House Democrats appear ready to move not one, but two different FY09 budget proposals next week. The unusual move would allow legislators to vote for many of their preferred spending priorities even though funds are not available to pay for them. The intent would be to put the Senate in the position of choosing which budget, or combination of budgets, to send on to the Governor.

At this time, there is no indication the Senate Democrats will accept this approach. Instead, most reports have the Senate majority crafting its own minimal growth, no-new-tax budget that will be passed over to the House.

The first House budget represents a “minimal growth” budget that features no new taxes, but additional revenue from the sale of the dormant 10th casino license. Natural revenue growth combined with the sale would allow for increased spending of more than $1 billion, with proceeds earmarked primarily for pension funding and covering general cost increases.

The second budget reportedly adds more than a billion dollars of spending to the first budget proposal, but supplies no new revenue to pay for it. Education and Medicaid would see substantial increases in addition to many other spending priorities sought by rank and file legislators.

If the Senate were to go along with this plan, it has the potential to allow adjournment of the session by the May 31 deadline. However, problems abound. If the Senate accepts even some of the add-ons included in the second budget it will send to the Governor a budget that is not balanced. There is no telling how the Governor will respond, but vetoes are likely, bringing legislators back to town for another round of wrangling. Of course, the Senate may try to pass its own budget and ignore the House action. This course would lead directly to another overtime session, with no end in sight.

Chamber Gets “Pay to Play” Bill Improvement, But More Changes Needed

The Illinois Chamber, working with bill sponsors Sen. Don Harmon and Rep. John Fritchey, was able to secure modest improvements to the “pay to play” legislation, HB 824. This bill will prohibit contractors from making political contributions to the office holders that award their contract – a practice derogatively known as “pay to play.” The bill is likely to pass the Senate next week, which quick House approval to follow.

While the Chamber does not oppose the prohibition in principle, the final version of HB 824 was badly unbalance against the business community, including an onerous new reporting requirement for thousands of businesses. The Chamber requested changes that resulted in a clear exclusion of state agreements that will not trigger the reporting requirement as well as privacy improvement for contractor employees. The Chamber appreciates the efforts of the bill sponsors and looks forward to future discussions to secure more common sense changes.

HB773 Still a Threat

HB 773, sponsored by Representative John Fritchey, expands the definition of public works projects to which the prevailing wage would apply to include TIF districts and enterprise zones. The legislation also extends the wage to include maintenance, repair, assembly or disassembly work performed on equipment whether owned, leased, or rented.

Senator Debbie Halvorson introduced an amendment that shells the legislation. Although the amendment strips the legislation of its current provisions regarding prevailing wage, the sponsors have indicated that they intend to bring additional language forward that will mirror the provisions that passed the House. HB773 currently sits on 2nd Reading in the House.

Structural Work Act (SWA) Looms on 2nd Reading

HB 2094, sponsored by Rep. John Fritchey (D-Chicago), reinstates the cause of action and all the prior case law of the SWA that was repealed in 1995. A study in 1998 showed that nearly $300 million in insurance liability and related legal costs were saved with the repeal of the SWA. The legislation was recently amended to exclude design professionals. Even with this exclusion, HB2094 is still detrimental to numerous other professionals.

Auditor General Releases Scathing Audit of Medicaid

Auditor General William Holland released the findings of his year-long performance and management audit of the Medicaid payment process, revealing a system fraught with mismanagement and problems that extend beyond unpaid bills. The audit’s findings underscore widespread concerns that the backlog of unpaid Medicaid claims is symptomatic of the Department’s inability to properly manage the current program and not simply due to the state’s current budget woes.

The audit, performed at the request of the Legislative Audit Commission, specifically examined the Department of Healthcare and Family Services’ (HFS) Medicaid and Group Health Insurance Program activities, as they related to the provisions of the Prompt Payment Act and the processing of Medicaid claims. In addition to the amount of time providers were forced to wait before they received full payment, the audit cites numerous instances where the Department fails to even have an adequate system in place to even process certain claims.

