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A Better Partnership


Jun 2012
June 22, 2012

From The Capitol - June 2012


The Michigan Legislature “virtually” adjourned for the summer, but not before passing a budget for all state departments, higher education and the School Aid Fund.  Like last year, Governor Snyder had set a goal for a budget to be on his desk by June 1. This year the Legislature didn’t disappoint the Governor, too much at least, by passing the budget for state departments (the Omnibus) by June 1, and the school package (the School Bus) early the following week.

The Legislature completed an early rollback of the phase out for the personal income tax rate, nearly completed reforms to the Michigan Public Employee Retirement System (MPERS), worked on medical malpractice revisions, and is halfway finished with a phase out of the personal property tax.

These legislative initiatives, and plenty of administrative actions were indicative of a flurry of activity in Lansing during May and June.

Lest we not forget, 2012 is an election year.  While state senators have a pass this year, all state house members who are not term limited or who have decided not to seek reelection face the voters this year. How will the Republican Majority in the House fare?  Will the Presidential race in Michigan favor the Republicans or Democrats? Will the Republican reapportionment plan keep the GOP in power in the House? Will President Obama make it six straight Democratic Presidential Election wins in Michigan? And if so, what effect will that victory have on Michigan’s political landscape?

The FY 2012-2013 budget appropriates over $34.3 billion to departments of state government, $7.5 billion of which comes from the state’s general fund (GF/GP).

The Department of Community Health (DCH) was appropriated over $15 billion gross and $2.8 billion GF/GP. Of course, the overwhelming amount of this appropriation goes to the Medicaid program, a program which now lends medical assistance to nearly 1 out of 5 Michigan citizens.

The DCH budget also includes:
  • A capitation rate increase of 1.5% for Health Plans and 1.25% for Prepaid Inpatient Health Plans (PIHP) in an effort to ensure these managed care entities are actuarially sound.
  • An increase in funding for the Children with Serious Emotional Disturbance Waiver Program by $4.5 million gross.
  • A reduction in funding for the Graduate Medical Education Program.
  • Recognition of an additional $282 million of federal funds to increase reimbursement rates for primary care physicians, family doctors and pediatricians up to 100% of Medicare rates.
  • Restoration of nearly $19 million in the Pharmaceutical Services line item.
  • Nearly $22 million to fund treatment for autism spectrum disorder for Medicaid and MiCHILD children.
  • A requirement for DCH to use standard program evaluation measures to assess the effectiveness of heroin and other treatment programs provided through coordinating agencies and service providers.
  • Allowing non-emergency medical transportation to be competitively bid.
  • A requirement for DCH to study the possibility of including quality indicators to exclude certain Medicaid managed care organizations in the next contract rebidding process.

The Department of Human Services (DHS) received a total appropriation of over $6.7 billion.  Of that amount, $1.047 billion is GF/GP money. Highlights of this budget include:
  • An increase in residential rates for private child welfare facilities.
  • An increase in foster family rates of $3 per child per day.
  • An increase in funding for outpatient mental health services.
  • A requirement for DHS to use e-verify to confirm that new employees and new contractors are legally present in the United States.
  • A requirement that DHS enter into a contract with a third party to establish per diem rates for private child welfare agencies.
  • A requirement that DHS use the same onsite evaluation process and non compliance penalties for privately, as well as state operated residential facilities.

The Department of Environmental Quality (DEQ) was appropriated nearly $431.5 million, of which $29.8 million is GF/GP.  Highlights of this budget include:
  • $10 million for cleanup of Leaking Underground Storage Tank (LUST) sites.
  • Retaining the current boilerplate language providing work project status to Part 1 funds for brownfield grants and loan programs.

For the Department of Transportation, the Legislature appropriated nearly $3.5 billion.  Approximately two thirds of the revenue in this budget comes from state restricted funds and nearly one third from the federal government. Highlights from this budget include $100 million additional State Trunkline Fund revenue due to the diversion of sales tax for one year.

