This document summarizes Representative John Zerwas's presentation on state legislative issues to the American Academy of Family Physicians. It shows how Texas Medicaid spending has shifted over time from institutions to managed care and outlines initiatives in Senate Bill 7 to improve quality and efficiency, such as expanding managed care, carving out prescription drugs, studying emergency room use, and creating a quality-based payment system. The bill also aims to develop alternative delivery systems through healthcare collaboratives and alternative payment methodologies like bundled payments.

1. American Academy of Family
Physicians
2011 State Legislative Conference
Representative John Zerwas, M.D.
Texas House of Representatives
Chair-Appropriations Subcommittee on
Health and Human Services
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2. State General Revenue Spending By Article: FY 2000 and FY
2010
FY 2000 State GR Spending by Article, FY 2010 State GR Appropriation by Article,
Total Spending = $27.3 billion Total Appropriated = $42.4 billion
General
General
Government/Other
Government/Other Public Safety and $2.6 billion
$1.7 billion Criminal J ustice
Public Safety and $4.3 billion
6% 6%
Criminal J ustice
$3.3 billion 12% 10%
Health and Human 20% 62% 56% Education
28%
Services Health and Human $23.5 billion
Education
$5.6 billion Services
$16.8 billion
$12.0 billion
Source: Legislative Budget Board, Fiscal Size-Up, 2010-2011 Biennium; 2002-2003 Biennium
State General Revenue Amounts do not adjust for American Reinvestment and Recovery Act (ARRA) funds in FY 2010
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3. Historical State & Federal
Medicaid Spending
Total Federal and State Medicaid Client Services Spending (millions)
1981 1991 2001 2011
Federal Client Services
$688.6 $2,350.2 $6,234.1 $16,146.3
Payments ($Millions)
$20,000.0
State Client Services
$493.5 $1,333.6 $4,024.4 $8,550.1 $16.1
Payments ($Millions)
B
$16,000.0
Total Spending ($Millions) $1,182.0 $3,683.7 $10,258.5 $24,696.4
Federal
Spending
$12,000.0
(millions)
$8.6B
$8,000.0
State
Spending
$4,000.0
$0.0
1981 1991 2001 2011
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4. Where Texas Spends
Medicaid Dollars – Caseload
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5. Where Texas Spends
Medicaid Dollars – Services
*
T exas Medicaid Expenditures, SFY 2009
By Service Type — Total $22.9 billion
Long T erm Prescription
Services and Supports Drugs
$5.2 billion $2.0 billion
Delivery
Supplemental
24% 9% Payments
to H MOs
Medicare
$0.3 billion
Parts A, B & D
Dental $1.3 billion
$1 billion 4%
Disproportionate
Supplemental Share H ospital
24% Program
Payments
$1.7 billion
$5.4 billion
Physician 17% Upper
Payment
& Professional
Limit
$4 billion
$2.0 billion
9% 14%
*
Source: Medicaid Management Information System (MMIS).
H ospital &
H ospital Inpatient Prepared By: Office of Strategic Decision Support, Financial Services,
Clinic Outpatient Texas Health and Human Services Commission, J 2010.
une
$3.3 billion
$2.1 billion N ote: Due to rounding, totals may not add up exactly.
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6. Where Texas Spends
Medicaid Dollars – Providers
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7. SB 7 Initiatives
• Purpose of legislation – Improve the
administration, quality, and efficiency of Texas
health care benefits.
– Allows Medicaid managed care expansion into the Cameron, Hidalgo, and
Maverick counties.
– Carves prescription drugs into managed care organization plans, including the
use of vendor drug program formularies.
– Study physician incentives to reduce non-emergent use of emergency rooms
and implement recommendations if found cost effective.
– Cost sharing requirements to improve appropriate program utilization.
– Creates a Quality-Based Payment Advisory Committee.
– Establishes the Texas Institute of Health Care Quality and Efficiency.
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8. SB 7 Initiatives
– Requires development of quality-based outcome and
process measures.
– New quality-based payment systems for:
• Managed care
• Home health
• Hospitals
– Develop alternative health care delivery systems that
promote health care coordination and provider
collaboration.
• Establishes health care collaborative guidelines and support
• Texas Legislature encourages health care provider collaboration
to improve transparency, create greater accountability, and
promote innovation.
– The new procurement of the managed care contracts will specify these objectives.
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9. SB 7 Initiatives
– Encourages cost-savings by implementing and
identifying:
• Alternative payment systems
– Blended
– Episode-based bundled
– Global
• Potentially preventable
– Admissions
– Ancillary Service
– Complications
– Readmission
• Payment Incentives for
– High-quality, cost-effective healthcare
– Evidence-based best practices
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