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GG 3
Consolidate Health and Human Service Agencies to Reduce Cost and Improve Service Delivery

Summary

Texas has 24 state agencies that deliver health and human services or license health and human service professionals. They should be consolidated into five agencies to make them more cost-effective and to increase their responsiveness and accessibility to the public.

Background

The bureaucracy governing state health and human service programs, in Texas and elsewhere, is in part a result of federal categorical mandates. Over the last several decades, the federal government has created several programs that require states to establish a “single state agency” to administer each health and human services (HHS) program, with little regard for other, similar programs already in place. While these mandates, taken individually, may have made sense to someone in Washington, the resulting array of state agencies delivering similar services is confusing and cumbersome.

Complicating the situation still further has been a series of ad hoc responses to pressures from single issue advocacy groups championing specific populations.

Evolving structure and functions

Texas’ HHS structure is based primarily on discrete responses to individual needs or problems, and this approach often works well—for Texans who have only a single need or problem.

Most of the state’s HHS clients, however, have multiple needs. The Texas Health and Human Services Commission (HHSC) was created in 1991 to coordinate the state’s HHS programs to better serve clients with multiple needs or problems.[1] The agency was created in response to the 1991 Comptroller report Breaking the Mold: New Ways to Govern Texas, but the effort fell well short of the Comptroller’s recommendation.[2]

Breaking the Mold recommended consolidating the state’s 14 primary HHS agencies into a single agency with six departments, to be headed by a Board of Health and Human Services. This agency would have been responsible for policy development and planning, quality control, contracting, information management and regional administration and oversight for about 300 programs.

The 1991 Legislature maintained all of the existing agencies, however, and added another, the Department of Protective and Regulatory Services (PRS). The Health and Human Services Coordinating Council, an existing interagency coordinating body, became HHSC, but retained essentially the same duties. The 1993 Legislature further increased the number of HHS agencies by making the Interagency Council of Early Childhood Intervention (ECI), formerly a unit of the Texas Department of Health (TDH), into a separate agency. One agency, the Texas Youth Commission (TYC) was moved out of HHSC’s “umbrella,” while a related agency, the Texas Juvenile Probation Commission, remained.[3]

The 1995 Legislature strengthened HHSC’s oversight duties by requiring the agency to review and comment on all agency appropriations requests and annual operating budgets; approve agency automation plans before their submission to the Department of Information Resources; coordinate and approve caseload estimates; expand integrated eligibility pilot programs; develop and implement a plan for an integrated eligibility determination and service delivery system; and develop a plan for the consolidation of administrative and service delivery functions for agencies under the HHSC’s oversight. The 1995 Legislature also stipulated that rates approved by various state agencies for the residential placement of clients could not exceed maximum rates recommended by HHSC.

A 1996 Comptroller report, Disturbing the Peace: The Challenge of Change in Texas Government, recommended that HHSC assume responsibility for providing administrative functions, such as accounting, human resources, training, mail handling, warehousing, purchasing, and facilities and fleet management, for the agencies under its oversight. This recommendation stressed that agency executives and line managers should concentrate on the delivery of core services.

During the 1997 legislative session, several House members introduced legislation based on the Comptroller’s recommendation. These bills required HHSC to establish pilot programs to consolidate the non-core services of the HHS agencies it oversees. In response, HHSC and several agencies under its administrative oversight moved into the Texas Rehabilitation Commission (TRC) building to facilitate the consolidation of various support services.[4]

In 1998, the Sunset Advisory Commission recommended that the administrative functions of the Texas Department on Aging (DOA) be consolidated with the Texas Department of Human Services (DHS). According to the report, DOA’s focus on accountability and contract administration was limiting its ability to fulfill its federally mandated role as an advocate and planner for seniors. The report indicated that DOA, in its then-current form, was unable to support its advocacy mission.[5] The 1999 Legislature passed enabling legislation to execute this recommendation in 2003; the 2001 Legislature, however, postponed the consolidation until 2005.

