Legislative Update - January 29, 2010

Hearings began in earnest this week as the House and Senate settled in to tackle the budget.

The House has been slow on bill assignments. However, that should be remedied next week according to Speaker Richard.

Hearings on the so-called “fair Tax” occurred this week. In addition constitutional amendments to opt out of the federal healthcare program for Missourians were heard in the House and Senate.

Good news was hard to come in this week's Senate Appropriations hearing. Missouri Budget Director Linda Luebbering presented to the committee Governor Nixon's FY 2011 Budget Recommendations amid a bleak backdrop of revenue shortfalls. Even though Missouri is in better shape than most other states, tough budget challenges remain. The national and international economic crisis has caused revenue to continue its downward spiral, reaching historic rates of decline in the previous and current fiscal years. Revenue forecasters predict a modest increase for FY 2011, but not enough to prevent additional cuts and the continued fiscal restraint necessary to keep the Missouri's budget balanced without raising taxes, said Luebbering. The FY2010 budget originally assumed net general revenue collections of $7.764 billion. That estimate was revised downward to $6.971 billion, leaving a revenue shortfall of $793 million. The FY 2011 budget is based on a revenue estimate of $7.22 billion. While an increase over FY 2010, it is below FY 2009 collections of $7.45 billion and well below FY 2008 collections of $8 billion. During the presentation, Sen. Kurt Schaeffer questioned the legality of the governor's recommendation not to fully fund the education foundation formula. Schaeffer also questioned the prudence of basing a budget on funding, such as $300 million in potential Medicare funding, that has not yet been approved by Congress.

Appropriations
The Governor’s office gave a presentation on the Budget. Highlights include:

Overview of FY11 Budget
Presenter: Linda Luebbering

MO is doing better than most states because we made cuts along the way.
Consensus revenue is $793 million less than forecast a year ago. Last year’s estimate was very conservative at 6.4% below 09 collections. They look for a 3.6% increase next year.
Reviewed the reductions outlined in the handout.
MO HealthNet hired consultants to help find efficiencies. The consultant’s recommendations are included in the Governor’s recommendations.
Medicaid reductions of $121 million are a result of efficiencies. We are not reducing eligibility, not adding eligible categories nor are we eliminating or adding services.
Medicaid provider rate reductions occur only where state is paying more than Medicare and other insurance rates.
Part of Medicaid savings will come from better management of high cost recipients (i.e. looking at drug interactions in patients).
Governor’s recommendation is to reduce optical to 90% of reimbursable rate.
Governor’s budget estimates approximately $300 million to come from ARRA (federal money).
The Governor wants to enhance existing Dept. of Revenue staffing to increase collections.
The consensus revenue estimate is the largest reduction in 30 years.
We are anticipating increase in individual income tax and steady sales tax with sales taxes slowly increasing as the economy improves.
No new capital improvement projects.
The “Other Funds” increase is MODOT bonds.
544 positions cut in FY 11; holding vacancies to minimize layoffs. The larger departmental layoffs are:

298, Dept. Social Services; 354, Dept. Mental Health (170 positions transferred to OA as part of facility consolidation);

Mayer questions/comments:

question on vetoed & restricted money and enhanced FMAP;
pointed out that the foundation formula is not fully funded;
DESE has no specific statutory authority to prorate but they are going to do it anyway.
In order to balance the budget MO depends on the feds to pass a bill to get $300 million.
$121 million savings from efficiencies at the departments
$250 million in federal dollars transferred into General Revenue.
What happens in FY 12?

Schaefer questions/comments:

Supplemental k-12 adds $63 million to make up for lost revenue from decreased taxes; $123 million willfully fund the foundation formula – the governor’s plan will be $43 million short of fully funding.
$300 million coming from federal funds is speculative, will we know before the end of session if will materialize?
What if MO doesn’t get the $300 million federal funding? Luebbering: $300 million will be covered with expenditure restrictions.
DESE pays districts as if fully funded, how will they pay when not fully funded?
Extremely concerned about future litigation because of the statutes not specifying reductions and prorations of foundation formula funds.

Pearce questions/comments:

Revenues $50 - $100 million short on page 1 of handout.
Page 4 outlines all restrictions; Access MO 1st semester and 2nd semester. Luebbering: Dept. of Higher Education said they had $13 million more than they needed to maintain same scholarships.

Bray questions/comments:

2010 foundation formula had increase of $67 million and that would have fully funded the formula, but Dept. of Elementary and Secondary Education came back with new figures and now the $67 million will not fully fund. Governor’s recommendation will maintain the FY 10 $67 million.
How will they pro-rate the proportional reduction among the school districts?
What about the “hold harmless” school districts?
State statutes define the formula but no statute on prorating reductions.

Dempsey questions/comments:

Where are we with federal food stamps? Luebbering: No answer as of yet. We are waiting for a response to MO claim that numbers need to be re-calculated. There is nothing in the FY11 budget for this.
Of the federal stabilization money, 1/2 is coming to MO and of the federal stimulus money, 1/2 is coming to MO; do you anticipate MO getting 100% of that? Luebbering: Unsure, there are no guarantees.

Rupp questions/comments:

Page 5 reducing cost of emergency transportation. Luebbering: MO is working with contractor to get recommendations on cost savings for emergency transportation. The contract rebids in July. We have negotiated a lower rate per person to get $100,000 in savings.
Governor’s recommendation is the first in five years to not fully fund the foundation formula.

Wilson questions/comments:

Page 8, Dept. of Social Services and Mental Health – detail cuts.

