Little Rock, Arkansas
August 14 to August 18, 2004
October 12, 2004
TO: Members of the Executive Committee
FR: Representative Warren Chisum,
Chairman, Energy & Environment Committee
RE: Report of Activities of the Energy & Environment Committee at the 58th Annual Meeting of the Southern Legislative Conference in Little Rock, Arkansas, August 14-18, 2004
The Energy & Environment Committee convened on Monday, August 16, for a business session and on Tuesday, August 17, for a program session during the 58th SLC Annual Meeting. The following is a summary of the speaker presentation and Committee activities.
Monday, August 16
I. LIHEAP: An Update on the Federal Low Income Home Energy Assistance Program
Ed Rissing - Principal, Rissing Strategic Advocacy, Virginia
The federal Low Income Home Energy Assistance Program (LIHEAP) was authorized in 1981 and amended in 1984 to assist low-income households in meeting their home heating and cooling needs. The Committee heard an update on this program and the opportunity for reform, as LIHEAP is due to be reauthorized by Congress.
According to Mr. Rissing, LIHEAP
was created in 1981 by an act of Congress as a federal program administered by
the U.S. Department of Energy’s Administration for Children and Families’
Division of Energy Assistance, with funds going to states to help eligible,
low-income households meet their home heating and/or cooling needs.
Dr. Victor began his presentation by noting that the last two decades have involved both challenge and opportunity for workers’ compensation systems--a time in which many jurisdictions implemented reforms to try to stem rapidly rising costs and improve worker outcomes, insurers faced unanticipated losses, employers called for reasonable, predictable costs, and workers sought to ensure or maintain adequate benefits.
Despite the upheaval during these decades, the following fundamental goals of workers’ compensation systems remained constant: 1) to provide prompt and adequate benefits to injured workers; 2) to ensure workers have timely access to quality medical care; 3) to accomplish the previous goals at reasonable costs to employers; 4) to operate an effective benefit delivery system; and 5) to finance all these with well-functioning insurance mechanisms.
Understanding the flow of medical payments—to whom and for what—is essential for targeting cost drivers and evaluating innovations in medical management. The major medical cost driver in Texas is utilization of medical services, especially the utilization of chiropractic care. Healthcare costs are the major drivers of medical costs in Illinois, Indiana, Tennessee, and Wisconsin--states with no fee schedules. In Tennessee, surgery rates are noted to be unusually high.
Dr. Victor noted that in his study on workers’ compensation, Texas figured prominently in the study. Workers’ compensation costs per claim in Texas increased at double-digit rates for the third consecutive year, according to Dr. Victor. Texas’ workers’ compensation costs per claim remain among the highest of the states in the study at the Workers’ Compensation Research Institute (WCRI). At $5,320, the average cost per claim in Texas is 68 percent above the median of the 12 states in the study. The average total cost per workers’ compensation claim in Texas rose 10 percent between 2000 and 2001, following an 11 percent increase between 1999 and 2000, and a 13 percent increase between 1998 and 1999. Its annual growth in costs per claim averaged 8 percent in the two previous years. For Texas, the major drivers behind the increase in overall costs per claim were a 10 percent growth in medical payments per claim, an 8 percent rise in indemnity payments per claim (wage replacement payments for lost time injuries), and a 23 percent growth in benefit delivery expenses per claim. The other states included in this study were California, Connecticut, Florida, Illinois, Indiana, Louisiana, Massachusetts, North Carolina, Pennsylvania, Tennessee, and Wisconsin.
For each of the state studies, factors contributing to the most recent growth in indemnity benefits per claim include a longer duration of temporary disability and an increase in the percentage of cases with permanent partial disability (PPD) or lump-sum payments. The study also reported that benefit delivery expenses per claim rose 19 percent between 2000 and 2001 (for claims with more than seven days of lost time). Of the 12 states in the study, Texas led in medical costs per claim. Illinois was the next highest.
