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Texas 2020-21 Biennium Budget Overview

This week, our In Focus section reviews the Texas 2020-21 biennium budget. The Texas Legislature adjourned its biennial legislative session on May 27, 2019, after adopting a $250.6 billion budget (all funds). The total budget is 6.3 percent higher than the 2018-19 budget with an increase of $14.8 billion. 

Total Health and Human Services (HHS) funding increased from $83.6 billion in 2018-19 to $84.4 billion, an increase of $784.5 million (0.9 percent). Medicaid funding includes $66.5 billion (all funds), an increase of $0.8 billion over 2018-19 funding. The budget increase is due primarily to a more favorable Federal Medical Assistance Percentage (FMAP) resulting in a higher proportion of HHS costs being funded with Federal Funds. State General Revenue Funds actually decreased by $1.9 billion from the prior budget.

The funding increase supports caseload growth, maintains fiscal year 2019 average costs for most services, and provides funding for cost growth based on average costs established by the federal government. The budget also includes funds for an additional 1,628 community-based waiver slots; provides attendant wage and rate enhancement program increases; rate increases for consumer-directed services and certain waivers; and payment-rate increases for certain services provided by rural hospitals, intermediate care facilities for individuals with intellectual disabilities, and certain therapy services.

Despite the budget increase, the legislature did not fully fund anticipated cost increases due to medical inflation, higher utilization of services, or increased acuity of Medicaid recipients. The budget also assumes savings of $0.9 billion (all funds) and directs the Health and Human Services Commission (HHSC) to achieve savings of at least $350 million in General Revenue Funds through implementation of cost containment initiatives.

Medicaid Funding for 2020-21 Biennium

Funding Category[1]SFY 2020-21 Funding – All FundsSFY 2018-19 Funding – All FundsIncrease/Decrease from SFY 2018-19
Medicaid Client Services$61.6 billion$57.4 billion+ $4.1 billion
Other Programs supported by Medicaid Funding$1.8 billion$1.7 billion+ $.1 billion
Medicaid Program Administration$3.1 billion$3.3 billion– $.2 billion
Total$66.5 billion$64.2 billion+$0.8 billion

 CHIP funding totals $2.0 billion for the biennium, a slight decrease of $8 million from 2018-19.

Separately, the Legislature also approved supplemental funding to meet budget shortfalls for the current fiscal year for Medicaid and several other state programs. House Bill 500 provides $4.15 billion (all funds) to meet underfunded Medicaid expenses through August 31, 2019. A similar Medicaid shortfall for FY 2021 is anticipated when the legislature reconvenes in 2021.

Other HHS budget highlights include:

  • Total $3.3 billion for non-Medicaid/CHIP behavioral health services, including funding for community mental health services, mental health services for veterans, and substance abuse prevention, intervention, and treatment services.
  • Total of $341.6 for Women’s Health Programs, an increase of $67.9 million from 2018-2019
  • The Medicaid budget assumes an average monthly cost per full-benefit Medicaid client (including drug and long-term care services) of $496 in 2020 and $511 in 2021. The average Aged and Medicare-related cost per recipient per month is estimated at $1,176 in 2020 and $1,220 in 2021.
  • Medicaid prescription drug costs are estimated at $83 per recipient per month in 2020 and $86 in 2021.

Medicaid-related Budget Riders

The Appropriations legislation for the Health and Human Services Commission also includes 176 “riders” that address additional requirements related to program operations, funding, and budget guidance. Following is a summary of some of the more significant Medicaid riders.

Rider 12: Requires a study of Medicaid medical transportation program utilization and costs and how HHSC intends to address unmet transportation needs.

Rider 15: Requires HHSC to submit quarterly reports to the legislature on utilization, appeals, provider participation, and other data on pediatric acute care therapy services.

Rider 19: Requires HHSC to develop and implement cost containment initiatives to achieve savings of at least $350 million in GR funds for the 20-21 biennium, for a total of $0.9 billion, all funds. The agency is directed to focus on increasing fraud, waste, and abuse prevention and detection; seeking to maximize federal flexibility; and other programmatic and administrative efficiencies without adjusting the amount, scope or duration of services or otherwise negatively impacting access to care.

Rider 27: Requires HHSC to study the cost impact of STAR Kids members with high utilization and cost drives in each MCO to determine if the current rate-setting methodology should be adjusted. HHSC is to make appropriate adjustments only if the changes would not result in increased expenditures.

Rider 33: Requires HHSC to review claims and expenditures for Medicaid recipients in STAR+PLUS with a serious mental illness to evaluate any inappropriate variation in services by MCO. HHSC also is directed to identify performance measures to better hold MCOs accountable for outcomes and spending and develop recommendations to improve quality of care. The report is due no later than August 31, 2020.

Rider 34: Requires HHSC to evaluate prescribing practices for opioids under Medicaid and provide recommendations on steps to take to better align prescribing practices with guidelines adopted by the Centers for Disease Control and Prevention.

