MINUTES OF THE MEETING OF THE JOINT SUBCOMMITTEE ON HUMAN RESOURCES/K-12 ASSEMBLY COMMITTEE ON WAYS AND MEANS AND SENATE COMMITTEE ON FINANCE Sixty-eighth Session March 28, 1995 The meeting of the Joint Subcommittee on Human Resources/K-12 of the Assembly Committee on Ways and Means and the Senate Committee on Finance was called to order at 7:38 a.m., on Tuesday, March 28, 1995, Chairman Hettrick presiding in Room 352 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. ASSEMBLY SUBCOMMITTEE MEMBERS PRESENT: Mr. Lynn Hettrick, Jr., Chairman Mr. Dennis L. Allard Mrs. Vonne Chowning Mr. Joseph E. Dini, Jr. Mrs. Jan Evans Ms. Sandra Tiffany ASSEMBLY SUBCOMMITTEE MEMBERS ABSENT: None SENATE SUBCOMMITTEE MEMBERS PRESENT: Senator Raymond D. Rawson, Chairman Senator William J. Raggio Senator Bob Coffin Senator Dean A. Rhoads SENATE SUBCOMMITTEE MEMBERS ABSENT: None STAFF MEMBERS PRESENT: Mr. Mark Stevens, Fiscal Analyst Mr. Bob Guernsey, Deputy Fiscal Analyst Mr. Steve Abba, Program Analyst DEPARTMENT OF HUMAN RESOURCES - WELFARE DIVISION Ms. Myla Florence, Administrator, Welfare Division, introduced Mr. Mike Willden, Deputy Administrator. She noted the budgets to be heard had been continued from the March 15, 1995, hearing. She explained three of the budgets (Petroleum Overcharge Rebate, Program for Homeless Nevadans, and Refugee Program) were recommended for closure. ENERGY ASSISTANCE - WELFARE - PAGE 1237 Ms. Florence explained the Low Income Home Energy Assistance (LIHEA) program is federally funded and provides for one-time heating payments (and in southern Nevada a one-time cooling payment) for assistance with energy costs. She noted the measurement indicators had not been reviewed. She pointed out the number of applications received in Fiscal Year 1994 was slightly over 11,000. Over 9,500 households were assisted. The average LIHEA payment was $314. Funding for the program was provided by the United States Department of Health and Human Services. Ms. Florence reported the major change in the base budget was reflected in the reduction in the balance forward and was due to the elimination of the transfer of funding to the weatherization program. She noted no new positions were recommended in this budget. Decision units M-100 and M-300 included standard changes for inflation and fringe benefit changes. The enhancement budget reflected the reduction of anticipated funding for Fiscal Years 1996 and 1997. She explained this reduction would affect the average payments made to eligible households. Decision unit E-720 represented a request for funding for four desktop calculators. Ms. Florence pointed out funding for this budget was targeted towards low income households. The majority of clients were eligible for public assistance, either through Aid to Families With Dependent Children (AFDC), food stamps, or Social Security supplemental security income (SSI). Approximately 35 percent of eligible households included at least one disabled member. Benefits ranged from $90 to $510. The average payment to date in the current fiscal year was $222. Chairman Hettrick questioned why decision unit E-400 reflected an increase in information services expense if there was no increase in number of clients. Mr. Willden explained federal regulations would require the agency to examine energy burdens within households and perform automated interface with energy companies. Chairman Hettrick requested a detailed report of this issue. Mr. Willden agreed to provide the information. PETROLEUM OVERCHARGE REBATE - PAGE 1241 Ms. Florence stated this budget was recommended for closure. The petroleum overcharge rebate funds were received as the result of various federal court settlements. The agency anticipated no payments coming to Nevada in the coming biennium. If funds were received, however, the agency would recommend transfer of this program to the energy conservation program within the Department of Business and Industry. Mrs. Evans inquired whether all distributions had been made from this account. Ms. Florence replied current available funding has been allocated to other agencies. She said it was her understanding some agencies had not drawn down their allocated amounts. The Welfare Division had been advised those agencies would be drawing down the funds, but there was a potential for a balance remaining to be carried forward in this account if they did not. She recommended that balance be placed within the authority of the Department of Business and Industry. Mrs. Evans asked if the draw down would be accomplished within the current fiscal year. Ms. Florence said she would verify with the other agencies when the draw downs would occur and provide the information to the subcommittee. DOE WEATHERIZATION - WELFARE - PAGE 1243 Ms. Florence reported this program was fully federally funded. It was developed in response to energy problems during the 1970s. The purpose of the program is to provide maximum energy conservation measures in low income households (below 150 percent of poverty). The Welfare Division provided funding to nonprofit organizations to provide direct service within their communities. Ms. Florence noted the program had been essentially flat-funded. Assistance in the current fiscal year had been given approximately equally to single-family homes and multi-family units. Approximately 55 percent of the weatherized homes have been occupied by either elderly or handicapped individuals. The average cost per household during the current fiscal year has been approximately $1,600. Ms. Florence indicated the agency had attempted to provide services statewide over the years and while it was not cost effective to serve every community every year, over the years funding has been allocated in proportion to the population. Ms. Florence stated adjustments to the base budget included standard cost allocation changes, inflation, and occupational adjustments. Decision unit E-400 provided funding for the cost of attendance at out-of-state conferences required by the United States Department of Energy and technical assistance to local level providers. Funding was recommended to provide for weatherization for six additional homes in each year of the biennium and twenty-five additional homes through co-sponsor contributions. She noted the budget would be adjusted to delete the co-sponsor