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Texas Revenues, Medicaid & National Health Reform TMA Select Committee on Medicaid, CHIP, and the Uninsured February 13, 2010 Anne Dunkelberg, Assoc. Director, [email protected] Center for Public Policy Priorities 900 Lydia Street - Austin, Texas 78702 Phone (512) 320-0222 (X102) – www.cppp.org www.texasvoiceforhealthreform.org 1 LBB’s Best Case Scenario Assuming revenue growth matches growth in expenses Current Budget 2012-13 Budget General Revenue ARRA (instead of GR) Cash on hand $75.0 billion $6.4 billion $2.4 billion $75.0 billion $0 $0 Property Tax Relief Fund carryover Permanent School Fund $3.0 billion $0 $0 $1.2 billion Other adjustments TOTAL GR BUDGET $0.2 billion $87.0 billion $76.2 billion GAP $10.8 billion 2 Budget Scenario for 2012-13 $100 Additional GR Needed $7 b ARRA instead of GR $75 $1 b GR for Higher Ed None Local School Tax Cut (GR and PTF) $3 b $50 Other GR for K-12 $3.3 b $25 GR for HHS $300 m GR for Prisons Other GR* $0 2002-03 2004-05 2006-07 2008-09 2010-11 $700 m 2012-13 3 Sources of State Revenue 2009 Total $84.5 billion Taxes, 45% Other, 5% Interest, Investment Income, 2% Federal Funds, 37% Licenses, Fees, Fines, Penalties, 9% Lottery, 2% Source: Comptroller of Public Accounts, Annual Cash Report 4 Major State & Local Taxes in Texas, 2009 Other State 20% Local 7% Sales Tax – 32% State 25% School 26% Property Tax – 48% Special Districts 6% City 8% County 8% Sources: Comptroller of Public Accounts, Annual Cash Report, Annual Property Tax Report. 5 How to Balance 2012-2013? Options for a Balanced Approach: “Easy Money” Potential Revenue for 2012-13 Economic growth with no change in revenue system Smoke and mirrors $800 million for each 1% growth $1.5 billion Payment delays, etc. 6 Funding a Balanced Approach: Rainy Day Fund Rainy Day Fund Potential Revenue for 2012-13 Beginning balance $8.2 billion Growth during 2012-13 $1.4 billion TOTAL AVAILABLE $9.6 billion Current Balance: expected to reach $8 billion by end of fiscal 2011; another $922 million deposit slated for Fall 2011 Uses: 1991: $29 million for public schools 1993: $200 million for prisons 2003: $1.2 billion — the entire balance that was projected at the time — was appropriated for CHIP and Medicaid shortfalls, retired teacher health care, and for brand-new Governor’s Enterprise Fund 2005: $1.9 billion, for existing shortfalls, and for 2006-07 child protective services reforms and new Emerging Technology Fund • 2/3 vote of each chamber needed to spend RDF “at any time and for any purpose”; slightly less (3/5 vote) required when state revenue is expected 7 to drop in upcoming biennium Options for a Balanced Approach: Potential Revenue for 2012-13 Eliminate Current Exemptions: • Sales tax on business, professional services (Legal, stock & real estate broker, accounting, management consulting – except health care) $5.6 billion • Eliminate high-cost natural gas exemption $2.3 billion • Eliminate recognition of optional % homestead exemption: $1.0 billion • Eliminate freeport property tax exemption (constitutional) $850 million • Eliminate 10% property tax appraisal cap (constitutional) $650 million • Eliminate sales-tax timely filer and prepayment discounts $425 million • Eliminate sales tax holiday $100 million • Eliminate gasoline-tax collection allowance $100 million • Eliminate CAPCO credits $100 million • Eliminate ineffective tax exemptions $100 million • Eliminate reimbursement of school taxes for local tax abatements $20 million 8 Options for a Balanced Approach: Potential Revenue for 2012-13 (more) Increases to Existing Taxes: • Raise sales tax ½% (to 6.75% state/8.75% total, with rebate for families in bottom 20% of income; 8 states would have $3.0 billion • Increase franchise tax rate from 1% to 1.25% (Retail from 0.5% to 0.625%) $2.1 billion • Raise gasoline tax by 5 cents per gallon (From 20¢ to 25¢ – 23 states now at 25¢ or higher) $1.6 billion higher state rates) – ($400 million to Available School Fund; $1.2 