Overview of FY 2010 Executive Budget Health Care & Health Insurance
The SFY 2009-10 Executive Budget and SFY 2008-09 Deficit Reduction Plan recommend a plan that includes $3.5 billion in Medicaid and health-care savings and reform initiatives impacting all sectors of New York's health-care industry. It relies, in part, on spending reductions, redirection of resources and revenue raisers such as taxes on health insurance and hospital revenue.
To reduce what the state spends on health care, it is proposing $855.3 million (FY2009-10) and $827.0 million (FY2010-11) in new or increased insurance and/or health-related assessments and surcharges. These taxes will ultimately be passed through to businesses and consumers in the form of higher health and other insurance premiums.
Because employers pay for most New Yorkers' health benefits, the various private insurance surcharges and industry assessments are viewed as a business tax.
State Fiscal Year 2008-2009 Deficit Reduction Plan includes provisions to increase a number of assessments on the insurance industry to help fund state health care programs. (2009-10 Savings: $644.8 million; 2010-11 Savings: $368.8 million)
- Shift the financing for selected public health programs from HCRA and the state's General Fund to assessments on the insurance industry. (Assembly Bill 162, Part G; 2008-09 Savings: $0; 2009-10 Savings: $99.8 million)
- Shift the financing of the cost of assisting small businesses to implement the Timothy's Law mental health insurance mandate from the General Fund to assessments on the insurance industry. (Assembly Bill 162, Part D; 2008-09 Savings: $0; 2009-10 Savings: $179 million)
- Increase the Covered Lives Assessment. One of two HCRA taxes, the Covered Lives Assessment is a regional tax collected from health plans on the basis of individual and family policies issued and used in part to fund Graduate Medical Education (GME). The Covered Lives Assessment would increase by $240 million, from $920 million to $1.160 billion. (Assembly Bill 162, Part G; 2008-09 Savings: $0; 2009-10 Savings: $240 million)
- Increase Hospital Surcharges. A tax on hospital patient discharges, the second of two HCRA taxes would increase from 8.95 percent to 9.63 percent for private payors and from 6.54 percent to 7.04 percent for public payors. (Assembly Bill 162, Part G; 2008-09 Savings: $0; 2009-10 Savings: $126 million)
The SFY 2009-10 Executive Budget recommends:
- Extend the Insurance Department Assessment to out-of-state insurers. The insurance assessment will be applied to the premium base for all policies written for New Yorkers, including those policies written by out-of-state insurers, which were previously exempt. (Assembly Bill 160, Part D; 2009-10 Savings: $0 million; 2010-11 Savings: $134.8 million)
- Extend the Covered Lives Assessment. The Covered Lives Assessment will be extended to health insurers headquartered out-of-state. (2009-10 Savings: $5 million; 2010-11 Savings: $5 million)
- Establish Third Party Administrator Claims Processing Fee. A one dollar assessment per claim processed by entities that administer self-funded health insurance plans will be established. (Assembly Bill 158, Part C; 2009-10 Savings: $63.1 million; 2010-11 Savings: $126.2 million)
- Establish Physician Procedure Surcharge. The increased 9.63 percent HCRA surcharge on services performed in hospitals that is proposed in the DRP will be extended to surgical and radiological procedures performed in private ambulatory surgery centers, physician offices and urgent care settings. (Assembly Bill 158, Part C; 2009-10 Savings: $49.8 million; 2010-11 Savings: $98.5 million)
- Finance anti-tobacco program costs with an insurance industry assessment. (Assembly Bill 158, Part C; 2009-10 Savings: $70.9 million)
- Finance Early Intervention (EI) costs through an insurance industry assessment, requiring health insurers to pay a higher share of EI medical costs. (2009-10 Savings: $21.7 million)
- Restructure the Insurance Tax. Simplifies the insurance tax on life insurers and establishes a straightforward 2 percent tax on premiums for all insurers, effectively raising the health insurance premium tax from 1.75 percent to 2 percent. (Assembly Bill 160, Part D; Savings: $58 million)
Within the 2009-10 Executive Budget's $3.5 billion health-care savings and reform package are many proposals designed to slow the growth in Medicaid spending in the hospital, community-based services, pharmacy services, nursing home, home care and managed care sectors.
Total Medicaid spending is still expected to reach $45.4 billion in 2009-10, an increase of $432 million or approximately 1.0 percent from 2008-09 levels. State-funded Medicaid spending is expected to total $16.0 billion, an increase of $587 million or 3.8 percent.
Hospital and Community-based Services
A series of proposals focus on continuing the multi-year hospital reimbursement reform started last year which will redirect resources and improve access to primary and preventive care saving $699.7 million in 2009-10 and $623.4 million in 2010-11.
Implement Deficit Reduction Bill. This bill includes proposals to achieve savings by reducing rates, eliminating inflation trend factors, reducing or eliminating certain grants and other actions. (Assembly Bill 162, Part G; 2009-10 Savings: $535.3 million; 2010-11 Savings: $458.3 million)
Reallocate Graduate Medical Education Funds. State-only Graduate Medical Education funding will be redirected to the indigent care pool to support teaching hospitals serving uninsured patients. (2009-10 Savings: $141.3 million; 2010-11 Savings: $141.3 million)
Increase Indigent Care Funding for Community Clinics. Subject to a federal waiver, the indigent care pool for diagnostic and treatment centers will be doubled in size ($55 million to $110 million) and expanded to include clinics licensed by the Office of Mental Health.