contributions. Chairman Hettrick asked the dollar amount of that adjustment. Mr. Willden replied $117,268 in other non-state resources and $117,268 in the SPPC grant category would be deleted from the base budget. In decision unit E-400 $42,732 would be deleted from other non-state resources and from SPPC grant. He explained Sierra Pacific Power Company had indicated it would no longer be participating in the program. Senator Rawson asked if Sierra Pacific Power Company was withdrawing from the program amicably. Mr. Willden explained Sierra Pacific Power Company was in the process of restructuring many of its projects as a result of its merger with Washington Power. Senator Rawson questioned whether the merger would mean less concern for Nevadans on the part of the power company. Mr. Willden stated he could investigate this matter. Ms. Florence noted the departure of Sierra Pacific Power Company from the program was disappointing. Senator Coffin noted this action appeared to fit a trend. Future demand for utilities had fallen to the point where utility companies no longer thought it was necessary to fund low cost energy conservation measures. SAFETY SEAT PROGRAM - PAGE 1253 Ms. Florence explained this program operated in conjunction with the federal Office of Traffic Safety, which provided a grant to the Welfare Division to fund the cost of issuing car safety seats to AFDC and Child Health Assurance Program (CHAP) recipients. Ms. Florence noted the measurement indicators reflected actual numbers of families served and safety seats issued below projections. She explained the projections for the first year of operation of the program had been optimistic. Additionally there had been a delay in hiring a program coordinator. Ms. Florence stated a number of adjustments were required in this budget. The Welfare Division had been in contact with both the Budget Division and the Fiscal Division regarding these adjustments. She noted the Interim Finance Committee had approved moving funding from contract services to a classified position. Ms. Florence reported funding recommended in decision unit E-425 would allow for the purchase of 1,163 additional safety seats in Fiscal Year 1996 and 1,165 additional safety seats in Fiscal Year 1997 and cover personnel and operating expenses associated with the program. She stated the only new office equipment recommended for the program was a file cabinet and bookcase. Ms. Florence added the program operated only in Clark County. It was the division's hope to locate a stable, private funding source in order to expand the program statewide since it was in the interest of AFDC children to be restrained in vehicles. She pointed out national research suggested Medicaid costs were reduced as the result of restraint of children in vehicles. Senator Raggio asked if this program was federally funded. Ms. Florence responded affirmatively. Senator Raggio asked what the average cost of safety seats was. Ms. Florence responded the cost was approximately $60 per seat. Senator Raggio inquired whether seats could be recycled. Ms. Florence stated the agency was finding when seats were returned they were not appropriate for reuse due to wear and tear. Chairman Hettrick asked if it would be wise, in light of actual use, to appropriate 1,100 seats in each year of the biennium. Ms. Florence explained in the current year use averaged approximately 75 to 80 seats per month. Mrs. Evans noted the grant funding would end in 1996. She inquired whether an extension to the grant could be requested. Ms. Florence said it was the agency's understanding an extension could be requested. Chairman Hettrick asked how the program could become self-sufficient. Ms. Florence replied the division was looking for corporate sponsors for the program. HOMELESS GRANTS - PAGE 1249 Ms. Florence stated this program was also fully federally funded. The agency acts as a pass-through of funding from the Department of Health and Human Services to subgrantees for emergency homeless services. Grantees include the Clark County Economic Opportunity Board and Washoe County Community Services Agency. Emergency shelter grants are passed through from the Department of Housing and Urban Development to local entities and the City of Reno. The third source of funding for this program was supplemental assistance to facilities to assist the homeless (the SAFAH grant), which was issued to the Women's Development Center in Las Vegas to provide ongoing assistance to homeless families. Ms. Florence noted the measurement indicators reflected funding for the current year of slightly over $300,000. Subgrantees have drawn approximately $292,000 of those funds. Welfare Division administrative costs are limited to 5 percent of the federal grants. Subgrantees are limited to 10 percent for administrative costs. Ms. Florence stated the number of individuals assisted was approximately 96,000 annually. The SAFAH grant funding served approximately 100 families annually. Ms. Florence said there are no adjustments to the base budget. An adjustment in decision unit E-400 related to the cost allocation for the Program Specialist position assigned for oversight of the programs. Chairman Hettrick inquired about a proposed increase in operating expense from $23 to $13,000 in Fiscal Year 1996 and $17,000 in Fiscal Year 1997 and about $1,000 in the information services expense category. Ms. Florence replied the increase in operating expense was the result of filling the Program Specialist position. She noted the position would be cost allocated to the grant in the current fiscal year in order to maximize the federal funding available for administrative costs. The information services expense would cover the cost of minor program changes. PROGRAM FOR HOMELESS NEVADANS - PAGE 1247 Ms. Florence explained this program was formerly the emergency assistance program. During the past biennium the emergency assistance program was transferred to the Division of Child and Family Services in order to maximize federal participation for children at risk. The division recommended closure of this budget account. REFUGEE PROGRAM - PAGE 1257 Ms. Florence stated this program was also recommended for closure based on the transfer of refugee services to Catholic Community Services in May 1994. Catholic Community Services was now