The 1999 Comptroller report, Challenging the Status Quo: Toward Smaller, Smarter Government recommended that HHSC and the agencies under its umbrella initiate an incremental plan to consolidate their administration and operations. In addition, it recommended that the administrative hearing processes of TDH, DHS and the Texas Department of Mental Health and Mental Retardation (MHMR) be consolidated and that HHSC at minimum consolidate the regional and non-core administrative functions of the Texas Department of Protective and Regulatory Services, DHS and TRC.[6]

The 1999 Legislature gave HHSC the responsibility for planning and implementing an efficient and effective system of administrative support services for HHS agencies. In response, HHSC began reviewing certain parts of the agencies’ administrative structures, but at this writing, only certain human resources functions and telephone services have been consolidated.

The 2001 Legislature instructed HHSC to review the effectiveness and efficiency of the business processes of all agencies under its purview and required it to identify $10 million in potential savings. In addition, in 2001 HHSC assumed responsibility for the administration of acute care Medicaid programs.[7]

While HHSC has been given some responsibilities to coordinate HHS, it still lacks the necessary authority over all state HHS agencies to ensure their coordination and cooperation. HHSC still does not have effective control over the operations and budgets of the agencies under its umbrella and relies on their assistance to perform many of its tasks. In practice, most of the state’s HHS agencies still operate independently of HHSC and are accountable only to their boards and the Legislature.

Exhibit 1 illustrates the current organizational structure of the Texas’ health and human service agencies.

Exhibit 1
Current Organizational Structure of
Texas Health and Human Service Agencies

Source: Texas Health and Human Services Commission.

HHSC provides coordination and limited oversight for those agencies directly linked to it in Exhibit 1. Agencies listed below the dotted line perform HHS related functions without coordination or oversight from HHSC.

The current organizational structure has caused several problems:

  • Administrative support services required to sustain each of the multiple state HHS agencies are redundant and inordinately expensive. Each agency still operates as a separate organization responsible for such activities as personnel, finance, purchasing and facilities maintenance. This redundancy is expensive and directs funds away from the services these agencies provide.
  • The proliferation of state HHS agencies frustrates opportunities to maximize federal funds and shifts a disproportionate share of these costs to the state. Although HHSC provides cross-agency coordination for Medicaid, the state lacks similar coordination for other federal funding streams such as Title IV-E (foster care placement) funds. As a result, Texas’ HHS programs do not recover the full amount of federal funding to which the state is entitled.
  • Individuals and families who need multiple services are forced to go from agency to agency to secure appropriate care. While some are able to secure the services they need from multiple agencies, others are not, due to confusing and cumbersome regulations at each agency. Unfortunately, the hodgepodge of state agencies is intimidating for persons with the greatest needs: children, seniors and individuals with physical or mental disabilities.
  • State-level policy making for vulnerable populations is unnecessarily fragmented. State officials find it difficult to develop cohesive policies to serve vulnerable populations with services from multiple state agencies. Ironically, attempts to establish mechanisms to coordinate policymaking (through interagency councils, working groups and task forces) often serve only to diffuse accountability, consume huge amounts of staff time and inhibit action.
  • State agencies are organized to deliver services that have been “pre-packaged” by the federal government instead of creating a delivery system responsive to the actual needs of Texans. As presently constructed, the administrative apparatus supporting each state HHS agency focuses largely on determining whether individuals and families “fit” the service restrictions established by federal statutes and regulations, rather than reconfiguring their services to meet clients’ actual needs.

A different approach

Texas can do better. The Comptroller’s recommendations are designed to:

  • bring together similar services and activities and simplify the bureaucracy to channel more funding to direct services for vulnerable populations;
  • consolidate the support structures of each HHS agency, eliminating duplication and improving their cost-effectiveness; and
  • challenge each consolidated agency to make its primary organizational goal the efficient and effective delivery of services to all Texans, rather than simple compliance with federal mandates and ill-planned responses to the demands of various interest groups.

Recommendation

State law should be amended to consolidate all health and human service programs into five agencies:

  • an expanded Health and Human Services Commission (HHSC),
  • a newly formed Department for Children and Families,
  • a newly formed Department for Persons with Disabilities,
  • a newly formed Department for Health and Mental Health, and
  • an expanded Department on Aging.

This would combine similar services and activities and consolidate support structures to eliminate duplication and improve cost-effectiveness.