In closing, Dr. Victor noted that WCRI studies also identified some of the factors behind higher medical payments in Texas--mainly substantially higher-than-average visits per claim to physicians and chiropractors, compared to physicians and chiropractors in the other states under study. Indemnity payments per claim were also among the highest of the states studied, 28 percent higher than the median state for claims with more than seven days of lost time. The study pointed out that the higher indemnity payments in Texas resulted from a higher percentage of claims with more than seven days lost time, a higher frequency of claims with PPD and the longest duration (at an average of 18 weeks) of temporary disability among the study states. Average benefit delivery expenses per claim in Texas were 14 percent higher than the 12-state median, largely due to higher medical cost containment expenses (claims with more than seven days of lost time).
Next, Commissioner James Neeley began his presentation with an overview of the Workers’ Compensation Division of the Tennessee Department of Labor and Workforce Development. Last year, Governor Bredesen charged the Commissioner and Commissioner Matt Kisber of the Economic and Community Development to travel the state to listen to concerns about the workers’ compensation program and to present an agenda for a working paper. Multi-state companies told the commissioners that their workers’ comp insurance rates are higher in Tennessee than in any of the other states in which they do business. This problem turned out to be consistent, and the SD1 (statistical data) forms proved crucial in providing four years of Tennessee-specific data that were important to developing the reform package.
Commissioner Neeley addressed the concerns of the employers and note that a number of plants and factories around the state continue to close down and more people are becoming unemployed. According to the Commissioner, this is due largely to high expenses from workers’ compensation insurance, claims, and lawsuits. The Department of Economic and Community Development has been told by several companies that Tennessee’s high costs for workers’ compensation insurance take the state out of the running for business expansion and relocation of corporations.
All Tennessee companies with more than five employees are required to carry workers’ compensation insurance to cover on-the-job injuries. Businesses complain that premium rates have increased to the point that it is more expensive to operate in Tennessee than other states in the region. Business groups have made an overhaul of the system their top legislative priority this year.
In Tennessee, according to Commissioner Neeley, workers' compensation cases go through the court system. There is an emerging consensus on setting up a commission or agency to review and decide cases without court action, a method favored in many other states. For every $1,000 spent on workers’ compensation in Arkansas, $3,920 is spent in Tennessee, and for every $1,000 spent in Virginia, $2,540 is spent in Tennessee. The average cost of a musculoskeletal disorder claim in Tennessee is $10,200, versus $2,200 in Arkansas and $1,400 in Virginia. A number of companies have refused to locate in Tennessee or expand existing facilities because of the workers' compensation system.
Governor Bredesen’s workers’ compensation reform package was introduced to the General Assembly on April 20, 2004, and was adopted May 12, 2004. This workers' compensation bill (SB3424/HB3531) rewrites significant portions of the state workers' compensation laws with regard to medical service rate caps on claims, independent medical evaluations, and other issues.
This reform bill will protect the workers’ compensation system so that injured workers can get a fair settlement in a timely manner and contain costs for many companies. Commissioner Neeley continued by giving a brief overview of the bill:
§ The workers’ compensation reform legislation provides for a medical fee schedule to apply to all manner of treatment of a work-related injury while controlling prices and system costs. The fee schedule is to be effective July 1, 2005.
§ The legislation provides for disputed and controverted claims to be settled as long as the total amount paid is no more than 50 times the minimum weekly benefit rate as of the date of the claimed injury. This provision is effective for injuries on or after July 1, 2004.
§ The bill establishes a cap of 1.5 times the permanent impairment rating for claims in which the injured worker returns to work with the same employer at the same or greater wage. This provision is effective for injuries on or after July 1, 2004.
§ The legislation requires physicians to use the applicable edition of the American Medical Association’s (AMA) Guides to Permanent Impairment. In cases not covered by the AMA Guides, an impairment rating by any appropriate method used and accepted by the medical community is allowed. This provision is effective for injuries which occur on or after July 1, 2004.