the direct grantee of the federal government. NEVADA MEDICAID - PAGE 1215 Ms. Florence testified the number of people eligible for Medicaid had increased steadily. Medicaid expenditure levels had also increased dramatically. However, average expenditures per eligible client were decreasing. Expenditures began to level off in 1992 and 1993. She pointed out 1992 was the year budget reductions were instituted due to the state of the economy. At that time, limits were placed on Medicaid providers with regard to physician visits, authorizations for pharmacy expenses, etc. In 1994 costs per eligible client declined. Ms. Florence reported growth in number of Medicaid recipients for Fiscal Year 1995 was projected at 13.82 percent over Fiscal Year 1994. Growth for Fiscal Year 1996 was projected at 30.22 percent over Fiscal Year 1994. And growth for Fiscal Year 1997 was projected at 45.58 percent over Fiscal Year 1994. She noted the growth experienced in Nevada was not atypical of what was occurring throughout the country. She explained growth was the result of program changes by the federal government to address the needs of the uninsured population and increase eligibility for pregnant women and low income children. Ms. Florence stated the increase in expenditures was the reason it was necessary to work toward full implementation of a mandatory Medicaid managed care program, if not to fully control costs, at least to predict costs and improve access to services for Medicaid recipients. She pointed out while AFDC recipients comprised nearly 48 percent of total caseload, their Medicaid expenditures totaled slightly over 22 percent of total expenditures. While the disabled population comprised nearly 14 percent of the Medicaid eligible caseload, their expenditures totaled over 36 percent of total Medicaid costs. Ms. Florence reported the budget account was impacted by the revised plan for the intergovernmental transfer program. She said the Budget Division had provided fiscal staff with all of the changes which flowed through the Medicaid budget and the tax and intergovernmental transfer program account. She noted the tax program had been a significant source of revenue to the Medicaid budget and over the past two biennia had contributed to reductions in General Fund need. Ms. Florence stated decision unit M-200 related to anticipated caseload growth. She pointed out the numbers would be revised when the division completed its most recent expenditure projections based on caseload projections. Therefore, it was anticipated adjustments would be required in the categories of fiscal agent charge, medical payments (current, second, and third years), and utilization review. Two Medicaid Specialist positions, one Management Analyst position, and one Program Assistant position were recommended in the first year of the biennium. Two Medicaid Specialist positions were recommended in the second year. The positions would not be impacted by managed care and would be primarily responsible for nursing home reviews, prior authorization requests, civil rights compliance reviews, and other required tasks. Mrs. Evans asked when the adjusted numbers would be available to the subcommittee. Ms. Florence said the division was striving to have revised Medicaid projections completed within a week. Ms. Florence noted the division would be submitting a budget revision related to the adult group care program waiver. It was estimated Medicaid expenditures would be reduced approximately $400,000 in Fiscal Year 1996 and $545,000 in Fiscal Year 1997. Chairman Hettrick questioned whether fine income in the Medicaid Fraud Unit should be budgeted at $900,000 per year. Ms. Florence responded the division had been in contact with the Attorney General's Office. The Attorney General's Office indicated the dollar amount collected was not necessarily related to the number of personnel. It was related to the magnitude of pending lawsuits. The Welfare Division's review of collections obtained revealed an average of one major case each fiscal year, but it was difficult to anticipate whether pending cases will actually be litigated. Ms. Florence testified decision units M-201 and M-202 were related to the Division of Child and Family Services budget where there were reductions in federal Title XIX dollars based on the expansion of treatment facilities resulting in a planned reduction in Medicaid expense. Decision unit M-530 related to mandated expenses associated with the CHAP program. Similarly, decision unit M-555 related to expenses associated with the early periodic screening (Healthy Kids) program. The Executive Budget reflected anticipated caseload growth and increased participation rates. The federal requirement would be to achieve an 80 percent level of screenings in the Health Kids program. The most recent calculations indicated the division was nearing 50 percent. Aggressive outreach would be required on the part of managed care providers to meet the 80 percent requirement. It was anticipated participation would increase through managed care case management. Ms. Florence stated decision unit E-125 referred to funding for actuarial consultation for the portions of the Medicaid program which would continue to be fee for service as well as consultation with regard to the existing Medicaid payment projection methodology. She acknowledged a sense of urgency on the part of the Budget Division and the subcommittee to receive updated Medicaid payment projections. She said the division was making projections from data which was only partially automated and part of the process was done manually. Under normal circumstances it took approximately 18 days to conduct a review and analysis for payment projections. She said actuarial assistance was needed in this area. Chairman Hettrick questioned how the actuarial contract differed from the contract reflected in decision unit E-401. Ms. Florence answered decision unit E-401 related only to the managed care aspect of the Medicaid program. She noted a large portion of Medicaid expenditures would not be impacted by managed care during the coming biennium. The fee for service would remain large even if all expenditures were under managed care due to the high retroactive payments made while clients are pending eligibility and not yet enrolled in managed care. She