Fiscal Note - SB 0024 - Requires Health Insurers to Offer Coverage for Diabetes Treatment
L.R. NO. 0477-01
BILL NO. Truly Agreed and Finally Passed SB 24
SUBJECT: Health Care, Insurance
TYPE: Original
DATE: May 2, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue ($5,152,630) ($10,116,532) ($10,860,177)
Insurance
Dedicated $14,250 to $28,500 $0 $0
Total Estimated
Net Effect on All ($5,124,130 to
State Funds# $5,138,380) ($10,116,532) ($10,860,177*)
*Does not include unknown amount of significant savings which research
indicates will occur in the third and subsequent fiscal years.
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Medicaid $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds* $0 $0 $0
*Costs and income net to zero.
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials from the Department of Corrections, the Department of Conservation,
the Department of Public Safety - Missouri State Highway Patrol, the
Department of Health, the Office of Administration, and the Missouri
Consolidated Health Care Plan assume this proposal would not fiscally impact
their agencies.
The Department of Insurance (INS) states that approximately 250 health
insurers and 35 HMOs have policies filed with INS. Each insurer may submit
one or two policy form amendments (one for individual and one for group or
one filing for both) to comply with the requirements of this proposal. The
result would be a range of 285 to 570 new policy filings needed to comply
with this proposal. Form filings are to be accompanied with a $50 filing
fee. Based on the estimated range of new policy filings, $14,250 to $28,500
in new revenue would be generated for the Insurance Dedicated Fund in the
first fiscal year only. INS further states that the passage of more than one
similar proposal could require the INS to request increased appropriations to
cover cumulative administrative costs.
Officials from the Department of Transportation (DHT) state the Highway and
Patrol Medical Plan currently covers the treatment of diabetes except for the
self-management training. DHT assumes the cost of providing this training to
the medical plan would be less than $10,000 per year and would be absorbed by
the plan. Therefore, DHT assumes this proposal would not fiscally impact
their agency.
The Department of Social Services (DOS) state that federal and state law
mandate eligibility and coverage for health care in the Missouri Medicaid
program. The medical care coverage mandated in this proposal, while not
enacted in the Medicaid statutes (Section 208.151 RSMo 1994), results in a
potential cost to Medicaid.
DOS officials state that diabetic testing supplies (blood glucose monitors,
blood glucose test strips and lancets) are not currently a covered service
for Missouri Medicaid recipients age twenty-one or over. The strips and
lancets would be requested through the exceptions process and are only
approved for insulin-treated diabetics. The blood glucose monitors are only
approved for purchase when the diabetic is severely visually impaired or
color blind. These items are approved for gestational diabetics. Ad hoc
reporting conducted by DOS revealed that there were 22,052 Missouri Medicaid
recipients treated for diabetes in FY97. Approximately 12,897 were insulin
treated and the remaining 13,045 were treated with oral hypoglycemic agents.
In addition, DOS estimates that 26,089 are diet controlled diabetics. DOS
states these numbers include those receiving pharmaceutical and
equipment/supplies. The number receiving equipment/supplies only was 5,206
recipients in FY96. DOS states that for this fiscal note, recipients,
one-time costs and on-goings costs would be calculated separately.
Recipients were estimated to grow at an annual rate of 7.06 percent in FY 97
and 5.3 percent in subsequent years. This diabetic population was judged to
closely resemble the Permanently and Totally Disabled (PTD) population in
terms of users. One-time costs were based on the FY 95 average cost for
blood glucose monitors ($50) and lancet devices ($15). They are not
projected to grown or shrink in terms of cost due to technological and
manufacturing advances. Ongoing costs for insulin dependent diabetics were
based on an average usage of three (3) test strips and lancets per day. This
results in a monthly cost of $84 per recipient. Ongoing costs for diabetics
without insulin dependence were based on an average usage of one test strip
and lancet per day. This results in a monthly cost of $28 per recipient.
The weighted average of both types of diabetic recipients result in a monthly
cost of $48 as calculated by attachment A-III. The ongoing costs are
estimated to grown in terms of cost by 1.2 percent per year based on past
experience. The costs derived represent utilization by every eligible
recipients, therefore the maximum cost has been projected. The number of
recipients that will fail to request the equipment, supplies or training is
not estimated.
