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A Better Partnership


Jan 2013
January 08, 2013

From the Capitol - January 2013



The 97th Michigan Legislature begins its session on January 9, 2013. The Senate, which was not up for reelection in 2012, still has a 26-12 Republican supermajority. The House of Representatives, where members were subject to re-election in 2012, will continue to be controlled by the Republicans by a 59-51 margin. Moreover, Republicans still have control of the Executive Office and the Supreme Court.

The Democrats, in the House at least, are a stronger minority after the 2012 general election, but were bruised by passage of right-to work legislation and other GOP initiatives during December’s lame-duck session. The extent to which Democrats influence close votes in 2013 remains to be seen.  But if Republicans maintain party discipline several issues will continue to go the way of the GOP. Those issues include:
  • Enacting the Governor’s budget priorities
  • Enacting education reforms designed to make public schools and teachers more accountable
  • Revising Michigan’s no-fault auto insurance law
  • Implementing other business initiatives, including a reduction of regulations and Department of Environmental Quality mandates

In the first two years of his Administration, Governor Snyder’s timetable for enacting a budget by Memorial Day was honored by the Legislature. Normally, the Governor delivers the executive budget recommendation to the Legislature in mid-February. This year, it appears he will fast forward the process to the last week in January.

However, a recent revenue estimate prepared by the Senate Fiscal Agency (SFA) may give both the Administration and the Legislature cause for some concern. The SFA is reporting a decrease in revenue during the course of this fiscal year. The SFA attributes this, in part, to a slowly growing economy and a shift in tax policy, which lowers the tax burden previously borne by business. Between ongoing and expected appropriations and one-time appropriations to fill a hole (see section on claims tax), the SFA estimates there will only be about $146 million in reserve by year’s end.

The official Revenue Estimating Conference, which consists of the State Treasurer and the Directors of both the House and Senate Fiscal Agencies, is scheduled for January 11. The results of that conference will go a long way toward shaping the budget for fiscal year 2013-2014.


Medicaid Expansion:

The federal Affordable Care Act (ACA,) often referred to as “Obamacare,” mandated that states expand their Medicaid programs to cover people with incomes up to 138% of the federal poverty level. In its landmark ruling upholding the constitutionality of the ACA, the U.S. Supreme Court struck down the mandatory expansion of state Medicaid programs as being punitive. The decision of whether to expand Medicaid eligibility was left to the discretion of each state.  The ACA says the federal government will pay the full cost of expansion of a state program from 2014 through 2016. Thereafter, states will incur some of the cost for program expansion, up to a ceiling of 10% by 2020.

For a variety of reasons both philosophical and fiscal, many states have opted not to expand their Medicaid programs. Proponents say expansion would save states money. They estimate the savings to state taxpayers would be about $1 billion from 2014 to 2023. Moreover, they predict expansion would infuse the Michigan economy with billions of dollars. Opponents, however, point out that Michigan is having a difficult time raising the revenue needed for its current Medicaid program (see section on claims tax) and question how it can meet additional obligations.

State lawmakers from around the country, Michigan included, explored the concept of expanding the program to something less than the 138% of the federal poverty level. That idea was stopped in its tracks by a December ruling from the U.S. Department of Health and Human Services. The ruling stated, in essence, that the ACA does not allow for state discretion in the level of Medicaid expansion so states that did not expand their programs to the level called for by the ACA (138% FPL) would not be eligible for full federal funding of that expansion. In essence, it said state Medicaid expansion is an all-or-nothing proposition.

Whether Michigan pursues Medicaid expansion will be determined largely by the Snyder Administration’s recommendation in its Executive Budget for FY 2013-2014.  The Governor has indicated that a key factor will be whether the provider community, in particular primary care physicians and supporting health professionals (see section on advanced practice registered nurse legislation), have the capacity to meet the needs of the estimated 400,000 people that expansion could bring to the program.  Still, this question remains for lawmakers and the Administration: How does Michigan afford the 10% match, which looms in 2020?  This issue will be one of the major policy/fiscal decisions facing the Snyder Administration and the Legislature in 2013.

Claims Tax:

Collections from Michigan’s 1% tax on paid medical claims fell about $130 million short of expectations in 2012.

Michigan imposes the tax on paid medical claims in order to raise $400 million, which then allows the state to receive $800 million in federal matching funds for the Medicaid program. The Snyder Administration wants this hole filled permanently by a reliable source of revenue. A fix was attempted in lame-duck session with SB 1359. The bill would have allowed the Department of Treasury to raise the rate of the paid claims tax in order to reach the “basic need,” which was defined as $400 million.  However, the bill never made it out of the Senate Appropriations Committee due to stiff opposition from the business community.

Officials from the Budget Office, the Department of Community Health and the Executive Office are looking at all sorts of alternatives, including taxing providers and using graduate medical education funds. This issue will be a challenge for lawmakers, especially Republican lawmakers, who have successfully campaigned on a theme of “no new taxes.”

Dual Eligibility Program:

A pilot project that will integrate into Medicaid managed care those people who are eligible for both Medicare and Medicaid is likely to be implemented this year with a targeted start date of January 1, 2014. Integration of those who are “dually eligible” under both programs has been the goal of the state for more than two years because it will save money and provide better, more coordinated care. Many of the patients suffer from chronic, long-term physical conditions as well as behavioral and mental health issues. Typically, this population is the costliest. Managed care is designed for such a function.