§ The legislation raises the cap on weekly temporary disability benefits to 105 percent of the state’s average weekly wage for injuries which occur between July 1, 2004 and June 30, 2005. It raises the cap on compensation benefits in temporary cases to 110 percent of the state’s average weekly wage for injuries effective July 1, 2005. The cap on permanent partial benefits remains at 100 percent of the state’s average weekly wage.
§ Case management no longer is mandatory and, if utilized, is at the employer’s expense and the employee must cooperate. This provision is effective July 1, 2004.
§ The Medical Care and Cost Containment Committee’s composition increases from eight to 14 members. This provision is effective July 1, 2004.
§ The minimum bond amount required by the Department of Commerce and Insurance from a single self-insured employer is $500,000. This section of the bill sets forth certain requirements for deposits of negotiable securities, certificates of deposit, letters of credit and bonds filed with the Department of Commerce and Insurance. Financial statements required to be filed biennially with the Department of Commerce and Insurance must be actuarially certified. This provision is effective July 1, 2005.
Commissioner Neeley concluded his presentation by stating that still is too early to see results from this reform, but he is hopeful that it will bring uniformity and predictability when it comes to workers’ compensation cases. The reform is necessary for good economic development and job growth in Tennessee.
At the end of the presentation, both presenters answered questions from the members, and the meeting was adjourned.
Tuesday, August 17
I. Arkansas Public Health Initiatives
James M. Raczynski, Ph.D. – Professor and Dean, College of Public Health, University of Arkansas for Medical Sciences
This session highlighted recent innovative Arkansas public health initiatives, including the state’s effort at tackling obesity in children, addressing minority health disparities, expanding community-based participatory initiatives, and meeting public health needs through the University of Arkansas for Medical Services’ College of Public Health, among others.
Dr. Raczynski opened his presentation by giving an overview of legislative initiatives to improve the health and well-being of Arkansans and the role of the College of Public Health in contributing to this effort. Legislative initiatives include the Tobacco Settlement Initiative, Health Insurance Initiative, Multi-State Integrated Database Initiative, and the Obesity and School BMI Initiative.
The Arkansas Center for Health Improvement (ACHI)—governed by the University of Arkansas for Medical Sciences, Department of Health, and BlueCross BlueShield—was instrumental in securing the state's $1.6 billion from the national tobacco settlement to improve the health of Arkansans. According to Dr. Raczynski, this accomplishment has gained national recognition. The national Campaign for Tobacco-Free Kids recognized Arkansas for moving from investing the least on tobacco prevention to being ranked in the top four states in the nation in 2003. Importantly, the Arkansas Tobacco Settlement Proceeds Act of 2000 established the Arkansas Tobacco Settlement Commission and requires biannual performance-based assessment and reporting through the Commission to the governor and General Assembly. The ACHI and the Arkansas Tobacco Settlement Commission share several goals, including the evaluation of component programs and timely reporting to the governor and the General Assembly. Through its Tobacco Settlement Initiative, the ACHI also provides staff support to the Arkansas Tobacco Settlement Commission which includes assisting in the establishment and monitoring of appropriate performance indicators for programmatic assessment, overseeing the independent evaluation of programs based upon performance indicators, and providing guidance to the Commission in recommending program modifications.
Dr. Raczynski stated that in 2000, to address the growing crisis in health insurance coverage, Governor Mike Huckabee asked the ACHI to lead in an examination of health insurance issues facing the state. To support this activity, the ACHI applied for and received significant funding from the federal Health Resources and Services Administration (HRSA) State Planning Grant Program to examine the issues and develop a platform of long-term strategic recommendations for the state. The ACHI also received a $1.3 million Demonstration Grant from the Robert Wood Johnson Foundation State Coverage Initiative Program that provides technical assistance and supports implementation of these recommendations.