Lembke questions/comments:

Of the 540 FTE to be cut – how many are currently vacant? Luebbering: We are hoping that by the end of the FY they will all be vacant. We have already laid of 300 part-time positions in the summer.
Medicaid assumptions – what were the savings in FY10? Luebbering: Most were one-time; $33 million first round; $9 million second round and current expenditure restrictions.
Did MO contract with outside consultants to find savings? Luebbering: yes, 3 consulting companies.
Page 4 #5 interoperable communications restrictions – will there be enough money to fund the highway patrol and the radio system?
In St. Louis, the voters passed local interoperability funding. How does that work with the state?
FMAP available now?
What is the balance in the rainy day fund?

Supplemental Appropriations:
Early Childhood Special Education;
Race to the Top;
Disability Determination;
After School Programs;
DESE High Need Program;
Dept. of Revenue; license plate production;
Dept .of Revenue; Amendment 3, Highway Fund;
Dept. of Revenue; Driver license suspension attorney and paralegal;
Dept. of Revenue; Intercept taxes from other states;
Office of Administration; recover legal costs;
Dept. on Insurance; recover legal costs;
Awards to families of emergency personnel killed while on duty;
DNA profiling program;
Interoperable Communication;
Dept. of Corrections; additional high security beds & relocate juvenile offenders;
Dept. of Mental Health; Overtime adjustment;
Dept. of Mental Health; Provider rate increase
Dept. of Mental Health; Provider assessment fee to get federal match;
Dept. of Health & Sr. Services; Attorney fees;
Dept. of Health & Sr. Services; Increased cost in Medicaid;
Dept. of Health & Sr. Services; In-home services;
Intergovernmental transfer for public hospitals;
MO HealthNet; increased case load;
Courts; Adding Clay county judge

Prompt Pay
Senate Bill 636 (Senator Lembke) was heard Monday in Senate Judiciary and HB 1498 (Representative Jones) was heard in the House Health Care Policy committee on Weneesday.

The bills modify Missouri's prompt pay law. The acts provides a definition for the term "clean claim." The term clean claim is defined as a claim that has no defect, impropriety, lack of any required substantiating documentation, or particular circumstance requiring special treatment that prevents timely payment.

Under the proposed acts, the definition of health carrier is modified to include self-insured health plans, to the extent allowed by federal law. Under the acts, third-party contractors are also considered health carriers. The act also amends the definition of "request for additional information" to mean a health carrier's electronic request for additional information from a claimant which specifies what information is needed in order to process the claim for payment. The act deletes the definition of the term "suspends the claim."

Under the terms of the acts, a health carrier must send an electronic acknowledgment of the date of receipt of an electronically filed claim by a health carrier or a third-party contractor within one working day. Within 15 days (current law allows 10 working days) after receipt of a filed claim by a health carrier, the carrier must send an electronic notice of the status of the claim. The electronic notice shall notify the claimant if the claim is a clean claim or whether the claim requires additional information from the claimant. If the claim is a clean claim, then the health carrier shall pay or deny the claim.

The acts modifies the interest and penalty provision for failing to promptly pay a claim. Under the proposed act, if the health carrier has not paid the claimant on or before the 45th processing day from the date of the receipt of the claim, the carrier must pay the claimant 1% interest per month (current law) and a penalty in an amount equal to one-fifth of the claim per day. A health carrier may combine interest payments and make payment once the aggregate amount reaches $100 (current law is $500).

The interest and penalties cease to accrue on the day a petition is filed in court to recover payment on a claim. If a court determines that a health carrier has failed to pay a claim, interest, or penalty without good cause, the court shall enter judgment for attorney fees. If the court determines that a health care provider has filed suit without reasonable grounds to recover a claim, the court shall award the health carrier reasonable attorney fees related to the defense.

Under the terms of the acts, any claim for which the health carrier has not communicated a specific reason for the denial shall not be considered denied under the prompt pay statutes. The acts also provides that any request by a carrier for additional information shall be reasonable in scope and pertain solely to the carrier's determination of liability.

Providers offered testimony and examples of how insurance companies are holding payments and using “the float” to invest funds owed to providers. These bills will move rapidly. You will recall that the Senate passed the legislation last year on a 29-0 vote.

Senate-General Laws
The Senate General Laws committee met on Tuesday. The following bill was discussed:
SJR 23 Prohibits a political subdivision from receiving state funding if it provides health insurance to its employees through a public health insurance option plan.

Senator Ridgeway presented this bill and stated that her constituents had been asking her for a bill similar to SJR 23. Senator Ridgeway stated that this bill would prohibit political subdivisions from being switched to public health insurance options if a health care reform bill passed in washington. Senator Ridgeway stated that she believed this bill would shrink the size of the private insurance pool. She went on to say that this change could potentially hurt the private insurance industry.

A representative of the Missouri Insurance Coalition stated the passage of a public insurance option by the federal government would shrink the insurance pool and that this change in size would hurt smaller businesses that are dependent on lower insurance rates.

A representative of the Missouri National Education Association and Missouri School Boards Association went on record as being against this bill. Stating that this bill would limit the options that school districts and other political subdivisions would have when it comes to health insurance.

Basically, this legislation allows Missourians to ignore the federal health insurance mandate and remain uninsured.

The estimated $2.5 billion in savings to be extracted from Health facilities over 10 years would pay for expanded coverage in other states or to be kept by the federal government.

The companion bill in the House is HJR 57 (Tim Jones). It was also heard Thursday.

Next week
A full hearing schedule awaits the House and Senate with Spring Break only 4 weeks away.