said the state had a significant investment in what it was paying for medical care and the state-funded portion of this expense ($25,000) was a wise investment to ensure the best methodologies for estimating expenditures of $600 billion. Ms. Florence said decision unit E-175 referred to staff development. She said she was pleased with the Governor's recommendation to significantly enhance personnel training. Decision unit E-176 provided funding for conversion of a contract employee to a classified employee. This recommendation was the result of reviewing the independence test for contract employees. It was determined the contractor did not meet the test, and therefore, it was appropriate to fill the position with a classified employee. She explained the position was a nurse who performed functions similar to those of other staff nurses in the Medicaid program. Ms. Florence reported decision unit E-401 represented the Medicaid mandatory managed care program. She explained the interim health care committee had worked with the Department of Human Resources to design a mandatory managed care program for Medicaid. A number of recommendations came out of the committee. One recommendation was that the Welfare Division should pursue a 1915 B waiver instead of an 1115 demonstration waiver. During startup of the managed care program the division should mandatorily enroll AFDC and CHAP recipients as well as the child welfare population. Ms. Florence expressed the belief the department was not yet prepared to proceed with Medicaid managed care for the disabled population. She explained this was a complex population to analyze. The department needed to ensure it had adequate information to make accurate estimates of costs and potential savings. Ms. Florence stated basic services recommended for the managed care program included the full array of services currently being provided to the target population with the exception of institutional treatment services for seriously emotionally disturbed individuals and the mentally retarded population. The service providers selected could expand the list of services. Senator Raggio asked what type of care would be provided to the mentally disturbed. Ms. Florence responded most of those services were provided by state agencies and would be exempt from managed care. Ms. Florence noted the Interim Finance Committee had provided funding to the agency to initiate planning and access to consultant services in preparation for implementation of managed care in January 1996. She stated the agency was attempting to collect bids from potential providers by June 15, 1995. A release for information outlining information required in the request for proposal would be issued to prospective bidders within a week. A bidders' conference would be held shortly thereafter to make an initial determination of the viability of the program. Senator Rawson inquired whether the existing waiver with the medical school was an 1115 waiver. Ms. Florence replied a waiver was no longer required, but it had been a 1915 waiver. Senator Rawson asked if there could be an 1115 waiver for the disabled portion of managed care and a 1915 B waiver for the remainder of the program. Ms. Florence said that was an available option, depending on the design of the program. She explained an 1115 waiver had to be supported by research findings. Adding new eligibles would not qualify. Ms. Florence stated the waiver, with the exception of the financial analysis section, had been submitted informally to the Health Care Financing Administration (HCFA) for comment. The agency did not anticipate any major problems with the waiver based on comments received from HCFA. It was expected HCFA would require some clarification of the waiver. The agency would remain in close contact with HCFA during the 90-day review process. Ms. Florence noted the consultants had been involved in the development of the waiver. She stated the consultants were active in Medicaid business throughout the country and were knowledgeable about HCFA operations. Ms. Florence said the request for proposal was expected to be released in mid-May. Selection of contractors would occur in August 1995 and negotiations would take place in September. Implementation of the program was projected for January 1996. Ms. Florence noted a concurrent issue was determining what kind of data requirements were needed under managed care which would be different from a fee for service reimbursement system. The Interim Finance Committee awarded the division approximately $300,000 to accomplish that task. She explained this work was not progressing as quickly as hoped due to the work required to develop the waiver and perform the bid process. Two things had been accomplished, however. The consultants had advised that states which had totally revamped their data systems experienced delays in implementing managed care. The recommendation of the consultants was to review what could be done to modify the existing system in order to meet the managed care data requirements while an assessment was made of what would be needed for a comprehensive information system. The agency would be requesting a reallocation of unexpended funding remaining from the $300,000 to continue the data analysis process in the upcoming biennium. Ms. Tiffany asked if the original proposal was for the management group to be responsible for the data system. Ms. Florence replied the committee recommended contractors for various components of the managed care system. The point of this contract was to assess what could be accomplished in-house and what data would be required initially. Ms. Tiffany asked what the existing system was that would be modified. Ms. Florence stated the existing system was a claims payment system which interfaced with eligibility files in the WELF data system. People would be brought into the managed care system incrementally in a phased-in approach. Therefore, it would be necessary to work within the existing system for some time. This project was to identify what data elements were needed for managed care. Phase 2 of the data system analysis would assess whether or not to outsource the data. She reiterated defining a new system had not proven successful in other states. Ms. Tiffany pointed out commercial managed care systems existed which could