Integration of “Dual Eligibles” into Managed Care:

On April 26, DCH submitted its plan to the federal Center for Medicaid and Medicare Services (CMS) to integrate those people who are eligible for both Medicaid and Medicare Program assistance (dual eligibles) into one plan of integrated Medicaid managed care. The dual eligible population in Michigan is estimated at 220,000 people, but they are the most expensive for both systems because of their chronic serious medical conditions.  It is estimated that the cost of care for these recipients is near a whopping $8 billion. Adding to this cost is the fact that the population slides back and forth between programs making it difficult to manage. The theory behind integrated managed care is that incorporating this population will lead to better care and outcomes for patients and save taxpayers hundreds of millions of dollars. On the other hand, mental health and behavioral health advocates worry about the sufficiency of Medicaid health plan networks to service the needs of their constituents.

After a series of public hearings and work groups conducted by DCH, it proposed a plan for “semi integration” of the dual eligible population. According to the plan submitted to CMS, behavioral health and mental health services would be separate from physical health administration with a “care bridge” used to span the gap between the two for coordination of care. CMS has not yet responded to the plan, but the word among the Lansing healthcare community is that it will reject the plan. However, the rejection will not require DCH to go back to the drawing board, but rather, will be in the form of “tweaks” to the plan.

A Change for Children’s Special Health Care Services:

The Children Special Health Care Services Program (CSHCS) is one which provides for the medical needs of children with the most serious conditions.  These conditions are chronic and very expensive.  Heretofore, the program has not been part of Medicaid managed care, but rather, has been paid on a fee for service basis.

Believing there are significant savings that can be achieved by having the care of these children managed, DCH last month issued a directive that the CSHCS Program would become part of Medicaid managed care.  That is, assumption of the CSHCS population by Medicaid health plans was made mandatory.  Health plans that did not meet the “care requirements” of DCH for assumption of CSHCS would be granted some time to comply.  Moreover, DCH dictates that health plans were to assume the “full risk” for these children requiring the plans to purchase reinsurance.

Health plans have concerns, which include:
  • Whether their current network of providers can be expanded to include the subspecialty fields of medicine this population requires.
  • Whether assuming the CSHCS population will require recruitment and training of additional health plan staff.
  • Whether the reimbursement rates proposed by DCH are too low as many believe.
  • Whether some health plans with greater numbers of CSHCS children in their service areas would be placed at a competitive disadvantage vis-à-vis other plans that do not have large CSHCS populations within their service area.

DCH is working toward answering these and other concerns.  Nevertheless, the Department still intends to implement this initiative on October 1 of this year.

Expansion of Scope of Practice for Nurses:

According to most health policy experts, Michigan faces a shortage of primary care physicians in the very near future.  Moreover, if the federal Affordable Care Act is upheld by the U.S. Supreme Court, Michigan could have an additional 500,000 people qualify for Medicaid in the near future.

Advanced practice nurses such as nurse midwives, nurse practitioners and certified nurse anesthetists want the authority to fill the primary care shortage and give patients, especially the poor, access to care.  The problem is the legislation (SB 481 and HB 4774) greatly expands the scope of practice without qualification.  For instance, nurse practitioners would be allowed to conduct, operate and interpret diagnostic tests including laboratory tests and imaging.  The term imaging is not qualified, and thus, a nurse practitioner could be statutorily empowered to operate and interpret MRI or even PET scanning tests.

The Senate Health Policy Committee chair will, in all likelihood, convene meetings among the stakeholders over the course of the summer in an effort to obtain a solution.

