting sales taxes on the government fees in phone bills: "I'd like to see who would vote against a tax on a tax."

Rep. Burt Solomons, R-Carrollton, on what people mean when they talk about their goals in redistricting: "Well, there's fair and then there's politically fair."

Randy Neugebauer, chairman of the Ports to Plains Trade Corridor in Lubbock, promoting ways to speed up highway construction and ease congestion on Texas roads: "If you build it, they will come. But what happens if they come and we do not build it?"

Sen. Steve Ogden, R-Bryan, on the Medicaid and CHIP cost increases that are dominating conversations about the budget: "I think we're going to get through this biennium, but if we don't get control of what's going on here, our whole budget will be health care and we're going to be broke."

Lt. Gov. Bill Ratliff, on the same issue: "It's frustrating that we keep chasing a moving target. But you know, if it were easy, monkeys would do it."

Sen. Carlos Truan, D-Corpus Christi, to Attorney General John Cornyn during Cornyn's testimony before the Senate Finance Committee: "You know, you know, well, sometimes you gotta squeeze people's balls for them to act and do what they need to do, with all due respect to the women members of this panel and the Legislature."

Senate Finance Chairman Rodney Ellis, an African-American, after State Board of Education Chairman Grace Shore said her agency had been doing something the same way for a long, long time: "Ma'am, let me tell you, there are lots of things that have been going on around here for 50 years. But we don't have to go back to the way things used to be, because I certainly wouldn't be here."

Texas Weekly: Volume 17, Issue 31, 12 February 2001. Ross Ramsey, Editor. George Phenix, Publisher. Copyright 2001 by Printing Production Systems, Inc. All Rights Reserved. Reproduction in whole or in part without written permission from the publisher is prohibited. One-year online subscription: $250. For information about your subscription, call (800) 611-4980 or email For news, email, or call (512) 288-6598.

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