billion to State Highway Fund) 9 Options for a Balanced Approach: Potential Revenue for 2012-13 (more) Increases to Existing Taxes: Raise cigarette tax From $1.41 to $2.00 per pack $1.2 billion Raise motor vehicles sales tax by ½% From 6.25% to 6.75% $450 million Raise beer tax 15 states now at $2.00 or above From 11 cents to 17 cents per six-pack Last raised in 1984; 15 states would be higher $100 million 10 Options for a Balanced Approach: Potential Revenue for 2012-13 (more) New Tax Options: Quality Assurance Fee $350 million Plus federal match of $550 million Soda tax 1 cent per 12 oz can of sugared soft drink $145 million 1% on revenues of hospitals, surgery centers 11 Funding a Balanced Approach: Beyond this Session Potential Revenue for Future Budgets State personal income tax Eliminate school property tax abatements - Chap 313 Sales tax on Internet sales Sales price disclosure $14 billion net (dedicated to education) $1.2 billion $1.2 billion $350 million 12 Medicaid in 2010-2011 TX Budget • No National Reform effect (expansion begin 2014; no state share $$ until 2017) • Avg. Budgeted Caseloads in SB 1 3,105,445 for 2010, 3,168,320 2011 “recipient-months” • Actual January 1 enrollment 2,918,958; converts to 3.3 million • Over 735 eligibility staff added since 9/1/09. • Feb 1 HHSC report to LBB projects HHSC Medicaid about $387 million GR over budget by end of FY 2010 (i.e., just for current year). • Texas getting 70.94% match now; 69.85% Jul-December. IF Congress extends 2 more quarters, worth $925 million to Texas. • HHSC has no “official” projection of current budget shortfall yet. 13 Medicaid in 2010-2011 TX Budget • Shortfall numbers make it obvious: without more revenue, there WILL be deep cuts. • In 2003, Provider Rates were the largest category of cut. After partial restorations, the total projected reduction in Medicaid and CHIP rates was about $599 million. • Federal law Medicaid maintenance of effort required: – From BBA 1997 (CHIP Statute): States cannot adopt Medicaid eligibility criteria that are more restrictive than those in effect as of June 1, 1997. – ARRA 2009 (stimulus): States cannot make eligibility standards, methodologies, or procedures stricter than 7/1/2008; includes disability standards or numbers served in community care waivers. – If health reform passes, additional MOEs will apply: children in Medicaid and CHIP through 2019; adults until Health Insurance Exchanges operational in 2014. • That leaves provider rates and “optional” adult benefits to cut – 2003 Lawmakers rejected certain cuts: cutting off community care and nursing home care; eliminating Rx coverage for aged, disabled, and adult clients – They DID eliminate services of LPCs, SWs, psychologists, LMFTs, podiatrists, and chiropractors; and adult eyeglasses and hearing aids. (Restored in 2005) 14 How National Health Reform Fits In: Texas Update 15 Only the Highest-Income Families Have Better-ThanU.S.-Average Chance of Being Insured 36% 34% 24% 16% 11% Below $25,000 $25,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 and over Texas average: 25.1% 42% 35% 29% 12% Below poverty 100 to 200% of poverty 200 to 300% of poverty Above 300% of poverty Source: CPS Annual Social & Econ. Supplement 16 www.census.gov/hhes/www/hlthins/hlthins.html Employer-Sponsored Coverage Declining in Texas and Nationwide, Even Before Recession % of Residents With Job-Based Insurance 75 U.S. Average 64.2 63.2 61.9 61 60.5 60.2 59.7 54 53.1 52.2 59.3 58.5 50.4 49.5 2007 2008 60 57.4 56.2 53 53 45 Texas 30 2000 2001 2002 2003 2004 2005 2006 Source: CPS Annual Social & Econ. Supplement 17 www.census.gov/hhes/www/hlthins/hlthins.html Health Reform Basics • Key elements of both bills: – Build on current system (Senate bill especially leaves curernt coverage potentially unchanged for years) – Medicaid expansion: cover all up to 133% or 150% FPL ($14,404-$16,245 for one; $29,327-$33,075 for 4). – Reform Private Health Insurance: standardize benefits, no price variation for gender or