The consolidation should be complete by the end of fiscal 2004. To achieve these savings, each of the new agencies’ indirect administration budgets should be reduced gradually, with a 10 percent reduction in fiscal 2005, a 15 percent reduction in fiscal 2006 and a 20 percent reduction in fiscal 2007 and fiscal 2008. Agency savings realized in fiscal 2004 should be counted toward the total required savings and the agency should be able to transfer these funds from fiscal 2004 to 2005 as an incentive.

Exhibit 2 illustrates a proposed structure for state health and human service programs consistent with the principles behind the recommendation.

Exhibit 2
Proposed Organizational Structure of
Texas Health and Human Service Agencies

*Some of the activities allocated to HHSC under the proposed structure are broad and could be parceled out to one or all of the agencies under the umbrella as HHSC deems necessary.
**The Health Care Information Council and the Office of Services to Persons with Disabilities administrative budgets are handled by larger agencies already listed in the chart. They are listed because they provide health and human services and are recognized by HHSC as independent agencies.
Source: Texas Comptroller of Public Accounts.

This organizational structure would help to ensure:

1. State-level coordination, by bringing all HHS programs under the HHSC “umbrella.”
HHSC would provide coordination for programs currently administered by the Texas Youth Commission (TYC), Texas Juvenile Probation Commission (TJPC) and seven professional licensing/examining boards. Consolidation of these programs under the HHSC umbrella would allow the agency to centralize the administration of HHS information technology. Bringing these programs under the HHSC umbrella and increasing their coordination with one another and other HHS agencies could allow the state to secure increased federal Medicaid funding for administrative and program costs. Currently, TYC, TJPC and the seven boards of licensing and examination lack the expertise needed to secure additional funding. HHSC is recognized as the state “expert” on Medicaid funding. The Medicaid program authorizes 50 percent federal financial participation (FFP) for administrative costs that are “reasonable and necessary for the administration of the Medicaid State Plan.”[8] Other states have accessed FFP for Medicaid administrative activities and drawn down increased federal funding for program components such as case management and services determined appropriate as a result of aggressive screening diagnosis and treatment. HHSC would be responsible for ensuring that eligible Texans served by its programs have access to such programs as Medicaid, the Children’s Health Insurance Program (CHIP), Temporary Assistance to Needy Families, Food Stamps and the Special Nutrition Program for Women, Infants, and Children. HHSC would absorb eligibility determination workers from the Department of Human Services (DHS). This should reduce the costs of eligibility determination by allowing for economies of scale concerning administrative costs and the development of greater expertise on the part of eligibility workers. Concentrating this function in one agency also would increase federal reimbursements for programs, since it would allow HHSC to identify funding gaps and opportunities more easily. Although eligibility determination for Title IV-B funds (for training and administration cost associated with foster care placements for children) and IV-E programs (foster care placement) could be included within an HHSC eligibility “service bureau,” the Comptroller recommends that this responsibility be given to the new Department for Children, Youth and Families, because these funds are only used to care for children that have been abused or neglected, a population that would be served by the new department.
2. Improvement of services for children and their families through the consolidation of programs serving this population into a single agency.
Services to children and their families currently are fragmented between the Texas Department of Protective and Regulatory Services (DPRS), TYC, TJPC and DHS. The Department for Children and Families would assume responsibility for child protective services, child care licensing and prevention and early intervention programs for at-risk youths from DPRS, TYC, TJPC and the DHS Family Violence Program. As the single state agency for Title IV-E and IV-B programs, the new department could formulate child welfare policies across the state’s programs for children and families. Since the programs formerly administered by TJPC and the TYC would be a part of the new single state agency, there would be no need for the current awkward memoranda of understanding (MOUs) used to convey Title IV-E funding for the services provided by these formerly separate agencies. Title IV-E funding for foster care placements would be more easily accessible to help prevent TYC commitments made to support juvenile probation services. Eight states (Connecticut, Delaware, Florida, Illinois, Kentucky, New Mexico, Rhode Island and Tennessee) and the District of Columbia have successfully consolidated children’s programs under a separate state agency.[9]
3. Focus on the needs of Texas’ aging population through a new Department on Aging.
This new agency would assume responsibility for the functions of the current Department on Aging, DPRS adult protective services and DHS community care and long-term care programs, including nursing homes. In 2000, Texas was home to more than 2 million people aged 65 and above, the fourth-highest senior citizen population in the nation. This population rose by nearly 21 percent between 1990 and 2000. In 2000, seniors represented 12 percent of the total Texas Medicaid population but accounted for 29 percent of Medicaid spending on direct health care services. A growing senior population will make their concerns increasingly important.[10] For the first time, the state would have a single agency dedicated to services for senior Texans.Eight states (Florida, Idaho, Illinois, Iowa, Louisiana, Massachusetts, Pennsylvania and Rhode Island) have successfully consolidated agencies to serve their aging populations.
4. Strengthened administration of Texas health and mental health services.
The Department for Health and Mental Health would assume responsibility for all programs of the Texas Department of Health (TDH), all mental health programs administered by the Texas Department of Mental Health and Mental Retardation (MHMR), Texas Commission on Alcohol and Drug Abuse (TCADA), Texas Cancer Council, Texas Health Care Information Council and seven professional boards of examination and licensing. TDH, MHMR and TCADA each have elaborate administrative support structures that could be merged to substantially lower administrative costs. The new department also would achieve savings by serving as the common administrator for multiple boards responsible for professional licensing and examination, including the boards of Pharmacy, Medical Examiners, Nurse Examiners, Podiatric Medical Examiners, Examiners of Psychologists and Vocational Nurse Examiners, as well as the Executive Council of Physical/Occupational Therapy Examiners, Texas State Board of Dental Examiners, Texas Optometry Board and the Texas Board of Chiropractic Examiners.The consolidation would make it easier to coordinate health care purchasing across programs, to purchase in bulk and to monitor contracted services, many of which may be with the same provider. It also would improve the coordination of care for individuals receiving health care services from several different agencies. Seven states (Connecticut, Hawaii, Louisiana, Maryland, Michigan, New Mexico and Wyoming) and the District of Columbia have successfully consolidated their health and mental health programs.
5. Enhancement of services for persons with disabilities through the creation of a single agency to serve this population.
The new Department for Persons with Disabilities would assume responsibility for the Texas Rehabilitation Commission (TRC), all mental retardation programs currently administered by MHMR, the DHS Office of Services to Persons with Disabilities, the Commission for the Blind and Visually Impaired, the Commission for the Deaf and Hard of Hearing and the Council on Early Childhood Intervention (ECI). Consolidating the TRC with the multiple agencies responsible for programs serving persons with disabilities would free administrative resources within each program to be used for direct services instead of administrative overhead. Maryland has successfully established a consolidated agency for individuals with disabilities.[11] A single agency with a directive to serve disabled Texans would help ensure that their needs are met as efficiently has possible.