DOS acknowledges that savings would be realized due to reductions in
hospitalization, physician visits, etc. If a recipient avoids a
hospitalization or physician visit for diabetic complications due to better
control of their blood sugar, the offset tot he additional costs to Missouri
Medicaid could be substantial. DMS has not been successful in defining date
on which to base such an estimate. However, inpatient hospital claims for
adults with a diagnosis of diabetes were paid in the amount of $4,598,276 for
a three- month period 06/95 to 08/95.
DOS acknowledges that savings would be realized due to reductions in
hospitalization, physician visits, etc. If a recipient avoids a
hospitalization or physician visit for diabetic complications due to better
control of their blood sugar, the savings to Missouri Medicaid could be
substantial. DOS does not have data on which to base such an estimate. DOS
further acknowledges that the potential for additional costs due to other
"physician prescribed" equipment, supplies, and training could be realized.
DOS assumes the effective date of this proposal would begin in January 1,
1998. At that time, all diabetic recipients would be eligible to request and
receive the equipment (one-time only) and supplies (on-going monthly). DOS
assumes no lag would be utilized as most costs would be in the pharmacy
program (instant billers). DOS assumes the federal financial participation
rate to be 60.04%
#Department of Social Services (DOS) has reviewed their reporting of Missouri
Medicaid recipients and determined the total number of affected recipients to
be 40,404. In addition, DOS has arrived at a more accurate estimate in
projecting the average usage of test strips and lancets. DOS estimates
revised costs to be $13,104,350 in FY98, $25,728,718 in FY 99, and
$27,619,982 in FY00. The federal financial participation percentage would be
60.68%.
#Oversight obtained information from the states of Maine, Michigan, Texas,
and the Congressional Budget Office which indicate such a program of diabetes
care and education could result in prevented or delayed progression of eye,
kidney and nerve damage by perhaps as much as 50%. It was also determined
that related hospitalizations were reduced between 32% and 45%. However,
substantial savings would not likely occur until 3-5 years following
implementation of the program. The state of Texas reported a break even
point in year two, with savings occurring thereafter. Oversight assumes
Missouri may realize slight savings in year three, in an unknown amount.
Oversight does not have available information concerning health plans for
local governments. Therefore, no cost are reflected for the fiscal impact
that this proposal may have on local governments.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(6 Mo.)
GENERAL REVENUE FUND
Cost Avoidance - Department of Social Service
Reduced hospitalizations $0 $0 UNKNOWN
Costs - Department of Social Services
Increased Medicaid cost ($5,152,630) ($10,116,532) ($10,860,177)
#ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND ($5,152,630) ($10,116,532)($10,860,177)*
*Does not include unknown amount of significant savings which research
indicates will occur in the third and subsequent fiscal years.
INSURANCE DEDICATED FUND
Income - Department of Insurance
Filings fees $14,250 to $28,500 $0 $0
ESTIMATED NET EFFECT ON
INSURANCE DEDICATED FUND $14,250 TO $28,500 $0 $0
FEDERAL FUNDS
Income - Department of Social Services
Medicaid reimbursements $7,951,720 $15,612,186 $16,759,805
Costs - Department of Social Services
Program specific expenses ($7,951,720) ($15,612,186) ($16,759,805)
#ESTIMATED NET EFFECT ON
FEDERAL FUNDS $0 $0 $0
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(6 Mo.)
$0 $0 $0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as result of
this proposal. However, the passage of more than one insurance proposal
could raise the insurance premiums for small businesses.
DESCRIPTION
This proposal would require insurers to offer coverage for physician
prescribed equipment, supplies and self-management training to be used in the
management and treatment of diabetes. Coverage shall include persons with
gestational, type I and type II diabetes. Health care services could not
charge greater deductibles or copayments for these service and may not reduce
or eliminate coverage due to the requirements of this act. The proposal
would apply to policies issued or delivered after January 1, 1998.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Insurance
Department of Corrections
Department of Conservation
Department of Public Safety
Missouri State Highway Patrol
Department of Health
Office of Administration
Department of Transportation
Missouri Consolidated Health Care Plan
Department of Social Services
This Fiscal Note is not an official copy and should not be quoted or cited.