occupation, limited age variation, no denial of coverage, no excluding pre-existing conditions, no annual or lifetime maximums. Changes first for uninsured, individual, small employer coverage. – New Health Insurance Exchange(s) where private insurers’ options can be compared and purchased (like Amazon or Travelocity for insurance). • May or may not include Public or Non-profit plan option? • HIE is only a framework: effectiveness depends on subsidies, market reforms, standardized benefits, individual mandate, negotiating powers. – Premium assistance up to 400% of FPL ($88,200 for family of 4) – Out-of-pocket subsidies (reduces out of pocket for all consumers) and stoploss caps, too, to increase affordability reduce medical bankruptcy – Individual mandate to have coverage (with exemptions) – Some Requirements for employers to contribute, with exemptions for small employers 18 Texas Uninsured by Income Today…… 6.1 million uninsured in 2008 >400% FPL >$88,200 682K 300-400% FPL $66,200-$88,200 1.611 Million 622K 250-300% FPL $55,100-$66,200 <100% FPL <$22,100/yr for family of four 484K 1.06 Million 751K 200-250% FPL $44,100-$55,100 898K 150-200% FPL $33,100-$44,100 Annual income limits given for a family of four, 2009 federal poverty level 100-150% FPL $22,100-$33,100 19 U.S. Census, CPS ……And if House Bill Implemented Tomorrow CBO: 4.7 to 4.8 million out of 6.1 million gain coverage >400% FPL <100% FPL 682K 300-400% FPL 1.611 Million 622K 484K 250-300% FPL 2.0 million 150-400% FPL qualify 1.6 Million 751K for help w/premiums, 200-250% FPL out-of-pocket In Exchange 898K 150-200% FPL 100-150% FPL Up to 1.8 million in Medicaid: • 1.3 million expansion to 150% FPL (adults) •500K alreadyeligible (kids) 20 Who Remains Uninsured? • CBO assumes small percentage opt not to be covered (no penalty for lowest income and penalties much lower than cost of coverage) • If premium subsidies lower, (Senate version concerns), larger share of low- & moderate income may stay uninsured. • Undocumented: – no Medicaid/CHIP, – no premium subsidy, possibly cannot buy @ full cost from exchange – Best estimates say 40% of undocumented in US TODAY have private coverage • Legal Permanent Residents: – continued exclusion from Texas Medicaid, – May be barred from subsidy, too, in first 5 years in US 21 Fiscal Benefit/Cost of Health Reform to State • Medicaid expansion—up to 133% FPL(S) or 150% FPL (H) • • “Static” Illustration based on current US Census data and Texas Medicaid costs: HOUSE: – – – in 2008, 1.3 million uninsured Texas adults aged 19-64 who (a) are U.S. citizens and (b) have incomes below 150% FPL. At 2009 cost of ~ $305 per adult/mo., covering 1.3 million more adults = about $4.7 billion in new health care spending. Under HR 3962, Feds pay 100% of costs for 2 years, and 91% after that. – In year 3, Texas’ 9% state share of the $4.7 billion would be would be about $421 million, – And Feds pay the remaining $4.25 billion. – In other words, about ten federal dollars in for every one state dollar. – Plus multiplier effect of over $12.5 Billion (economic multiplier of 3.25 per Perryman). (↑State tax revenues + ↓Local taxes avoided) nearly = GR costs • • Lesson: Medicaid expansion, while not “free” for Texas, will yield substantial economic benefits. Texas economy will also benefit from federal premium assistance and out-ofpocket cost help to families from 150-400% FPL, which will not require any state 22 budget contribution at all. Fiscal Benefit/Cost of Health Reform to State • Medicaid expansion—up to 133% FPL(S); same “Static” Illustration based on current US Census data and Texas Medicaid costs: • SENATE: – in 2008, 1.0 million uninsured Texas adults aged 19-64 who (a) are U.S. citizens and (b) have incomes below 133% FPL. – At 2009 cost of ~ $305 per adult/mo., covering 1.3 million more adults = about $4.7 billion in new health care spending. – Under HR 3590, Feds pay 100% of costs for 3 years: 2014, 2015, 2016 – In 2017 the Texas would pay about 5.14% or $188 million, with