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No significant fiscal implication to the State is anticipated.
SB 1585 would require the executive commissioner of the Health and Human Services (HHS), the Office of the Comptroller of Public Accounts of the State of Texas, and the Department of Aging and Disability Services (DADS) to conduct a joint feasibility study of developing a prepaid investment plan to help citizens cover the cost of residential care programs.
The study of this prepaid residential care program would have to model the prepaid higher education tuition program, also known as the Texas Tomorrow Trust Fund (TTF). Additionally, this study would have to evaluate alternative programs.
Finally, this study must be submitted to the governor and the legislature by no later than November 1, 2016.
While we are normally neutral on studies, SB 1585 is egregious enough to qualify as an exception because of the underlining effects that would result. Although this bill does not itself expand Medicaid it would inevitably lead to the development of a program that would bind the state to provide long term residential and home care services.
Prior to Medicaid’s passage in 1965, the private market for long term care insurance was growing. However, people soon realized that they would not have to provide their own private insurance because Medicaid would shoulder the costs for this service. In short, Medicaid’s growth in providing this service greatly hurt any private options for long term care insurance.
However, beginning in the mid 90’s the private market for long term insurance had a comeback that has continued to this day. Unfortunately, this bill would most likely suppress this latter market resurgence because the study would focus on the feasibility of implementing and expanding a government administered prepaid investment plan for similar services for yet another segment of the population.
To that point, the issue we have with modeling this prepaid investment plan after the TTF is that the TTF has proven to be financially unsound. In fact, this program has risked insolvency because of underfunded liabilities attributed to higher tuition costs. TTF has had to undergo many iterations to shore up stability within its unstable framework. We are puzzled that SB 1585 would investigate the TTF model as a viable option for funding long term residential care.
The author’s statement of intent argues that even though Medicaid is the largest payer of residential care services, “individuals still have to contribute an average of $715 per month, which is almost all of their income.” However, this argument neglects the fact that Medicaid covers everything medically necessary for an individual excluding incidentals. In addition, Texas already has a generous eligibility requirement for long-term care at 300% of SSI or about 225% FPL. The long-term care benefit received far exceeds the amount collected in annuity payments minus the personal needs allowance. Currently, Medicaid in fiscal year 2012 covered 64.1 percent of nursing home residents.
SB 1585 is the means to an end, and that end is increasing HHS spending by providing a prepaid investment plan for residential care coverage. In the current fiscal year, more money will be spent in Health and Human Services (HHS) than all of the money spent for state education programs including all public education and higher education combined. Instead of looking for ways to expand the bloated bureaucracy in the HHS, this legislation should be looking at ways to encourage the private market to alleviate the HHS of its already overextended obligations in providing other health services.
For these reasons, we oppose SB 1585 because it violates our limited government principle and personal responsibility principle.