be used in lieu of modifying the existing system. She expressed surprise at the consultant's suggestion. Chairman Hettrick questioned whether it was possible to contract with a supplier of an existing system. Ms. Florence said there were contractors available but the work which would have to be done to interface with the agency's existing eligibility system would delay implementation of the program. She noted time constraints were driving the planning process. Ms. Tiffany inquired whether a request for information and a request for proposals would be let for the management group. Ms. Florence said the requests would be let for the health maintenance organizations (HMOs), not the management group. The committee recommended keeping certain functions with the state as a savings measure. Ms. Tiffany questioned whether the management group concept had disappeared. Ms. Florence said she did not believe the committee had made a final recommendation with regard to independently contracting out the management of the health maintenance organizations. Ms. Florence continued her testimony. She stated the agency assumed 3 percent savings related to decision unit E-401 based on testimony by the consultants to the interim committee. She noted the 3 percent figure represented a range. The ultimate savings would be known at the point responses to the request for proposal were received. Ms. Florence reported the agency requested three positions associated with this program, which represented a minimal investment with regard to oversight of the managed care program. Ms. Florence stated changes associated with funding for this program related to the elimination of the health maintenance organization premium tax which was originally included in the Executive Budget were no longer recommended. Ms. Florence noted a one-time appropriation was proposed to pay off the accrued liability for fee for services claims associated with the AFDC, child welfare, and CHAP population. The total cost of the accrued liability for the biennium is $13.4 million. It was anticipated in the first year of the biennium there would be at least a $40 million reduction in claims due to managed care and a $38.9 million capitated rate payment, resulting in a first year savings of $1.1 million, increasing to $4.4 million in the second year of the biennium. Additionally, the agency anticipated reductions in fiscal agent and utilization review contracts which would bring the total savings, before administrative costs, to approximately $1.5 million in Fiscal Year 1996 and $5.9 million in Fiscal Year 1997. After payment of administrative expenses, state and federal savings were projected at $764,000 in the first year of the biennium and $5 million in the second year. The net state savings would be $327,000 in the first year and $2.3 million in the second year. She noted the first year savings would be affected by the incremental phasing in of that population. Chairman Hettrick inquired whether the caseload adjustment would affect the one- time appropriation. Ms. Florence said the adjustment would not be great since the appropriation dealt with Fiscal Year 1995 costs. Chairman Hettrick asked if a budget adjustment was required in funding for the external quality review to commence in July 1995 since program implementation was not anticipated until January 1996. Ms. Florence said the budget request included funding for planning purposes. She noted the contract was to commence in December 1995. She said revisions could be made in contract amounts. Ms. Florence stated decision unit E-425 reflected funding for room dividers recommended by the security consultant that reviewed department facilities. Legislation was introduced in the Senate for a one-time appropriation for this funding. Decision unit E-710 related to replacement of desks and chairs in the Medicaid program. Decision units E-902, E-903, E-905, E-906, and E-907 related to position transfers to more appropriate accounts. Decision unit E-907 referred to the transfer back to the division from the Human Resources Director's Office positions responsible for rate development and other Medicaid analyses. The need for the positions in the Director's Office decreased with the settlement of the Hill Haven lawsuit which challenged rate setting methodologies and resolution of acute care rate development issues. Chairman Hettrick asked for clarification of the functions of the positions proposed to be transferred in decision unit E-906. Ms. Florence answered the Resource Specialist positions had been responsible for making group orientation presentations to new applicants in order to market the voluntary primary care case management program operated through the university and other contractors. She noted the level of enrollment in the PCCM program had been very good and provided more opportunity for clients to interact with Welfare staff to ask questions about the advantages of finding their own physician. Approximately 39 percent of the AFDC population has voluntarily enrolled in that limited form of primary care. The plan was to continue to utilize those positions to facilitate enrollment in the mandatory managed care program, to deal with provider complaints, and provide initial patient education. Mrs. Evans asked how many of the five positions were presently filled. Ms. Florence responded four positions were filled, one was in recruitment. Mrs. Evans inquired whether the positions were needed July 1. Ms. Florence stated she could envision these positions being utilized in the transition of people who would be moving from the primary care case management program to another provider. Mrs. Evans requested clarification regarding decision unit M-200. She inquired whether decreases in projections related to AFDC and CHAP caseloads. Ms. Florence said Mrs. Evans was correct. Chairman Hettrick called for public testimony. Ms. Michelle Gamble, Nevada Association of Counties (NACO), read a letter from Mr. Robert Hadfield, Executive Director of NACO (see Exhibit C). Mrs. Evans expressed concern for Lyon County's and White Pine County's difficulties in making Medicaid payments. Senator Rawson inquired whether it would be helpful for the state to define a specific portion of the property tax for this type of issue. Ms. Gamble stated this solution had been discussed but