the federal share $3.47 Billion – In 2018, Texas would pay 6.14% or $225 million, with the federal share $3.44 Billion – In 2019 and thereafter, Texas would pay 7.14% or $261 million, with the federal share $3.4 billion. • $18 federal dollars for each $1 the state spent in 2017 on expanded Medicaid coverage; • $15 federal dollars for each $1 the state spent in 2018; and • $13 federal dollars for each $1 the state spent in 2019 and thereafter – Plus economic multiplier of 3.25 per Perryman 23 Welcome Mat Effect • • • • • • States that cover all children found that 50%+ of enrollment after reforms were kids already eligible before reform but not enrolled: “Welcome Mat” effect. No Individual Mandate penalties apply to Texans below 100% FPL who remain uninsured, but based on other states, over time more of our currently-eligible Texas children will enroll in Medicaid. Because Texas has very limited eligibility for adults today, there is very low risk of Medicaid welcome mat effect for adults.) UNLIKE state costs for newly-eligible adults largely borne by federal budget, strong welcome mat response by already-eligible uninsured Texas children would add significant cost to the state budget, because state will be responsible for standard Medicaid share of just under 40% for those children. If welcome mat effect were as powerful as 12-month enrollment projected to be, the GR annual costs (at current costs and demographics) could amount to $200 to $350 million (LBB vs. HHSC). If 100% of the 440,000 Medicaid currently-eligible uninsured children were to enroll today, the current annual cost to the state budget would range from about $350 million to $466 million (LBB vs. HHSC costs), based on the “usual” state’s share of ~39%. 24 Illustration: How House Bill Would Change Texas Medicaid Budget If Covered 1.3 million new adults; 400K kids, @ Current costs and demographics Fed Share 2008 $10.8 Billion State Share Welcome Mat Kids: $400 million Fed Share Welcome Mat Kids : $600 million State Share Expansion Adults $421 million State Share 2008 $7.0 Billion Fed Share Expansion Adults $4.25 Billion Baseline “Now” = Projected Texas Medicaid Services Spending, 2008 (Texas HHSC) Note: this does NOT model increased admin costs. 25 Top Advocate Concerns for Final Bill Affordability remains the top focus of consumer and low-income advocates, and the experts we trust the most continue to advocate for these provisions in the compromise bill: (1) House bill’s superior premium assistance for people under 250% FPL; (2) Senate premium assistance for people between 250-400% FPL. (3) House’s superior cost-sharing subsidies (which reduce out-ofpocket costs) for all incomes. (4) House’s broader expansion of Medicaid to 150% FPL. (5) House’s Medicaid primary care payment rate increases. (6) National Health Insurance Exchange in House bill, or dramatically stronger minimum standards and federal oversight than in Senate bill at minimum. 26 Other New Roles, Costs for State Roles/Functions • Possible Administration of Health Insurance Exchange – Senate: State or NFP must operate by 1/2014, or feds will do it; grant $$ available – Likely includes major enrollment/subsidy eligibility function – HIEs are to be $$ self-sustaining after first year • Much Greater Role for TDI in Regulation • Medicaid eligibility system enhancement CRITICAL – Accommodate both expansion & increased participation – Smooth interface with HIE system – HIE may pay state to do income eligibility for subsidies 27 Other New Roles, Costs for State (cont’d.) Costs • In addition to max. 9% share of Medicaid expansion & (possible) reimbursement increases from 2015 (H) or 2017 forward (S); and welcome mat kid costs… • Admin costs for state of expanded enrollment presumably @ 50%; financing of HIE interface costs unclear • Increased costs of doing business passed through in Medicaid rates. Issues • Will a Texas Executive opposed to reform implement new state functions competently? • 9% share--even offset 9-to-1 with federal funds--must be funded in stated budget, and in context of a severe structural deficit in our state tax system. 