BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1063 (Cox)
Hearing Date: 5/3/2010 Amended: 4/21/2010
Consultant: Katie Johnson Policy Vote: Health 9-0
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BILL SUMMARY: SB 1063 would require the Managed Risk Medical
Insurance Board (MRMIB) to structure copayments for prescription
drugs and emergency services for the Healthy Families Program
(Healthy Families) at specified minimum ratios.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Decrease copayments for likely in the millions of
dollarsGeneral/*
generic drugs for 101-150 commencing in FY
2010-2011Federal
percent FPL and below
Future potential cost likely in the millions of
dollarsGeneral/*
savings due to lower Federal
net cost and decreased
utilization of services for
above 150 percent FPL
Future potential ED unknown General/*
and inpatient costs Federal
*Costs are reimbursed 35 percent General Fund and 65 percent
Federal Funds
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
This bill would require: a) copayments for emergency health
services to be set at a level that is at least 150 percent of
the highest copayment charged for nonpreventive health care
services, except when the person is hospitalized; (b) copayments
for brand name prescription drugs to be set at a level that is
at least 150 percent of the highest copayment charged for an
equivalent generic prescription drug, except where no equivalent
generic drug is available.
Potential Future Cost Savings and Potential Costs Related to
Underutilization
While this bill would reduce MRMIB's flexibility to utilize
regulations to adjust subscriber cost-sharing requirements
through regulation, the bill's provisions would institute a
statutory requirement intended to manage future utilization
rates and minimize program costs.
Brand name drugs are generally more expensive to provide than
equivalent generic drugs and care provided in an outpatient
setting is generally less expensive than that provided in an
emergency room. To the extent that this bill maintains those
incentives and that the subscriber chooses to access more cost
effective alternative, there could
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SB 1063 (Cox)
be savings realized in the form of decreased utilization of
services and a lower net cost of a prescription or a service.
However, some of these savings may be offset by increased
emergency department (ED) and inpatient costs due to the
decreased utilization and underutilization of physician services
when necessary. It is unknown whether or not these ED and
inpatient costs would negate the cost savings.
An example provided by Mercer Consulting in an actuarial
analysis presented to MRMIB at its April 21, 2010, board meeting
estimated the Healthy Families cost savings if the copayment for
physician services was increased from $10 to $15 per visit. Due
to decreased physician service utilization and to unit cost,
Healthy Families could realize $25 million in total funds
savings, of which $8.8 million would be General Fund. Mercer
notes, however, that there would likely be an increase to
inpatient and ED costs and that, although it would be difficult
to quantify, it could offset some of the savings achieved by the
increased physician services copayment. For individuals who
utilize more than the average number of services, the copayments
could become unaffordable and they may forgo necessary services
until it is absolutely necessary, resulting in higher treatment
costs for more serious conditions.
HFP Reimbursement Increases due to Decrease in Copayments
MRMIB's current copayment levels are set by the board through
regulation. They are:
A) For subscribers with family incomes 101-150 percent
Federal Poverty Level (FPL), copayments for all services,
for which one is required, are currently $5, the legal
maximum.
B) For subscribers with family incomes above 150 percent
FPL, for generic and brand name prescription drugs are $10
and $15, respectively, and for non-preventive and emergency
health services are $10 and $15, respectively. No copayment
is required for generic or brand name contraceptive drugs.
Pursuant to federal regulations, copayments may not exceed $5
for Healthy Families subscribers with family incomes 101-150
percent FPL. If this group is subject to this bill, it could
require MRMIB to decrease the copayments on generic drugs to
$3.33 to comply with the 150 percent requirement. Reducing the
copayments by $1.67 would increase the cost to health plans to
provide prescription drugs to subscribers. Health plans that
contract with MRMIB for the Healthy Families program would
likely seek state reimbursement for this increase in the net
benefit cost for an unknown amount that would likely be in the
millions of dollars. Based on the Healthy Families November 2009
Budget Estimate, this bill would affect at least 250,000
children. Healthy Families benefits are reimbursed 35 percent
General Fund and 65 percent Federal Funds.
If MRMIB were to alter copayments in the future through
regulation, it would be important to balance program savings and
the potential for underutilization of services and indirect ED,
inpatient costs, and state-funded program costs. This bill would
limit the flexibility of the board to adjust copayment levels in
the future through regulations.