Previously, no systematic assessment or ongoing monitoring strategy had been employed to determine insurance coverage or direct policy development. The ACHI has completed the first empirical assessment and systematic evaluation of strategies to address uninsured Arkansans. Statewide data from households and employers was collected to assess the availability and need of health insurance in Arkansas. With this information, the Arkansas Health Insurance Roundtable, consisting of 21 private citizen members representing employers, consumers, and health insurance providers, examined all options for stabilizing and expanding health insurance coverage in the state. In an effort to increase public understanding regarding the personal and societal impact lack of health insurance has in the state, a draft of strategic steps for local, state, and federal action was developed. After legislative and executive review, these action steps were submitted to the U.S. Department of Health and Human Services in March 2002 as Arkansas' final report and strategic plan for addressing a growing health and fiscal crisis. The Roundtable continues to meet on a regular basis and is serving as the platform for the development of a five-to 10-year strategic health policy plan for Arkansas.
In the fall of 2003, the Roundtable supported the formation to the Arkansas General Assembly Joint Interim Committee on Health Insurance and Prescription Drugs. This Committee will serve as a permanently authorized body to study issues surrounding health insurance and prescription drugs and will make recommendations for legislation to be introduced in upcoming sessions.
With support and funding from the HRSA, the Arkansas team also was able to develop a Multi-State Integrated Database (MSID), which enabled Arkansas to access from and link data to all funded states. To date, 25 states from Rounds 1, 2, 3, and 4 of the HRSA State Planning Grant Program have received access to the database and several states have utilized the opportunity to incorporate their state-specific survey data into the database. One non-SPG state, New Mexico, has purchased access to the MSID using existing state funds.
In 2003, the General Assembly and Governor Mike Huckabee passed Act 1220 (which created the Child Health Advisory Committee). One component of this act focuses on measuring and reporting the Body Mass Index (BMI) of each child to their parents or guardians. Act 1220 mandates that parents (of children attending public schools) shall be provided an annual BMI report of their child, as well as an explanation of what the BMI means and health effects associated with obesity. The Arkansas Child Health Advisory Committee, a committee mandated by the Act and charged with making recommendations on the implementation of Act 1220, determined that parents will receive information regarding their child's BMI on a confidential health report. Reports such as these are recommended by the American Academy of Pediatrics for all children every year. The ACHI has the responsibility of developing and implementing standardized statewide BMI assessments, as well as reporting. This information will provide parents with important information regarding any health risks their child may incur as a result of being overweight or underweight. To accomplish this, the ACHI put together a BMI Task Force in partnership with local school districts, the Arkansas Departments of Education and Health, and the UAMS College of Public Health. The BMI Task Force developed a timeline and a strategy for implementation.
Three phases of implementation were developed. In Phase I, the ACHI staff worked closely with personnel at 11 schools to organize an assessment day, share necessary information to accurately calculate BMI on each child, and develop and create forms for recording height and weight data. In most cases, Dr. Kaczynski noted, the ACHI staff participated in the actual collection of assessment data. Comparison testing on assessment equipment was done at nearly every school with multiple measures being taken. This was done to compare and test the accuracy of equipment. The BMI Task Force’s goal was to be able to recommend quality equipment at the best possible price should schools wish to purchase equipment to complete assessments.
Phase II consisted of taking information gathered in the field and testing it in a second round of schools. These schools are providing feedback on the feasibility of the recommendations made by the Task Force. According to Dr. Raczynski, he final phase, Phase III, will begin with a statewide rollout of the program.
In closing, Dr. Raczynski noted that an important resource for the Task Force and school personnel has been the community health nurses and the health providers and instructors from the University of Arkansas for Medical Sciences’ College of Public Health. These professionals have been certified by experts in height and weight research measurements at Arkansas Children's Hospital. They, in turn, will train school health nurses and any other school personnel responsible for collecting assessment data. During the months of March and April 2004, the ACHI staff field tested the reports with groups of parents across the state and ascertained the type of report that would be most helpful. In May 2004, parents received health reports regarding their child’s general physical health.