In late December, the Department of Community Health (DCH) announced that it had reached a tentative agreement with the federal Center for Medicare and Medicaid Services (CMS) to begin the project in Michigan, but only on a regional basis. Key provisions include:
  • Integrated Care Organizations (ICOs), otherwise known as Medicaid managed care plans, will cover physical health, long-term care and pharmacy services
  • Prepaid In-Patient Health Plans (PIHPs), otherwise known as community mental health agencies, will cover behavioral health and rehabilitative services, including developmental disabilities, mental illness and substance abuse services
  • ICO contracts (between ICO, DCH and CMS) will be signed in late September with enrollment beginning on January 1, 2014; a request for proposals will be released in late February
  • Michigan will make capitation payments directly to ICOs and PIHPs and will preserve the current funding levels for PIHPs
  • All Medicare payments will go directly to the ICOs that were selected by DCH to participate in the project
  • A subcontract between ICOs and PIHPs will be mandated for the Medicare behavioral health services, including acute psychiatric hospitalizations
  • Those eligible will be automatically enrolled into the integrated system but may opt out
This is the biggest project DCH has initiated in quite some time. It will be devoting a great deal of time and energy to this project in order to adhere to a Jan. 1, 2014 start-up date.

Advanced Practice Registered Nurses:

Advanced Practice Registered Nurses (APRNs) such as nurse practitioners, nurse midwives and clinical nurses have for years sought recognition and licensing separate from the Board of Nursing.  They note the growing shortage of primary care physicians as one of the reasons they should be allowed to practice independent of a physician’s supervision  In addition, APRNs want  to expand their scope of practice to include treatment and diagnostic testing which is part of the practice of medicine.

The Department of Licensing and Regulatory Affairs (LARA), which oversees the health professions, wants the statutory authority to properly regulate APRNs.  Even physician groups that oppose greater  independence for APRNs recognize the need for a revision of the Public Health Code. The real battle will be over the extent to which APRNs can practice independent of a physician’s supervision. Past legislative efforts by APRNs to practice independently and to expand their scope of practice to what amounts to primary care medicine have been thwarted by the physician community. Look for reintroduction of this legislation and, if a compromise is not reached, an old-fashioned scope-of-practice battle.


Blue Cross and Blue Shield Conversion Legislation:

As much as the Governor wanted to sign the Blue Cross and Blue Shield of Michigan (BCBS/M) conversion legislation the Legislature had enacted, he felt he had to veto it because of an amendment added in the House. The amendment made abortion coverage elective, meaning it had to be purchased through a rider to the policy. In his veto message, the Governor said he thought it inappropriate to tell a woman who became pregnant due to rape that she needed to select elective insurance coverage. He also viewed the amendment as an overreach of government into the private market.

Look for reintroduction of the same or similar legislation on the subject, minus the controversial amendment.

Revision of Auto No-Fault Law:

Last session, a bill that would have eliminated Michigan’s mandatory unlimited auto insurance medical benefit died on the House floor. HB 4936 would have given an insured three choices of medical coverage benefits: $500,000, $1 million or $5 million.

A rare alliance between the plaintiff’s bar and health care providers killed the bill. Opponents said elimination of the unlimited benefit will eventually cost taxpayers because an injured motorist is then forced to the Medicaid program for care.

Auto insurance companies argue that Michigan has the highest mandated auto insurance medical benefit in the country. They say one in five drivers in Michigan is uninsured because of the high cost of premiums.  In addition, they contend that health-care providers charge auto insurance companies much more for medical claims so they can recoup shortfalls incurred under systems that are required to use a rate schedule, such as workers’ compensation.

Revision is a priority for the Governor. Look for reintroduction early in the new session.


Road Funding Given a Priority:

In the fall of 2011, the Governor delivered a message on transportation funding to the Legislature. The Governor suggested the Legislature significantly increase the fuel tax and vehicle registration fees in order to raise the approximately $1.4 billion in revenue needed just to keep up with necessary repairs and maintenance.  That proposal was rejected by House members who were facing re-election. However, late in 2012, the Senate Majority Leader appointed a special committee to look into how state funds were raised, whether different or new sources of revenue could be generated and whether spending priorities were correct.

The Committee heard a great deal of testimony, some of which asserted that Michigan really has a much greater need than the $1.4 billion.  iscussion touched upon a number of subjects including:
  • Dedicating a portion of the state sales tax to roads
  • Increasing the excise tax
  • Establishing user fees
  • Basing vehicle registration fees on the weight of the vehicle rather than its price, which is how registration fees used to be calculated
  • Determining what roadways are most heavily traveled and making those roads a priority for funding
The Legislature is still loathe to raise any tax, but it now appears Sen. Roger Kahn will provide leadership on a series of bills meant to raise revenue through increased fees and new spending criteria. Look for introduction prior to mid-February.


Educational Assessment Authority:

Late last session, an effort was made to gain support for legislation that would establish in statute the Educational Assessment Authority (EAA).  In the end, there just wasn’t enough time to gain a consensus.

The EAA was created in 2011 through an inter-local agreement pursuant to the Urban Cooperation Act between Eastern Michigan University and the Detroit Public Schools. The legislation that died this past session tracks that inter-local agreement in many respects. The EAA would:
  • Oversee a separate statewide Michigan school district called the “reform district”
  • Require schools in the lowest 5% of student achievement among Michigan schools for 3 consecutive years be members of the district and require them to stay in the district until achievement levels surpass the lowest 5%
  • Allow collectively bargained contracts to be cancelled when a school enters the reform district
  • Provide a statewide inventory of unused school buildings that may be sold to other educational entities, either public (including charter schools) or private schools
Democrats and teachers’ unions are adamantly opposed to the proposal. So, too, are most school district superintendents. Nevertheless, the odds of passage of an EAA or something similar to it are favorable. Governor Snyder has made the establishment of an EAA a priority for the upcoming year. Look for a bill to be introduced early this year.

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