no consensus opinion had been reached. She suggested this was an option which should be researched further. Ms. May Shelton, Director, Washoe County Social Services, and Chairperson, Nevada Association of County Welfare Directors, addressed the issue of long-term care and the inter-governmental transfer. She said currently both Medicaid and the counties applied the individual patient's income towards the cost of care first. Counties picked up the difference in the cost of care. She noted the cost of care varied from nursing home to nursing home and also according to level of care from $202 per day to $59 per day. Washoe County augmented cost of care by an average of $1,300 per month. In 1989, the first year of the interlocal agreement between the state and the counties, Washoe County paid the state $422,596 for its share of the Medicaid match program. Total expenditures that year were $744,000. Costs of nursing home care had risen every year. In 1992 Washoe County paid the state $1.3 million for approximately 76 patients. That year total county expenditures for nursing home patients was $1.4 million. This year Washoe County would pay the state $2.8 million for over 220 patients. Ms. Shelton noted the counties received no Medicaid match funds for persons receiving over 300 percent of SSI income. She said the Nevada Association of County Welfare Directors joined NACO in asking the Legislature to raise the $714 income level, which had remained unchanged for many years, to the 300 percent of SSI income level (currently $1,374 and adjusted for cost of living in January of each year). In the alternative, the income level could be raised to 300 percent of SSI income over the course of six years. She stated all counties needed relief from responsibility for long-term care. Ms. Shelton explained county tax levies were not growing fast enough to keep up with costs. In the past, expenditures had been adjusted by reducing payment rates. The statute now required counties to pay 100 percent of Medicaid rates for in-patients. Nursing homes also required Medicaid rates. The only area of flexibility was in emergency room and outpatient care. Without the intergovernmental transfer program, the counties will be short $1.7 million. With the intergovernmental transfer program, the counties will be short $1.2 million. She asked that the indigent levy be increased and suggested savings in the Welfare Division budget be used to raise the $714 income level. Mr. John Sasser, Nevada Legal Services, introduced Ms. Mary Ellen McCarthy of Nevada Legal Services and Mr. Michael Torphy of Washoe Legal Services. He expressed the opinion the Governor had made a recommendation in the Executive Budget which was "penny wise and pound foolish" to leave out three specific areas within the Welfare Division budget in which a small amount of money up front could save the state a great deal of money in the long run. He noted the Legislature had recommended inclusion of presumptive eligibility for pregnant women in the Medicaid budget to allow pregnant women to access prenatal care following a preliminary assessment of her eligibility for Medicaid pending the formal eligibility determination. He explained the state's savings would be realized from the provision of early prenatal care offsetting the risk of low birth weight babies who cost the state more for services. He noted it was difficult to estimate costs for presumptive eligibility, but the Health Division was currently preparing a fiscal note which would be presented to the committee when it became available. Mr. Torphy commented on the Early Periodic Screening Diagnosis and Treatment (EPSDT) program. He said the purpose of the program was to provide well child screening services to Medicaid eligible children. He noted the Executive Budget assumed the service utilization rates would remain the same. He said this assumption was possibly inaccurate based on HCFA guidelines issued in 1993. The federal agency required that two performance indicators be met: the 80 percent participation factor which Ms. Florence alluded to earlier and another 80 percent factor related to the number of screening services provided in toto. The State of Nevada provided approximately 13,678 screening services in 1993. In that year there were 34,000 eligible individuals. There was a 39 percent participation rate on the first performance indicator. The second performance indicator would have been substantially higher (approximately 70,000 services would have had to been provided) since a number of services are required for individuals under age one. That program requirement is set for implementation by the state in 1995, but clearly it could not be met. Mr. Torphy said the second assumption made by Ms. Florence was that case management would be done without that explicit requirement being made a part of the request for proposals to the health maintenance organizations. The case management requirement that either the HMO or the state agency managing the program monitor those individuals participating and eligible for the program for their access to services is explicit within the EPSDT program and the federal authorizing legislation (42 USC 1396d). Access to services, i.e., finding providers willing to take Medicaid patients, has been a major problem. Mr. Torphy stated leaving those assumptions undeveloped and unexplained to HMO bidders would lead to physicians dropping out of those HMOs as service providers, leaving the HMO with the same service provision problem which the state currently has. Mr. Torphy added since 1989 HCFA had been discussing whether or not a service should be counted if all the elements required of that screening service are not met. Apparently Nevada counts some screenings which are incomplete under HCFA's definition. Mr. Torphy said in conclusion three problems which the assumptions and the completeness factor may create for Nevada in its attempt to obtain a waiver are a possible delay in receiving the waiver, HMOs may have difficulty finding providers to perform the services, and legal actions could be brought by beneficiaries if services are not met. Ms. McCarthy stated she was appearing to solicit the subcommittee's attention to a problem being experienced by Nevada Legal Services. She explained seriously ill disabled Nevadans were dying