Fiscal Impact

Consolidating the administrative structures of 24 state agencies into five and coordinating the operations of associated regional offices would produce savings over time.

This estimate assumes the elimination of 615 administrative full-time equivalent (FTE) positions, which would save $18,211,000 in state general revenue and $19,296,000 in federal funding per year beginning in fiscal 2007. The consolidation should be complete by the end of fiscal 2004. To achieve these savings, each of the new agencies’ indirect administration budgets should be reduced gradually, with a 10 percent reduction in fiscal 2005, a 15 percent reduction in fiscal 2006 and a 20 percent reduction in fiscal 2007 and fiscal 2008. Fiscal 2004 will serve as a transition period and as such will have no fiscal impact, however any agency savings realized in fiscal 2004 would be counted toward the total required savings and the agency should be able to transfer these funds from fiscal 2004 to 2005 as an incentive. The fiscal impact is based on a reduction in salaries, benefits and other operating costs (Exhibit 3).

Exhibit 3

Agency Name FY2005 General Revenue Appropriations Reduction FY 2005 Federal Funds Reduction*
Health And Human Services Commission $ 470,000 $ 699,000
Department of Children and Families $1,271,000 $1,689,000
Department for Persons with Disabilities $1,539,000 $2,043,000
Department of Health and Mental Health $2,826,000 $2,507,000
Department on Aging $1,427,000 $2,710,000
ERS $1,147,000  
FICA $ 425,000  
Total Savings $9,105,000 $9,648,000

*The employee benefits portion of federal funds is reduced directly from each agency, therefore it has been added to each agency total under the federal funds column.
Source: Texas Comptroller of Public Accounts.

