11/2001: State Legislative Update

Published November 1, 2001


Governor John Rowland (R) gave the state’s not-for-profit hospitals a strong dose of taxpayer money. The assistance package repeals the hospital sales tax, for an annual savings of $111 million, and sends $50 million into non-profit hospital bank accounts.

While most hospitals in the state seem to be breathing a little easier now, health care administrators remain concerned about low reimbursements from HMOs and government, along with rising costs for their own insurance, fuel, and employee health plans.


A new legislative report has found that the state’s Medicaid program, HealthChoice, is $150 million in debt, which could “force” lawmakers to reduce benefits.

The report finds that Governor Parris Glendening (D) “underestimated” both the number of Medicaid beneficiaries who would enroll in the state’s managed care program, and the costs of these individuals’ treatment and medication, according to David Romans, a legislative budget analyst who helped prepare the study.

Glendening allocated enough funding for 428,000 Medicaid beneficiaries, but the actual number has neared 458,000 and could rise in a further economic downturn.

In addition, managed care organizations participating in HealthChoice have complained reimbursements from the state are too low to cover the cost of care. Some health plans are considering ending their participation in HealthChoice, which, according to Delegate John Hurson (D), would create “chaos” for Medicaid beneficiaries, forcing them to find physicians “willing to accept direct reimbursement from the state often at extremely low rates.”

House Speaker Casper Taylor (D), one of the “architects of Maryland’s public health care system,” said, “We have two choices. Either find more money for health care programs, or (make cuts)” in Medicaid.


Citing rising drug costs, Massachusetts will become the latest state to require Medicaid beneficiaries to use generic drugs when available, a move drug industry executives say may be the strictest program yet.

Starting November 28, the roughly 860,000 beneficiaries in the state’s traditional Medicaid program will have to use generic medications in all available cases except when “medical necessity” is demonstrated and doctors obtain prior approval from the state. The 40,000 enrollees in Medicaid managed care programs will remain in their HMO policies.

The state currently requires pharmacists to prescribe generic medications to Medicaid beneficiaries unless doctors request brand-name medications. The changes could save the state $10 million in the first year.


Governor Jesse Ventura (REF) says thousands of striking workers are “saving the state money.” State workers went on strike demanding millions of dollars more than the state can afford.

Union leaders say the first state employees’ strike in 20 years was “forced” upon them by a state health insurance proposal that could reduce some employees’ take-home pay by 25 percent. Julien Carter, the state’s commissioner of employee relations, says the state and leaders of the Minnesota Association of Professional Employees (MAPE) are “far apart.” He labeled the union’s expectations “unreasonable.”


Administrators of Mississippi’s Medicaid program have sought an additional $446 million in the 2002 budget.

State Division of Medicaid Director Rica Lewis-Payton told a recent state Joint Legislative Budget Committee hearing lawmakers should budget additional state funds to take full advantage of federal matching funds. The federal government provides $4 for each dollar the state allocates for the program.

During the hearing, state lawmakers asked questions about a $124.6 million deficit in the current state Medicaid program. According to Lewis-Payton, state Medicaid enrollment has increased, while the federal match rate has decreased. She also said state lawmakers required Medicaid to provide additional services but didn’t set aside money to pay for them.


Governor Bob Holden (D) got what he asked for . . . and maybe more. The state has scrapped a previous prescription plan—which ballooned to over $85 million a year on a $20 million projection.

According to the governor’s prescription task force, the new plan will cost $50 million in the first year, and roughly $80 million the second. But an independent actuary hired by the legislature projected a price tag of $99.6 million. The discrepancy arises from differing projections of how many residents will actually use the plan. Holden says he hopes to pay for the plan with funds from the general revenue and from the state’s tobacco settlement.

New York

New York state legislators have decided to allow all legal immigrants to receive health benefits under Family Health Plus, a new program intended to provide health insurance for the working poor who have incomes too high to qualify for Medicaid. To be eligible for the program, a family of four must have an income that does not exceed $23,475 per year, slightly more than the federal poverty level.

Covering legal immigrants is expected to cost the state $10 million. A total of roughly 600,000 uninsured individuals, immigrant and native, will be covered by the $1.1 billion effort over the next three years. Previously, state officials had been noncommittal about whether some immigrants would be eligible for the program, noting federal welfare laws bar legal immigrants who arrived in the country after 1996 from receiving certain public benefits.

State Deputy Health Commissioner Robert Hinckley, who announced the decision to extend Family Health Plus benefits to legal immigrants, said it is unclear when the coverage for immigrants will begin because State Comptroller H. Carl McCall has not yet approved the health department’s contracts with private insurers. The New York Times reported the comptroller’s office said it could not approve the contracts until “crucial questions,” specifically concerning immigrant coverage, were answered.


Responding to critics who have said plans to revamp TennCare, Tennessee’s Medicaid managed care program, will never be approved by the federal government, Governor Don Sundquist (R) said he believes the government will “be receptive” to the revamp proposal.

“TennCare is an experiment and it’s one that is ever-evolving. I believe our waiver will be approved,” said Sundquist.

TennCare would be split into three insurance pools. The proposal also would cut from the current TennCare program about 180,000 beneficiaries who are Medicaid-ineligible, a move that would save the state $150 million. (See “High-Risk HIP Will Return to Tennessee,” Health Care News, October 2001.)


To control soaring prescription drug costs, Washington’s Medicaid program plans to push physicians to prescribe more generics by limiting beneficiaries to four brand-name drugs per month. The Medicaid program’s drug costs have almost doubled over the past three years, now reaching $500 million a year.

Under the “Therapeutic Consultation Service” program, if a patient attempted to fill a fifth brand-name prescription in a month, the pharmacist would contact the physician, who would then have to contact a pharmacist hired by the state for approval. The state-approved pharmacist would examine the patient’s current prescriptions to “prevent duplications and dangerous interactions.”

According to Siri Childs, a pharmacy research specialist with the state Department of Social and Health Services, “Our attempt is not to restrict drugs. It’s to make sure patients are getting the right drug.” Contraceptives, HIV medications, chemotherapy drugs, antidepressants, and antipsychotics would be exempt from the four-drug limit. The program is slated to begin January 1.

Sources: The Council for Affordable Health Insurance (CAHI) and its member companies provided information for this State Legislative Update. Contact CAHI at [email protected], Additional material was provided by The National Association of Health Underwriters (NAHU) http://nahu.org/government, http://bizjournals.com, http://stateline.org, and Nexis/Lexis research.