while waiting to receive home and community based Medicaid services. There are presently approximately 107 positions available in the Welfare budget. She explained the budget is capped, therefore, if some of the recipients required additional services the number of available positions would drop. There are 93 individuals currently on the waiting list, not including persons in Clark County, the area with the largest population base. The wait in northern Nevada averaged between 16 to 19 months, and some of the disabled individuals have a life expectancy of less than one year. Ms. McCarthy stated there was no access to health care for individuals earning over $458 per month unless they were institutionalized or they qualified for the waiver program. She noted a requirement of the waiver was that home care cost less than community care. She encouraged the subcommittee to increase funding for this program. Mr. Stephen Lewis, Director, Nevada Programs for Health Insight, read from a prepared statement (see Exhibit D). Mrs. Bobbi Gang, speaking on behalf of the Nevada Women's Lobby and Planned Parenthood of Southern Nevada, testified the Maternal and Child Health Coalition of Nevada had identified adequate and accessible perinatal health care as vital to the well being of both mother and baby. Early identification of problems or risk factors can lead to better outcomes and lower health care costs. Approximately 75 percent of Nevada mothers start prenatal care in the first trimester, 20 percent do not receive prenatal care until the second trimester, and the remainder either receive prenatal care late in pregnancy or not at all. In many cases women do not receive necessary care because they cannot afford it. Mrs. Gang stated the Nevada Women's Lobby wished to emphasize the ethical, humanitarian, and financial reasons for providing early and continuous prenatal care for every pregnant women. National studies have shown every dollar invested in adequate prenatal care can result in a savings of $3 in later medical costs. She urged the subcommittee to include presumptive eligibility in the budget. Mrs. Gang then read a letter from Planned Parenthood of Southern Nevada (see Exhibit E). Ms. Jan Gilbert, representing the League of Women Voters of Nevada, expressed support for presumptive eligibility for pregnant women. She urged the subcommittee to consider including presumptive eligibility in the Welfare budget. DEPARTMENT OF HUMAN RESOURCES - DIRECTOR - HOSPITAL TAX ACCOUNT - PAGE 993 Ms. Florence introduced Mr. Chris Thompson, Chief of Health Care Financial Analysis Unit, Department of Human Resources. She noted there had been a number of changes in this budget account. The Department of Human Resources had been working with the various eligible entities to design a program which emphasized fairness, provided the maximum state benefit available, and remained within the overall limitations of disproportionate share payments that can be made. Ms. Florence explained the department was proposing $54,551,000 in intergovernmental transfers, raised from the $48 million reflected in the Executive Budget. That funding, together with a $45 million balance forward and interest earned of $2.8 million, would equal total revenue of $2,351,000, of which $358,640 would be transferred to the Director's administrative account. Then $77,051,000 would be transferred to Medicaid for matching federal funds in order to provide for $73,560,000 in disproportionate share payments, the maximum amount the state may pay out under current federal rules. This would result in $80.5 million in non-disproportionate share payments for the biennium, of which $17.3 million would be the net state benefit for each year of the biennium. In Fiscal Year 1997 $23.4 million would be carried forward, together with $1.5 million in reserve, resulting in the same net state benefit and $73.5 million in disproportionate share payments. Ms. Florence explained under new federal rules the only eligible entities were public hospitals or local entities such as Washoe County. The intent of the program was to provide the greatest benefit to eligible entities. In redesigning the program, Washoe Medical Center would be a current benefactor. Ms. Florence noted fiscal staff had been provided with all necessary budgetary adjustments. Chairman Hettrick asked why the HMO tax was being dropped. Ms. Florence replied the original proposal for the HMO tax would require changes in state law. It was determined those changes could not be made. There was also concern on the part of HCFA as to whether the exemption for home office credits under a Medicaid HMO premium tax would be allowable. Therefore, no changes were proposed in the premium tax. There would be a new line of business to any HMO provider that is awarded contracts for the mandatory managed care component and there would be increased revenues to the state by virtue of that new line of business. Ms. Florence noted anticipated revenue and expense associated with the tax had been zeroed down. Senator Rawson asked if there had been a definite decision not to pursue the HMO tax. Ms. Florence responded affirmatively. She said based on meetings with the Department of Insurance as well as discussions with HCFA, the changes which would be required would not be appropriate. Senator Rawson questioned whether it was unlikely HCFA would accept the tax. Ms. Florence said HCFA was a minor part of the problem. More important was the concern about exempting the Medicaid line of business from the home office credit. Senator Rawson asked if a decision had been made not to offer a home office credit. Ms. Florence said that decision had been made on the advice of the Insurance Commissioner. She asked Mr. Thompson to address this issue. Mr. Thompson stated when the HMO premium tax was initially included in the budget there was no provision for companies to apply a home office credit against it. In discussions with the Department of Insurance and the Department of Taxation two issues were raised: 1) that denying the home office credit worked against the general policy of the state with regard to economic development and 2) that the Department of Taxation was concerned about adding another exemption which could potentially be harmful in defending the tax credit as a whole. In addition, HCFA