II. Medicare Reform Act of 2003: State Implications
James Randolph Farris, M.D. – Region VI Administrator, Centers for Medicare and
U.S. Department of Health
and Human Services, Texas
This presentation provided an overview of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and its impact on states. Highlights included the Medicare-Approved Prescription Drug Discount Card and Transitional Low-Income Assistance; Medicare Part D benefits; coverage of dual eligible and state contribution; information pertaining to Disproportionate Share Hospitals; and other new announcements from the Centers for Medicare and Medicaid Services.
Dr. Farris began his presentation by noting that on December 8, 2003, President George W. Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003. This landmark legislation was intended to provide seniors and people living with disabilities with a prescription drug benefit, more choices, and better benefits under Medicare. Dr. Farris observed that the 2003 MMA was the most significant improvement to senior healthcare in nearly 40 years.
The two most important provisions of the MMA are the new voluntary drug benefit and the enhanced health plan choices in Medicare Advantage. As a result of these new benefits, beneficiaries can get voluntary drug coverage and new support for their existing drug coverage through Medicare, and they can get access to preferred provider organizations (PPOs), which are the most popular health plan choices for non-Medicare beneficiaries.
On July 26, 2004, the Centers for Medicare and Medicaid Services (CMS) proposed regulations to provide a voluntary prescription drug benefit under Medicare and new health plan choices, including regional PPOs to provide better benefits, higher quality care, and substantial cost savings for Medicare beneficiaries. The CMS will use public meetings and comments on the regulations to assure that the new benefits are implemented as effectively as possible by January 2006.
In addition to the standard drug benefit, which is available to all beneficiaries with a 75 percent premium subsidy, the MMA and the proposed regulations provide opportunities for beneficiaries to get even more comprehensive coverage. Low-income seniors and people with a disability who have limited means--about a third of all people on Medicare--will get access to comprehensive coverage, with no or limited premiums and deductibles and no gaps in coverage. Medicare beneficiaries with retiree coverage will benefit from a set of options to get affordable enhanced coverage, including a new retiree drug subsidy as well as options for employers and unions to wrap around Medicare coverage or offer Medicare-subsidized drug coverage themselves. Beneficiaries who are contributing to their own coverage now can use the new Medicare subsidies to enable them to pay for additional coverage at a lower cost. In addition, states, other individuals, and charitable organizations can contribute toward a beneficiary’s out-of-pocket costs and still have those contributions count toward catastrophic coverage. This coverage is worth almost $3,500 on average and involves tremendous savings in drug costs. Beneficiaries with incomes below 135 percent of the federal poverty level and meeting the asset test may qualify for a credit up to $600 per year to help pay for prescription drugs.
While the retiree drug subsidy is likely to be the most attractive option to employers and unions, the additional options are important to help ensure that retirees are better off. One of the objectives of the proposed rule is to avoid windfalls for employers and unions, those situations in which retirees would receive a smaller subsidy from their retirement plan than Medicare would pay on their behalf. Some employers currently contribute less than the value of the retiree drug subsidy, and while some of these employers may increase their contributions in order to qualify for the alternative subsidy, others may need to use a different approach to combine their support with the new assistance from Medicare. The additional approaches use means other than the retiree drug subsidy to reduce the cost to employers who continue to provide as generous or more generous retiree coverage in order to achieve the maximum increase in support for retiree coverage. Consequently, under all of the options discussed in the MMA, the new Medicare support for retiree coverage is expected to result in a net increase in contributions for retiree coverage, with a substantial increase in the generosity of coverage for many retirees.
This new drug benefit is particularly important for Medicare beneficiaries who live in rural areas and have limited incomes and assets. These beneficiaries are less likely to have inexpensive drug coverage from retirement plans or other sources. The prescription drug plans will serve entire regions, and the proposed rule includes a guaranteed fallback program to further ensure that every Medicare beneficiary across the country has access to prescription drug coverage.