Some of the findings highlighted by the audit include:

Failure to define or provide documentation as to how the Department establishes payment schedules and payment parameters.
Failure to secure a system that automatically pays interest owed to providers until May 2007 (eight years after the Prompt Payment Act required the Department to pay interest on Medicaid claims owed after 60 days).
Failure to implement any standard policy or procedure governing how the Department determines those providers that are eligible for expedited payment.
Implementation of a cumbersome claims rejection process, often resulting in failure to notify providers that a claim had been rejected within 60 days.
Implementation of a new Exclusion Policy (as of May 2007) that lists reasons the Department will not pay accrued prompt payment interest to a provider, some of which are in violation of the Department’s own Administrative Rule.
Implementation of an interest calculation method (via Administrative Rule) that is inconsistent with the method of calculation prescribed by the Prompt Payment Act resulting in less interest paid to providers.

The audit findings also back up earlier reports released by the Comptroller claiming approximately $1.5 billion in unpaid Medicaid claims have been rolled over each fiscal year since Fiscal Year 2005. Current law allows the state to carry these unpaid bills into the next fiscal year; a provision that many legislators and the Comptroller alike have criticized. In light of the recent audit findings, however, forcing payment of unpaid claims by the close of the fiscal year would not address the severe mismanagement issues that run deeper within the Medicaid program.

The findings also come at a time when HFS is in the middle of a messy battle over the expansion of FamilyCare. A Cook County judge recently prohibited the Department and the Governor from moving forward with enrolling new individuals under the expanded eligibility guidelines the administration implemented despite rulings against those new guidelines by the Joint Commission on Administrative Rules. The ruling subsequently forced the Department to also suspend services and payment to those new individuals already enrolled.

Since the judge’s ruling, HFS has claimed that complying with the injunction will prove difficult because they have no way of determining what providers have not yet been paid for services already delivered to individuals in the expanded eligibility category. The Auditor’s report, in many ways, backs that claim up, further showing that the Department has failed on numerous levels to develop standard policies for processing all claims.

To view the Auditor’s report, please click here.

PBM Licensure Legislation Remains in Senate Committee

The proponents and opponents of HB 5614, placing strict licensure and regulation requirements on Pharmacy Benefit Managers (PBMs) in Illinois, were allowed to present their case before the Senate Licensed Activities Committee on Wednesday. Senator Cullerton, the Senate sponsor of the legislation, however, did not call the controversial legislation for a vote.

Opponents of the legislation, including PBMs, the Chamber, WellPoint, CIGNA, Pharma, the Illinois Retail Merchants Association, the Illinois Manufacturers Association, and the City of Chicago, have spent nearly 5 months negotiating the legislation and its companion Senate bill- SB 2222- with the Illinois Pharmacists Association (IPA). Despite the ongoing discussions, little progress has been made towards a compromise, as evidenced by Senate Amendment #1, which was adopted in committee before testimony began.

The IPA has continued to claim that PBMs are not regulated in Illinois and the lack of regulation has contributed to higher healthcare costs. PBMs are, however, already subject to heavy regulations under the Department of Financial and Professional Regulation. The legislation, as amended, would place additional and more onerous licensure requirements on the PBMs, subjecting them to regulation by the Department of Insurance. Opponents also argue that the legislation is attempting to regulate private contracts between PBMs and employers; a regulation that is unprecedented for any other industry.

Although Senate Amendment #1 attempted to address some smaller concerns raised by the opponents during negotiations, the amendment still failed to address the overarching issues, which includes extensive bureaucratic oversight of a private industry. This oversight would ultimately translate into higher healthcare costs for employers and provide little value to consumers.

Chamber Videos

Throughout the legislative session, the Illinois Chamber's Vice President of Government Affairs, Todd Maisch, will be interviewing legislators on pertinent issues facing the General Assembly. Also included are special presentations from legislative events.

Interview with Senator Christine Radogno regarding this week's budgeteers meeting and the Medicaid audit.

Interview with Treasurer Alexi Giannoulias about the budget and Bright Start program.

May 9, 2008

Interview with Senator Dale Righter regarding redistricting and other Constitutional amendment. May 2, 2008

Highlights of Secretary of Indiana's Family and Social Services Administration Mitch Roob's presentation from the Chamber's Healthcare Reform Symposium. April 11, 2008

Interview with Representative Frank Mautino on pending healthcare reform. April 4, 2008

Interview with House Minority Leader Tom Cross regarding economic stimulus and the need for infrastructure investment.

March 14, 2008

Interview with Comptroller Dan Hynes on the fiscal health for Illinois. February 20, 2008