Oral Chemotherapy Parity Stalled in the House:

Two bills requiring parity in reimbursement between oral and intravenous chemotherapy are currently stalled in the House Health Policy Committee.  SB’s 540 and 541 sailed through the Senate as the chair of the Senate Appropriations Committee is the bill sponsor.  But, by the time the bills received their first hearing in the House committee, it soon became apparent that considerable opposition had formed, led by the Michigan Chamber of Commerce, Michigan Manufacturers Association and Blue Cross & Blue Shield of Michigan (the state’s largest commercial insurer).  The bill has lingered in the House since December. It looks like one more push at passage will be made this year.

No Sales Tax on OTC Prescription Drugs?

Article 9, section 8 of the Michigan Constitution states that no sales or use tax shall be charged from and after January 1, 1975 on the sale or use of prescription drugs for human use.  The Treasury Department still required that sales tax be paid on over the counter prescription drugs such as low dose aspirin.

HB 5678 makes it clear that sales tax does not apply to over the counter drugs that are properly prescribed.  The House Fiscal Agency estimates that the state will lose approximately $10 million if the bill passes.  Nevertheless, the bill has been reported from Committee and is now on the second reading on the House Floor.

Tamper Resistant Opioids Get Special Treatment?

House Bill 5643 requires the Board of Pharmacy to create a list of opioid analgesic drugs for which it has received evidence that the drug packaging incorporates tamper-resistant technology and that the drug has received FDA approval.  A pharmacist would be prohibited from interchanging or substituting the opioid analgesic drug without either:
  • Verifying that the substitute has similar tamper resistant packaging; or,
  • Obtaining written, signed consent from the prescriber for the interchange or substitution.

The bill met with stiff resistance from the Michigan Association of Health Plans,  several business trade associations and Blue Cross & Blue Shielf of Michigan.  Consequently, it remains in its first House Committee.

Tougher Abortion Legislation Advances:

Just prior to breaking for the summer, the House passed one bill and advanced two others that place significant restrictions on abortion accessHouse Bill 5711 adds language to Michigan’s laws about screenings for coerced abortions and requires stronger liability insurance coverage for physicians who perform abortions.  This bill passed by a vote of 70-39 and has been referred to the Senate Judiciary Committee.

House Bill 5713 establishes the “Pain Capable Unborn Child Protection Act” making it illegal to perform an abortion after 20 weeks unless “in the reasonable and clinical judgment of a physician the abortion is necessary to avert the pregnant individual’s death.”

House Bill 5712 sets sentencing guidelines for coercing a pregnant woman to have an abortion against her will.  Both House bills 5712 and 5713 were kept on the floor of the House because of concerns regarding their constitutionality.

The debate was and will continue to be heated between pro-life versus pro-choice advocates.

Before leaving, House Republicans were successful in passing House Bill 5729 which rolls back the current income tax rate of 4.35 percent to 3.9 percent over the next six years.  The measure will cost the state approximately $1.8 billion.

Two related bills are now on their way to the Governor.  House Bill 5699 reduces the personal income tax rate from 4.35 percent to 4.25 percent on October 1, 2012 (just over a month before the general election) rather than January 1, 2013 when the rate is currently scheduled to decrease.

House Bill 5700 allows a taxpayer to claim a personal exemption in the amount provided under current law or in the following amount, whichever is greater, for each personal or dependency exemption allowable on the taxpayer’s federal income tax:
  • $3,950 beginning on and after October 1, 2012 and before January 1, 2014.
  • $4,000 beginning on or after January 1, 2014.

It is estimated that both enactments taken together reduce the general fund and school aid revenue by $102 million in FY 2012-2013, $35 million in FY 2013-2014, $32 million in FY 2014-2015, and $8 million in FY 2015-2016.

Personal Property Tax Phase Out on the Way?

An eight bill package designed to phase out the personal property tax on business equipment has passed the Senate and is now with the House Tax policy Committee.  Senate Bills 1065–1072 would, among other things:
  • Eliminate the personal property tax for eligible manufacturing property acquired after December 31, 2011, beginning January 1, 2016.
  • Eliminate the personal property tax on small commercial and industrial businesses (taxable value of $40,000 or less), effective December 31, 2012.
  • Create a broad calculation but not a reimbursement formula to replace some, but not all of the personal property tax revenue to be lost by local governmental taxing units.