States are projected to get net savings of about $500 million in 2006, and $8 billion in the first five years of the drug benefit. Net savings are projected for states that provide Medicaid-only coverage, states with Medicaid and state pharmaceutical assistance plans, and states with Medicaid and Pharmacy Plus (Section 1115 waiver) plans. Dr. Farris noted that the sources of savings include:
· Medicare drug coverage for dual eligible: Starting in 2006, full-benefit dual eligible beneficiaries will receive prescription drug coverage through Medicare rather than through their state Medicaid programs.
· New subsidies for state retiree health programs: As employers, states can qualify for the new retiree drug subsidies available to employers and unions that furnish qualified retiree drug coverage to Medicare beneficiaries.
· Relief for State Pharmaceutical Assistance Programs: States that operate State Pharmaceutical Assistance Programs (SPAPs) and Pharmacy Plus waivers providing subsidized drug coverage to individuals who will be eligible for the Medicare prescription drug plan will gain substantial savings starting in 2006, when Medicare begins providing very generous coverage for beneficiaries with limited means. As a result of the savings on beneficiaries who qualify for the low-income Medicare coverage, states can wrap around the Medicare benefit to maintain or enhance benefits, at a lower cost to them.
Dr. Farris closed his presentation by noting that while states no longer will have the obligation to pay for drug coverage for full-benefit dual eligibles, they will be required to make payments to the federal government to defray a portion of the Medicare drug expenditures for full-benefit dual eligibles. States also will face some new administrative costs, though the Social Security Administration expects to provide substantial assistance in enrollment, reducing state administrative burdens. The new drug coverage and outreach also are expected to increase Medicaid enrollment. The net savings for states reflect all of these factors.
III. Legislative Roundtable Discussion
During the roundtable discussion, Committee members were asked to review any legislation or debate of importance, in particular relating to Human Services & Public Safety topics, in their respective states during the last legislative session or interim.
Alabama—Enacted HB 742 which amended Section 22-6-123, Code of Alabama 1975, to exempt children and adolescents under the age of 18 years from the Medicaid preferred drug program.
Arkansas—Recommended that those states interested in doing the BMI study to strongly educate the parents and the media before further launching the program.
Mississippi—Governor Barbour signed a new law that ended Medicaid eligibility for approximately 65,000 low-income senior citizens and people with severe disabilities. Under the new law, the maximum income allowed for an individual to receive Medicaid in Mississippi from $12,569 per year to $6,768.
North Carolina—No Report
South Carolina—The asthma policy for school districts was developed (SB 604) which required school districts to adopt a policy authorizing a student to self-administer asthma medication or insulin injection and/or attend to the care and management of the student's asthma and diabetes medications and testing supplies and equipment. The bill also required that parents of asthmatic and/or diabetic students to provide certain medical information and immunity from liability for school districts and their employees.
Texas— The House found that budget cuts to state-supported health and human services programs contained in Chapter 1330, Acts of the 78th Legislature, Regular Session, 2003 (the General Appropriations Act), have been devastating to the most vulnerable Texans. The failure to fund healthcare needs at the state level imposed an additional burden on local healthcare providers and local taxpayers across this state. The purpose of this Act is to make appropriations for certain state-supported programs and services in order to restore budget cuts made to health and human services programs.
West Virginia—The state is struggling with Medicaid benefits and state health insurance programs that focus on health prevention, diabetes, and obesity. The Legislature enacted the Pharmaceutical Availability and Affordability Act of 2004 (HB 4084). This Act is to help with the rising cost of prescription drugs which has imposed a significant hardship on individuals who have limited budgets, are uninsured or who have prescription coverage that is unable to control costs successfully due to cost shifting and disparate pricing policies.
IV. Nominating Committee Report
The Nominating Committee, Chaired by Representative Joe E. Brown, South Carolina, recommended that the Human Services & Public Safety Committee elect Senator Roman Prezioso, West Virginia, to continue to serve as Chairman, and Representative George Flaggs, Jr., Mississippi, as Vice Chairman for 2004-2005. The Committee voted, concurring with those nominations.
V. Closing Comments
The Chairman thanked Representative Brown and the Nominating Committee for their work. With no further discussion, the meeting was adjourned.