The total 10 percent savings of $9,105,000 for all agencies would be realized in fiscal 2005; a 15 percent savings or $13,658,000 for all agencies would be realized in fiscal 2006 and 20 percent savings or $18,211,000 for all agencies would be realized in fiscal 2007.

Exhibit 4 illustrates estimated budgets for the consolidated agencies in fiscal 2004 and 2005, based on actual fiscal 2002 budgets.

Exhibit 4
Estimated Indirect Administration Budgets for the Consolidated Agencies
Fiscal 2004 and Fiscal 2005

  FY 2004 FY 2005
Proposed Agencies General Revenue Funding Federal Funding FTEs General Revenue Funding Federal Funding FTEs
Health and Human Services Commission $ 4,702,000 $ 5,848,000 212 $ 4,145,000 $5,150,000 191
Department for Children and Families $12,709,000 $13,798,000 478 $11,169,000 $12,110,000 430
Department for Persons with Disabilities $15,384,000 $16,944,000 656 $13,497,000 $14,901,000 590
Department for Health and Mental Health $30,573,000 $20,846,000 963 $27,159,000 $18,338,000 908
Department on Aging $14,277,000 $22,753,000 768 $12,577,000 $20,042,000 691
Total Budgets $77,645,000 $80,189,000 3,118 $68,547,000 $70,541,000 2,810

Notes: Agency totals for fiscal 2004 and 2005 assume comparable funding in fiscal 2002. Agency totals have been rounded to the nearest thousand. FTEs have been rounded to the nearest whole number.
Sources: Texas Comptroller of Public Accounts and Agency Legislative Appropriations Requests, 2002.

Fiscal Year Savings to General Revenue Savings to Federal Funds Change in FTEs
2004 0 0 0
2005 $ 9,105,000 $ 9,648,000 -308
2006 $13,646,000 $14,472,000 -461
2007 $18,195,000 $19,296,000 -615
2008 $18,195,000 $19,296,000 -615

(General Government Issue 2 recommends consolidating TJPC into TYC due to similarities in their clients and services. If this issue is approved, the savings identified in GG 2 would be deducted from the total savings listed in this one, since the TJPC/TYC consolidation would occur before the broader health and human services consolidation.)


Endnotes

[1]Texas Health and Human Services Commission, “Vision/Mission/Philosophy,” www.hhsc.state.tx.us/about_hhsc/vision.html. (Last visited October 2, 2002.)

[2]Texas Comptroller of Public Accounts, Breaking the Mold: New Ways to Govern Texas (Austin, Texas, June 1991), p. HS 27

[3]Texas Comptroller of Public Accounts, Gaining Ground, (Austin, Texas, November 1994), p. 211.

[4]Texas Comptroller of Public Accounts, Disturbing the Peace: The Challenge of Change in Texas Government (Austin, Texas, 1996), p. 641.

[5]Texas Sunset Advisory Commission, Report on the Texas Department on Aging (Austin, Texas, 1998), p. 1-2.

[6]Texas Comptroller of Public Accounts, Challenging the Status Quo: Toward Smaller, Smarter Government (Austin, Texas, 1999), p. 350-351.

[7]Texas Health and Human Services Commission, HHSC Report on Consolidation of Support Services Provided to health and Human Services Agencies (Austin, Texas, September 1, 2002), www.hhsc.state.tx.us/hhsc_projects/report_consolidation.htm. (Last visited October 1, 2002.)

[8]Texas Health and Human Services Commission, “Texas Medicaid Managed Care—Revised Federal Medicaid Managed Care Rules,” Austin, Texas, June 2002, www.hhsc.state.tx.us/Medicaid/mc/about/rules/FedRule0602.html. (Last visited October 22, 2002.)

[9]American Public Human Services Association, 2001-2002 Public Human Services Directory (Washington, D.C., June 15, 2002).

[10]Texas Health and Human Services Commission, 2002 Texas Medicaid in Perspective (Austin, Texas, April 2002), Chapter 4, p. 6, www.hhsc.state.tx.us/Medicaid/reports/PB/2002pinkbook.html. (Last visited October 22, 2002.)

[11]American Public Human Services Association, 2001-2002 Public Human Services Directory.