Rider 38: Requires HHSC to issue a report on outcomes achieved by providers participating in the Medicaid Delivery System Reform and Incentive Payment Program (DSRIP). The report must include review years 7 and 8 of the waiver and provide information on project outcomes, cost effectiveness, and amount of funds earned by participating providers. The report is due to the legislature, governor and legislature budget board no later than December 1, 2020.

Rider 43: Requires HHSC to create an incentive program that auto-assigns Medicaid enrollees to an MCO based on quality of care, performance, and efficiency and effectiveness of services. HHSC is required to implement the program by September 1, 2020 and issue a report by January 15, 2021 that includes information on program cost, quality of care, and Medicaid member satisfaction.

Rider 45: Clarifies that the adopted budget includes $87.1million to increase the base wage of personal attendants to $8.11 per hour in FY 2020-21; and $13.5 million to fully fund the rate enhancement programs for community care and IDD providers.

Rider 47: Clarifies that the adopted budget includes funds for a 10 percent rate increase in Medicaid provider rates for physical, occupational, and speech therapies provided in home to children, and increase reimbursement rates for therapy assistants to 80 percent of the rate paid to a licensed therapist.

Rider 58: Places 10 percent of funds allocated to Local Mental health Authorities (LMHA) and Local Behavioral Health Authorities (LBHA) at risk and subject to recoupment for failure to achieve HHSC outcome targets. Recouped funds may be used for technical assistance or redistributed as an incentive payment.

Rider 67: Requires HHSC to develop a proposal to improve the efficiency of administering substance abuse treatment services and expand the capacity of substance use treatment services.  The report is due by December 1, 2020.

Rider 115: Clarifies the legislature’s intent that HHSC use funds appropriated to the Office of Inspector General to detect, investigate, and prosecute abuse by dentists and orthodontists, and conduct more extensive reviews of medical necessity for orthodontia services.

Rider 157: Requires HHSC to develop strategies to recruit, retain, and ensure adequate access to the services of community attendants. The rider outlines detailed requirements for the study, including developing enhanced network adequacy standards Medicaid MCOS for ensuring sufficient member- access to attendants. The report with recommendations is due November 1, 2020.

Rider 170: Requires HHSC to clarify the process for the inclusion of prescription drugs in the Medicaid and CHIP programs.

Links to information used in developing this summary are available at the Texas Legislative Budget Board website,

Texas State Legislation Summary

In addition to the state biennial budget, the Legislature enacted numerous legislative proposals that impact public and private insurance plans. Not all enacted legislation has been signed by the governor. The governor has 10 days after receipt of a bill to sign or veto the legislation or allow it to become law without signature. For bills sent to the governor within 10 days of adjournment (May 27, 2019), the governor has 20 days to sign or veto a bill or allow it to become law without signature.

Following is a brief summary of some of the more significant legislation impacting health care and health insurance programs. Links to all legislation are available at the Texas Legislature Online at

Senate Legislation

  • SB 436: Opioid Treatment Services – Improves access to services for opioid use disorders among pregnant and post-partum women
  • SB 670: TelemedicineRequires Medicaid to cover telemedicine and telehealth services and clarifies ambiguous provisions that may have previously prevented access to services
  • SB 749: Maternal/Neonatal Care – Establishes level-of-care designations for hospitals that provide maternal and neonatal care
  • SB 750: Maternal Postpartum Care – Improves access to postpartum care through the Healthy Texas Women Program
  • SB 1096: Medicaid Formulary Requirements – Enacts numerous MCO provisions related to prior authorizations and access to medications on the Medicaid formulary
  • SB 1207: Operations Related to Medicaid and HHSC Oversight – Imposes new requirements related to operational functions of HHSC and their oversight of MCOs. Some of the more significant provisions include:
  • New requirements related to prior authorization requests, adverse determinations and denials of coverage, with a goal of reducing the overall number of prior authorizations
  • Provisions related to external medical reviews conducted by HHSC and/or MCOs
  • Additional requirements for STAR Kids contracts between an MCO and HHSC
  • Implementation of a Medicaid help-line for escalated complaints and inquiries
  • A review and improvement of the care needs assessment tool for the STAR Kids program
  • Requirements to streamline aspects of the STAR Kids program
  • HHSC must develop an easy process to allow a recipient with complex medical needs to continue receiving care from a specialty provider
  • SB 1264: Surprise Medical Bills – Amends the Texas insurance code to prohibit health care providers from billing patients for certain out-of-network services when patients have no choice, including when patients receive care from an out-of-network doctor at an in-network ER (including freestanding ERs) during an emergency, or when they receive care from an out-of-network doctor at an in-network facility. Establishes binding mediation procedures for providers and insurers to resolve payment disputes and requires plans to pay reasonable or agreed-to amounts for out-of-network care as determined through mediation.
  • SB 1519: Long Term Care Council – Establishes a Long-Term Care Facilities Council to study and make recommendations regarding the dispute resolution process for long-term care facilities and a Medicaid quality-based payment system for those facilities.
  • SB 1564: Reimbursement for Buprenorphine – expands access to buprenorphine for Medicaid enrollees for treatment of an opioid use disorder by expanding types of practitioners who can prescribe the medication
  • SB 1742: Health Plan Directory Accuracy – Requires health plan directories to clearly identify which physician specialties are in-network at network facilities

