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Texas Senate
September 5, 2002
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Senators Concerned about Rising Medical Costs

AUSTIN - The Senate Finance Subcommittee on Rising Medical Costs met September 5, 2002, at the State Capitol. Chairman Robert Duncan opened the hearing saying it is important for the members to set the right priorities, confronted as they are with a very tight state budget.

Charles Dunlap, Executive Director of the Teacher Retirement System, talked about the need to raise the funds his agency receives, due to an increase in enrollment and the high cost of medicine and health care. He said that $720 million would only maintain the present benefit level. Senator Carlos Truan made the point that teachers' health insurance received $1.4 billion for the present biennium. The senator also questioned the way the agency has previously purchased health services, and asked why the same company, Aetna, repeatedly gets the contract. Dunlap said the company keeps offering the best prices and timely payments.

Next to provide testimony were representatives of the Texas Department of Criminal Justice Managed Health Care: Chairman Dr. Ben Raimer, Executive Director Allen Hightower, and Assistant Director Allen Sapp. Dr. Raimer talked about the prevalence of such illnesses as high blood pressure, diabetes, HIV, Hepatitis C, cancer and liver disease among the prison population. Sixty percent of this population is considered indigent, and four hundred prisoners die in the Texas system every year. The agency is asking for $27 million on top of its base budget, for medical, dental and mental health care. Forty five million goes to mental health, for the treatment of inmates who suffer from diseases such as depression and schizophrenia.

Jose Montemayor, Commissioner of the Texas Department of Insurance, spoke about the problem of doctors who cannot afford the latest increase in liability insurance. Senator Duncan expressed concern with Hidalgo County's high incidence of class action medical claims, and the possibility that tort reform is not working. Senator Truan made a distinction between the number of claims filed and those settled, and defended the right of the people to have access to the court system and be represented by legal counsel. The highest insurance costs for medical malpractice are seen in Brownsville and Harlingen, and the cheapest is in Lubbock.

The Texas Medical Association (TMA) was represented by Joe Cunningham, MD, President, TMA Council on Legislation; Karol Shepard, immediate past President Texas Medical Group Management Association; and Teresa Waters from Tennessee, Ph.D. in Economics. Cunningham said high liability costs and low reimbursements are the two biggest concerns of doctors in a recent TMA survey. Dr. Waters gave reasons for the increase in medical costs, such as an aging population that is logically more affected by chronic diseases. New technologies also raise prices, as does malpractice litigation, higher pharmaceutical costs and increasing demand for new drugs by patients. Shepard asked the Legislature for relief for doctors, many of who have had to close their doors or reach into savings to keep their offices open.

John L. Simms, President and CEO of Trinity Medical Center, Brenham, Texas, and Sally Jeffcoat, President and CEO of Christus Health, Gulf Coast Region, provided testimony representing the Texas Hospital Association. Simms mentioned that the high cost of health insurance causes many people to drop it, and they then end up in hospital emergency rooms, which are the most expensive form of care. Ms. Jeffcoat asked for help from the Legislature to assist non-profit groups like hers, which she says are losing money. Senator Duncan asked her to bring solutions to the table, and reiterated his concern of the state's limited budget.

The Pharmaceutical Research and Manufacturers of America (PhRMA) was represented by Dr. Eugene Michael Kolassa, Associate Professor of the Department of Pharmacy, University of Mississippi; Merrill Mathews Jr., PhD, Visiting Scholar at the Institute for Policy Innovation, a think-tank in Lewisville, Texas; and Thomas Hardaway, Director of State Affairs at PhARMA, in Atlanta, Georgia. Dr. Kolassa talked about pharmaceutical pricing being based on the value the new drugs bring to the market, saying they save in treatment and costs of other medicines. Senator Ogden refuted this statement, saying new drugs are not showing a decrease in illnesses, hospitalizations, and medical procedures in general. Dr. Mathews, who specializes in medical ethics, argued for access to generic drugs by low-income populations, and pointed to the high investment in marketing of brand-name manufacturers. Senators Duncan and Barrientos asked for reasons why U.S. patients have to travel to Canada and Mexico to get cheaper medicines. Answers varied from cheaper prices due to government intervention to what the market can bear.

Genentech Pharmaceuticals was represented by Todd Kaufman, Director of State Government Relations. The company manufactures drugs used in oncology, cardiovascular disease, and stroke, among others. He advised the state government to institute a preferred-drug list, asking companies for supplemental rebates to be included in the list. This has been done in Florida, and saves money, he said.

Next was Will Saunders, Vice-President of account Management, Marketing and Sales of Heritage Information Systems Inc. The company works with the Medicaid program in ten states, including Texas, as well as with the private sector. Don Gilbert, with the Health and Human Services Department, testified about projected savings thanks to the use of the Heritage program.

The Texas Association of Business was present at the hearing with Bill Hammond, Executive Director; Lara Laneri Keel, Governmental Affairs Manager; Tom Blaise, Town and Country Food Stores; and Tom Fitzsimmons, President of SEI Metalforms. They all expressed concern about the high price of health insurance for employers. The last witness was Dr. Gary Goldstein, CEO of Humana Central Texas, representing the Texas Association of Health Plans. The committee also heard public testimony.

The subcommittee is chaired by Senator Robert Duncan of Lubbock. Members include Senators Gonzalo Barrientos of Austin, Troy Fraser of Horseshoe Bay, Steve Ogden of Bryan, Todd Staples of Palestine, Carlos Truan of Corpus Christi, and Judith Zaffirini of Laredo. The subcommittee recessed subject to call of the chair.

Session video and all other Senate webcast recordings can be accessed from the Senate website's Audio/Video Archive.