28 Use of This Presentation The Center for Public Policy Priorities encourages you to reproduce and distribute these slides, which were developed for use in making public presentations. If you reproduce these slides, please give appropriate credit to CPPP. The data presented here may become outdated. For the most recent information or to sign up for our free E-Mail Updates, visit www.cppp.org. © CPPP Center for Public Policy Priorities 900 Lydia Street Austin, TX 78702 P 512/320-0222 F 512/320-0227 29 Resource Slides 30 2010-11 Biennial State Budget $200 All Other 10% Highways 10% Prisons 3% $150 HHS 33% $100 All Other 9% Prisons 7% $50 91% 77% HHS 27% Property tax cuts 8% Higher Ed 16% Property tax cuts 12% $0 Higher Ed 13% Other K-12 28% General Revenue $80.6 billion Other K-12 22% All Funds $182.2 billion Source: Legislative Budget Board, Fiscal Size Up 2010-11 31 How Would An Income Tax Work? Net cost to Texas taxpayers after lower property taxes, federal tax deduction changes $4.6 billion $2.2 billion $13.7 billion Uncle Sam would pick up 10% of the cost of an income tax through higher deductions on federal tax returns Two-thirds of income tax revenue would be returned to taxpayers through lower property tax rates Total income tax revenue = $20.5 billion annually 32 State Tax Collections 2009 Total $37.8 billion Motor Vehicle Sales and Rental 7% Motor Fuels 8% Sin (Cigarette, Tobacco, Alcohol) 6% Franchise 11% Gas/Oil Production 6% Sales 56% Other 3% Insurance 3% Source: Comptroller of Public Accounts, Annual Cash Report. 33 Uninsured Texas Children, (0-18) 2007-2008 > 400% FPL, By Family Income 118K 300-400% FPL, 108K <100% FPL, 446K 200-300% FPL, 282K Total uninsured children: 1.418 million 100-200% FPL, 464K 34 US Census, March 2008 & 2009 CPS Income Caps for Texas Medicaid and CHIP, 2009 250% 200% 150% $24,264 $33,874/yr $33,874/yr 185% 185% $24,352/yr $18,310 100% 50% 133% 100% $36,620 222% 200% Long Term Care CHIP $7,884 $2,256 $3,696 12.3% 20.2% 74% 0% Pregnant Newborns Age 1-5 Age 6-18 TANF Working SSI (aged Women parent of Parent of or 2, no 2 disabled) income Mandatory Optional Income Limit as Percentage of Federal Poverty Income Annual Income is for a family of 3, except Individual Incomes shown for SSI and Long Term Care 35 Texas Medicaid: Who it Helps October 2009, HHSC data. Disabled, 359,937 Elderly, 374,395 Poor Parents, 91,838 TANF Parent, 30,758 Children, 1,944,555 Maternity, 96,036 Total enrolled 10/1/2009: 2.97 million 36 Uninsured Texans by Age Group, 2008 65+ 57% are below 200% FPL ~2/3 are below 200% FPL 0-18 Rate: 20% of 0-18 are uninsured 19-64 Rate: 32% of 19-64 are Uninsured Source: U.S. Census 37 Texas Worst Among the States U.S. average: 15.1% Massachusetts: 4.1% Texas: 24.1% All Ages, 2008 38 Almost All Congressional Districts Worse than U.S. Average U.S. average: 15.1% — Texas average: 24.1% % Uninsured (All Ages) by U.S. Congressional District, 2008 District 26 Inset: Dallas/ Fort Worth District 3 24 32 District 16 Inset: Houston Area 25 20 15 28 7 27 39 Working-Age Texans Are Most Likely to be Uninsured Millions of Texans 15 32% uninsured 10 19% uninsured 5 3% uninsured 0 Under 19 Job-based coverage 19 to 64 Medicaid 65 and over Medicare Uninsured Source: CPS Annual Social & Econ. Supplement 40 www.census.gov/hhes/www/hlthins/hlthins.html 2 Out of 3 Uninsured Working-Age Texans Have a Job Uninsured by Labor Force Status, 2007-08 Average Not in Labor Force 28% Unemployed 7% Employed 65% Source: CPS Annual Social & Econ. Supplement 41 www.census.gov/hhes/www/hlthins/hlthins.html Most Uninsured Texans are U.S. Citizens (6.1 million Uninsured in 2008) Uninsured by Citizenship Status, 2007-08 Average Not a U.S. Citizen 1.6 million (~40% legal immigrants) 26% Naturalized U.S. Citizen 6% 352,000 4.1 million U.S.-born citizen 68% Source: CPS Annual Social & Econ. Supplement 42 www.census.gov/hhes/www/hlthins/hlthins.html