As far as local governments are concerned, the last issue is the problem. In some instances, this tax rightly or wrongly is responsible for up to 25% of a locality’s revenue.  Local governments wanted a replacement “guarantee” for this tax revenue, but the Senate Republicans have not been willing to provide one.

House Republicans facing the voters this year are not likely to consider this package, at least until after the election in “lame duck” session.  That is so because polling consistently shows repeal of tax not popular with the public.

GOP Passes Changes in Voter Registration in Time for November Elections:

A series of bill that would make several changes to election law prior to the November election passed both Chambers on a partisan vote.  The most controversial bills require photograph identification for in person voter registration and require education and training of voter registration organizations.  Democrats claim that the bills are merely meant to suppress voter turnout.  Republicans, on the other hand, say this package is needed to avert fraud.  The Governor is expected to sign the legislation.

Top Republicans in the House and Senate agreed that reform of the Michigan Public School Employees Retirement System (MPSERS) needed to happen.  The problem was getting an agreement over what the final product would look like.

The biggest bone of contention between the House and Senate was whether new teachers should be required to participate in a defined contribution system or whether they should be permitted to enroll into the existing hybrid system.  The Senate wanted the defined contribution system while the Governor and the House wanted employees to enter the hybrid system.

The Senate plan would have cost more up front, thus leaving the state less to prefund the system.  On the evening before the last day of session, House and Senate leadership agreed to retain the hybrid pension plan for new hires.  However, the agreement also addressed what is termed “stranded costs.”  These costs are a result of school districts privatizing certain services such as transportation, food and maintenance.  With those workers out of the system, there are fewer paying into it.  The agreement calls upon school districts to contribute to MPSERS based on 11.9 percent of their expenditures starting in the 2013–2014 school year.

The next day the House passed this version with a narrow majority and returned it to the Senate for concurrence.  It is expected that the Senate will concur with the House action when it returns for its one scheduled session day in July, the 18th.

On Friday, June 15, Governor Snyder and Canadian Prime Minister Stephen Harper jointly announced the execution of an historic Crossing Agreement providing for a new International Crossing across the Detroit River, approximately 2 miles south, or downriver, from the 82-year-old Ambassador Bridge.  The Crossing Agreement was executed by Governor Snyder, on behalf of the State of Michigan, and by The Honorable Denis Lebel, Minister of Transport, on behalf of Canada.  The Crossing Agreement provides a framework for a Crossing Authority established by Canada to design, construct, finance, operate and maintain a new International Crossing between Canada and Michigan, under the oversight of a jointly established International Authority with three members appointed by Canada and three members appointed by Michigan.  All funding will be provided by Canada.  Michigan is not obligated to pay any of the costs of the new International Crossing.


With a precious 16 electoral votes, Michigan will be a key state in the Presidential race.  Most polls have the race as a dead heat as we head into summer.  Each candidate should get at least some “bounce” of popularity after their Party’s national conventions.  Still, President Obama at this stage has to be considered the slight favorite to once again put Michigan in the Democrats’ column.  Clearly, this slight edge could change, especially if the unemployment rate climbs.

U.S. Senate:

Incumbent Democratic U.S. Senator Debbie Stabenow is seeking her third term.  Stabenow enjoys a prominent place within her Caucus and chairs the Agriculture Committee.  She will be challenged in November by one of four Republicans including former Congressman Pete Hoekstra, charter school entrepreneur Clark Durant, Midland resident Gary Glenn and former judge Randy Heckman.  Right now, the odds-on favorite to garner the GOP nomination is Hoekstra who has the edge in name identification and money.

Polls continue to show Stabenow beating any of the four and at this stage she has to be considered the favorite, even though Super PACs will spend millions in an effort to defeat her.