expressed concern about the overall allowability of taxes. HCFA suggested there could be a problem with regard to not allowing a home office credit solely for Medicaid HMOs due to the possibility of causing the tax on HMOs to be considered a separate tax, under which case federal funding could be disallowed. Senator Rawson asked if the home office credit was allowed and the HMO premium tax was assessed the benefit would be negated. Mr. Thompson said the department had not been able to quantify a benefit, the tax credit was equal to one-half of the total premium tax. Therefore, individuals who would be eligible for the tax credit and would get the bids in the managed care would pay only one-half of the amount that was previously shown. The benefit to the state would depend on the negotiating position and the position taken by the HMOs in making their bid. It was conceivable a company which felt it had a sufficient competitive advantage over other managed care companies could build in the entire 3.5 percent premium tax into their bid--even though they would get the home office credit--on the basis that they would still be competitive over HMOs which would not get the credit, and they would then take as profit to themselves all of the benefit from the credit. To the extent that all HMOs that got the business also took that position in making their bid and were able to get the home office credit, there would be zero benefit to the state. To the extent that any HMOs that receive the business do not get the tax credit and to the extent that any HMOs that are able to get the tax credit determine in their process of developing a bid that they want to take some amount off of the 3.5 percent in order to make their bid more competitive, there would be a benefit to the state. Senator Rawson asked if there was any indication the program would be disallowed with or without the tax or with or without the home office credit. Mr. Thompson said at this time the concern was if the premium tax was applied to HMOs in the same way it applied to all other insurers in the state, it would be acceptable to HCFA and would not be considered a health care tax because less than 85 percent of total revenues would be received from health care. If the home office credit to HMO providers was included and not allowed by HCFA, benefit for the entire tax would be lost. He said the tax would be applied to HMOs but with the ability for them to receive a tax credit in accordance with state law. Mrs. Evans inquired whether the communications with HCFA were in writing. Mr. Thompson stated HCFA had been reluctant to put anything in writing regarding any of these issues. On February 24, 1995, he attended a meeting in Dallas, Texas, convened by HCFA at which this issue was specifically discussed and the previously mentioned determinations were reached. The department has asked for written confirmation from HCFA, but HCFA has not provided that confirmation. In the alternative, the department wrote a letter to HCFA clarifying its understanding of the meeting to create a written record of HCFA's comments. To date there had been no response from HCFA which would rebut that letter. Mrs. Evans expressed concern that decisions were being based on assumptions that certain things would occur. She said the subcommittee would be more comfortable if there was some guidance from HCFA regarding a workable solution. She suggested the Legislature also correspond with HCFA regarding this matter. Mrs. Evans noted an earlier plan had been problematic and could place Nevada in some jeopardy. She inquired about Nevada's current status with regard to any potential liability. Ms. Florence responded at the meeting in Dallas the state was given its first indication that there may be a problem with the prior tax programs. Originally HCFA's communications suggested they had misinterpreted Nevada's programs. The department has sought an informal legal opinion from attorneys who were instrumental in negotiating the provider tax law with Congress and involved with HCFA in the development of regulations. Currently indications are that the state has a strong position, but it was extremely difficult to get anything in writing from HCFA at this time. Mrs. Evans asked what repayment Nevada might be required to make. Ms. Florence stated the figure was based on three-fourths of one fiscal year of the biennium. The department estimated the repayment would be approximately $30 million. Chairman Hettrick asked if the proposed distribution of funding had been agreed to by the entities involved. Ms. Florence said not all parties had agreed to the distribution. Chairman Hettrick asked if agreement was necessary for the Legislature to act on this program. Ms. Florence replied the position of the Executive Branch was that as long as the state benefit amount remained intact, there could be variation in individual benefits to the entities. The department would like to move as quickly as possible in reaching agreement with all of the parties. Chairman Hettrick said it was not possible to close this budget without accurate individual numbers. Chairman Hettrick inquired whether there would be a change in the carry forward amount which would require a budget adjustment. Ms. Florence responded the indication, based on completion of the most recent Medicaid payment projections, was the balance forward of $45 million may increase. Chairman Hettrick asked the status of legislation required for the intergovernmental transfer program. Mr. Thompson stated legislation was being drafted. Chairman Hettrick emphasized the subcommittee needed to receive new budget projections as quickly as possible. He asked when conclusion of negotiation of intergovernmental transfers was anticipated. Ms. Florence said the department was proceeding as quickly as possible to gain consensus. She said she could provide some answer to the subcommittee in two weeks. Mr. Dini expressed concern for the small hospitals in the state. Ms. Florence said the program design was sensitive to the need to include small rural hospitals. There being no further business, the meeting was adjourned at 10:38 a.m. RESPECTFULLY SUBMITTED: Dale Gray, Committee Secretary Joint Subcommittee on Human Resources/K-12 Assembly Committee on Ways and Means and Senate Committee on Finance March 28, 1995 Page