Require Agencies to Use Medicaid for All Eligible Clients



The state should require agencies to use Medicaid for payment of expenses for clients who are eligible for Medicaid.


Background
Currently, state agencies sometimes use general revenue to pay the medical expenses of clients who may be eligible for Medicaid. The cost of Medicaid is shared by the state and federal government, with the federal government paying about 64 percent of the total. Currently, state law does not require agencies to use Medicaid for Medicaid-eligible clients.

Paying the medical expenses of clients with general revenue when the clients are eligible for Medicaid is not sound management. Data do not exist at this time to determine the extent of the problem. However, information from the Medicaid Analysis and Cost Control Office (MACC) in the Legislative Budget Office indicates the practice is fairly common.

A recent report from the MACC to the Legislative Budget Office cited instances in which children were eligible for Medicaid under the Chronically Ill and Disabled Children (CIDC) program and yet Medicaid was not billed for expenses. The report estimated that 25 percent of tuberculosis patients are eligible for Medicaid, and reimbursement could be received for some services if public health departments and T exas Department of Health laboratories enrolled as Medicaid providers for all applicable service categories, such as lab services and chest x-rays.

State agencies that are most likely to have clients who are eligible for Medicaid and for whom medical serv ices are purchased with general revenue are: the Department of Human Services, Department of Protective and Regulatory Services, Texas Youth Commission, Texas Department of Health, Texas Department of Mental Health and Mental Retardation, Texas Juvenile Pr obation Commission, Texas Commission for the Blind, Texas Commission for the Deaf, Texas School for the Blind and Visually Impaired, Texas School for the Deaf, Texas Commission on Alcohol and Drug Abuse, Texas Rehabilitation Commission, the state chest hos pitals and the university teaching hospitals.

One of the reasons that agencies do not aggressively pursue reimbursement from federal funds is that federal reimbursements are sent to the General Revenue Fund instead of the agency. Without an incentive, agencies are less likely to pursue federal funds r eimbursement. One option that could help resolve this problem is to allow agencies to keep their federal reimbursements. But this option reduces the amount of money in the General Revenue Fund by the amount o f the reimbursement and the accumulated interest.

An alternative way would be simply to make it unlawful for agencies to use general revenue to purchase services that can be purchased at a savings to the state through Medicaid. This would require agencies to know who in their caseload is Medicaid-eligible and make sure that they take all steps necessary to maximize reimbursements.


Recommendation
The Legislature should include a rider in the appropriations bill for the following agencies that makes it unl awful for them to use general revenue to purchase medical services available through Medicaid for Medicaid-eligible clients: the Department of Human Services, Department of Protective and Regulatory Services, Texas Youth Commission, Texas Department of Hea lth, Texas Department of Mental Health and Mental Retardation, Texas Juvenile Probation Commission, Texas School for the Blind and Visually Impaired, Texas School for the Deaf, Texas Commission on Alcohol and Drug Abuse, Texas Rehabilitation Commission, the state chest hospitals and the university teaching hospitals.


Implications
This recommendation saves general revenue without cutting services and provides more funding to serve Medicaid clients. Since Medicaid is a payor of last resort, state agencies would have to ensure that no other third-party payor, such as an insurance comp any, would pay for these services.

This requirement may appear burdensome to administer; however, the additional expenses required for administration would be far less than pay ing for services with general revenue. Additionally, 50 percent of Medicaid administrative expenses are covered by federal funds.


Fiscal Impact
The state would save 64 percent of every dollar that it has been spending out of general revenue for medical services for Medicaid-eligible clients. Although Medicaid reimburses the state for 50 percent of Medicaid administrative expenses, agencies would i ncur some additional indirect administrative costs for fully implementing this recommendation. However, the total cost would be minor compared to the savings in the General Revenue Fund.

Currently, the state does not maintain sufficient data on which to base cost savings estimates.



Endnotes
1 Legislative Budget Office, Medicaid Analysis and Cost Control Office, Monitoring Report on Interagency Federal Funds Initiatives and Medicaid Funding for Children s Health Services, (Austin, Texas, December 1, 1992).