U.S. House:

Due to the results of the 2010 census, Michigan loses one congressional seat. Consequently, state legislative Republicans combined two statistically Democratic districts, pitting two incumbents, Gary Peters and Hansen Clarke, against one another.  In additional Southfield Mayor Brenda Lawrence and former state representative Mary Waters are in the race for what is now known as the 14th District.  The winner of the August Primary will win in November in this heavily Democratic district.  To date, Peters has the edge in endorsements (especially organized labor) and money. This promises to be a hard-fought race.

Another intriguing primary fight involves long term Congressman John Conyers who is being challenged by three state legislators, State Senators Glenn Anderson of Westland, Burt Johnson of Highland Park, and State Representative Shanelle Jackson of Detroit.  With 3 Detroiters in the race, there is a possibility that Anderson could emerge, but Conyers must still be considered the favorite.

For November, the Democrats’ best hope of retaking a seat is in the 1st District, which is comprised of the Upper Peninsula and most of the Northern Lower Peninsula.  Conservative first term Republican Dan Benishek will have a rematch against former state representative Democrat Gary McDowell.  Look for the Super PACs to be active here.

In one of the more bizarre turn of events in recent Michigan political history, incumbent Republican Congressman Thad McCotter, once a presidential candidate, failed to obtain the necessary petition signatures to qualify for the ballot.  In fact, some of the petition signatures were duplicates, leading to an investigation by the state police.  The only other Republican candidate in this heavily GOP district is newcomer Kerry Bentivolio, a retired Milford school teacher with tea party leanings.  In an effort to keep this seat Republican, the Oakland County Party endorsed a write-in effort by former State Senator Nancy Cassis of Novi who should have the funds to make a strong run, even as a write-in candidate.

In November, when all is said and done, the Michigan congressional delegation will probably consist of 9 Republicans and 5 Democrats with a possibility of 8 Republicans and 6 Democrats.

Michigan House:

Twenty new Republicans were swept into the Michigan House of Representatives by the GOP tidal wave of 2010.  Regaining the majority in that year allowed the Republicans to reapportion their districts in accordance with the decennial census.  This they did, giving themselves the statistical party base advantage in 60 out of 110 districts.  Moreover, the Republicans who traditionally have more funds than the Democrats have exponentially increased that advantage by being in the majority and being supported by Super PACs.  The Democrats could be successful in a handful of districts just because those districts have a slightly higher Democratic base which would be enhanced somewhat if President Obama wins big in those districts.  As of now, look for the Republicans to maintain their majority in the House for the next legislative session, but look for a stronger Democratic minority with a gain of 3 to 5 seats.
  • After delays due to objections registered by BCBS/M, look for legislation establishing protocols for pharmacy audits to be introduced.
  • With the Presidential race close in Michigan, look for Obama campaign ads to concentrate on how he “saved” General Motors and Chrysler while Romney would have allowed them to go bankrupt.  Reason being, this is the big issue in this state that gets the Obama positives moving upward.
  • Look for Super PAC money to flood into the race on behalf of 1st District freshman Congressman Dan Benishek, the Republican, over his Democratic challenger, former state representative Gary McDowell.
  • If the right to collective bargaining amendment to the state constitution is approved for the November ballot, the turnout by pro Democratic voters will increase, at least in theory.  Earlier this month, however Wisconsin Governor Scott Walker survived a recall election and garnered 40% of the union vote.
  • The race for leader in next year’s House Democratic Caucus is shaping up between current Minority Floor leader Kate Segal of Battle Creek, former Flint Mayor Woodrow Stanley and freshman Jim Townsend of Royal Oak.
  • Look for Senate GOP legislative initiatives regulating employer/employee relations, including job interviews and conduct in the workplace.
  • Other than possibly meeting for two days this summer, the Legislature will be back in session for 3 weeks in September, take another break until after the November election and return for a 3 week “lame duck” session.


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