House of Representatives Legislation

  • HB 25: Medicaid Medical Transportation – Creates a pilot program to streamline nonemergent medical transportation services in Medicaid and allow children to accompany their pregnant mothers on doctor’s visits, including postpartum care
  • HB 72: Medicaid Enrollment for Foster Care Children – Requires HHSC to develop strategy to ensure more foster children continue their Medicaid coverage by ensuring coordination for children transitioning between the STAR Health program for children in foster care and other Medicaid managed care programs
  • HB 170: Coverage of Diagnostic Mammograms – Amends the Texas Insurance Code to require health plans to cover diagnostic mammograms at 100 percent, as is already required for screening mammograms
  • HB 253: Treatment of Postpartum Depression – Requires HHSC to develop a strategic plan to address and treat post-partum depression for Medicaid enrollees
  • HB 1063: Home Telemonitoring – Requires Medicaid to cover home telemonitoring for specific pediatric patients
  • HB 342: Six Month Review of Medicaid Eligibility – Authorizes HHSC to confirm certain children’s eligibility for Medicaid six months following eligibility/re-eligibility certification
  • HB 1065: Graduate Medical Education – Creates a grant program to develop residency training tracks for physicians practicing in rural, underserved settings
  • HB 1584: Restrictions on Step-Therapy for Breast Cancer – Amends the Texas Insurance Code to prohibit health plans from requiring step-therapy protocols for stage 4 metastatic breast cancer
  • HB 1941: Limitation on Out-of-Network Charges – Restricts free-standing emergency centers from charging rates that are 200 percent or more of the average charge for the same or substantially similar treatment at a hospital emergency room
  • HB 2050: Use of Psychotropic drugs in Long Term Care Facilities – Requires written consent for the administration of psychoactive drugs to long-term care facility residents
  • HB 2174: Opioid prescriptions – Limits the duration of opioid prescriptions, requires electronic prescribing beginning January 2021, requires opioid-related Continuing Medical Education, and prohibits prior authorization requirements for medication-assisted treatment for opioid use disorder.
  • HB 2041: Freestanding Emergency Room Notices – Requires free-standing ER facilities to post notices they might be out-of-network, along with disclosure of possible fees
  • HB 2327: Medical Service Authorization Transparency – Establishes greater prior authorization transparency in Medicaid and requires that utilization reviews be conducted by a licensed Texas physician
  • HB 2536: Drug Pricing – Requires drug pricing transparency by imposing requirements on drug manufacturers, health plans and pharmacy benefit managers (PBMs). Drug manufacturers must submit a report to HHSC when there is a price increase for a specific drug of at least 40 percent in its wholesale acquisition cost in the preceding three calendar years, or at least 15 percent in the previous calendar year. The reports, which will be posted online by HHSC, must include a detailed statement explaining the cause of the price increase. PBMs and health plans must submit to the Texas Department of Insurance annual reports including information on aggregated drug rebates, fees and price protection payments collected from drug manufacturers for PBMs, the names of the 25 most frequently prescribed drugs, percent increase in annual net spending for drugs, and percent increase in health plan premiums attributable to drugs.
  • HB 2813: Behavioral Health Coordinating Council – Permanently codifies creation and operations of the Statewide Behavioral Health Coordinating Council
  • HB 3285: Opioid Use/Substance Use Disorder – Makes numerous changes to Medicaid to improve access to services and prescriptions for treating opioid use or substance use disorder
  • HB 3345: Telemedicine Services Flexibility – Allows physicians to choose the best platform for providing telemedicine services rather than having health plans dictate the platform
  • HB 3703: Cannabis Use – Expands the list of conditions for which a physician can recommend low-THC cannabis for medical use to include epilepsy, a seizure disorder, multiple sclerosis, spasticity, amyotrophic lateral sclerosis, autism, terminal cancer, or an incurable neurodegenerative disease.
  • HB 4533: Pilot Managed Care Program for Individuals with IDD – Requires HHSC to implement a Medicaid pilot program in which long term services and supports will be provided through a managed care plan for individuals with intellectual or developmental disabilities. Includes detailed requirements related to the pilot. The pilot must include not more than two MCOs and would begin September 1, 2023, and end September 1, 2025.

Please contact Dianne Longley at [email protected] for more information.

[1] Texas Legislative Budget Board, Summary of Conference Committee Report for House Bill 1 – 2020-21 Biennium, May 2019