Advance Health System Reimbursement Reform. The Health Care Improvement Act continues the reimbursement reform effort initiated in 2008-09 by updating inpatient reimbursement to current costs, calibrating inpatient rates to reflect patient severity, and channeling hospital inpatient savings to investments in more appropriate and cost-efficient primary and ambulatory care. (Assembly Bill 158, Part C; 2009-10 Net Savings: $23.1 million; 2010-11 Net Savings: $23.8 million)
Reimbursement Reform Savings. Hospital inpatient savings of $96.9 million are realized in 2009-10 by reducing inpatient rates to bring reimbursement closer to costs ($76.2 million), accelerating the phase-in of detoxification reimbursement reform, enacted in 2008-09, from four years to two years and reducing payments for medically supervised detoxification ($18.4 million); reviewing inpatient admissions for medical necessity ($1.4 million); and implementing a new inpatient reimbursement methodology to better define the intensity of services ($900,000). (Assembly Bill 158, Part C)
Investment of Reimbursement Reform Savings. Most of the savings proposals described above are re-invested ($73.8 million) in the health care system including hospital outpatient clinics ($29.6 million); community-based clinics ($11.4 million); community-based detoxification services ($1.9 million); in-home crisis services to children at risk of psychiatric hospitalization ($10.5 million); and clinics overseen by the offices of Alcohol and Substance Abuse Services, Mental Health and Mental Retardation and Developmental Disabilities ($3.8 million). (Assembly Bill 158, Part C)
New York spends $7 billion on nursing homes; Medicaid underwrites 72 percent of nursing home costs in New York. The Long Term Care Reform Act proposes a more rational reimbursement system that is simple, transparent and uses an average price adjusted for the needs of the residents, not the individual facility costs. (Assembly Bill 158, Part D, 2009-10 savings $420.2 million; 2010-11 savings $334.1 million)
Implement Deficit Reduction Bill. This budget includes provisions to achieve savings by eliminating trend factors, reducing rates and delaying nursing home rebasing. (Assembly Bill 162, Part G; 2009-10 Savings: $252.4 million; 2010-11 Savings: $182.0 million)
Advance Nursing Home Reimbursement Reform. A new regional pricing system, using more current Medicaid cost data and tied to quality, efficiency and resident need will replace the current system. Much needed investments to support quality improvement initiatives and development of assisted living beds are included. (Assembly Bill 158, Part D, 2009-10 Net Savings: $167.8 million; 2010-11 Net Savings: $152.1 million)
Reimbursement Reform Savings. Savings will be generated by replacing the current system which includes hold-harmless provisions and multiple rate add-ons disconnected from efficiency and quality with a regional patient-centered pricing model ($175.8 million), phasing out 6,000 nursing home beds and replacing them with community alternatives over a five-year period ($8.7 million), reforming assisted living program reimbursement ($1.7 million) and reducing nursing home AIDS rates ($5.0 million), bed hold payments ($10.8 million) and payments for lower acuity patients ($5.3 million) to more closely reflect actual costs. (Assembly Bill 158, Part D)
Reimbursement Reform Investments. The budget invests a portion of the savings described above to phase-in 6,000 new assisted living beds over five years ($3.7 million); support financially disadvantaged homes ($5.0 million); and recognize hard to serve patients ($3.0 million). It also establishes a quality incentive funding pool ($25 million), a falls prevention program for nursing home residents ($300,000) and a geriatric nurse training program ($2.5 million). The budget also lifts the moratorium on community-based new adult day care programs. (Assembly Bill 158, Part D)
Home care is the fastest growing area in Medicaid. The Governor's budget proposes to create a more rational reimbursement system, similar to the one implemented by Medicare, that will help control the growth of home care costs, and will save $189.4 million in 2009-10 and $190.5 million in 2010-11.
Implement Deficit Reduction Bill. This budget includes provisions to achieve savings by reducing reimbursement rates and eliminating trend factors. (Assembly Bill 162, Part G; 2009-10 Savings: $142.3 million; 2010-11 Savings: $126.6 million)
Advance Home Care Reimbursement Reform. The current reimbursement system is replaced with a new pricing methodology based on patient condition, similar to Medicare. This generates savings of $36.7 million, a portion of which are re-invested in a quality incentive funding pool ($2.5 million), cash and counseling demonstration programs to support personally directed home care ($1 million) and the development of a uniform assessment tool for home care ($5 million). The budget also lifts the moratorium on new Certified Home Health programs and establishes Long Term Care Assessment Centers, overseen by the state, to authorize certain home care services. (Assembly Bill 158, Part D, 2009-10 Savings: $28.0 million; 2010-11 Savings: $42.1 million)
Establish 0.7 Percent Assessment. A 0.7 percent assessment on total home care provider revenues is established. An assessment on home care providers was previously in effect from 1995 through 1999. (Assembly Bill 158, Part B; 2009-10 Savings: $19.1 million; 2010-11 Savings: $21.8 million)
Proposals in this area reduce state spending and maximize non-state revenues by directly negotiating with manufacturers for drug rebates and by accessing federal Medicare Part D coverage for New York's seniors. These proposals will save $111.4 million in 2009-10 and $185.9 million in 2010-11.
Implement Deficit Reduction Plan. Actions include expanding the preferred drug list and reducing reimbursements. (Assembly Bill 162, Part G; 2009-10 Savings: $25.2 million; 2010-11 Savings: $26.5 million)
Modify Supplemental Rebate Program. Participation in the National Medicaid Pooling Initiative is discontinued, allowing the state to negotiate supplemental rebates directly with manufacturers. (Assembly Bill 158, Part C; 2009-10 Savings: $1.8 million; 2010-11 Savings: $11.0 million)
Limit Quantity, Frequency and Duration of Certain Dispensed Medications. The existing Medicaid prior authorization process will be employed to limit the number of units of certain dispensed medications that have a high incidence of fraud or misuse. (Assembly Bill 158, Part C; 2009-10 Savings: $9.4 million; 2010-11 Savings: $20.6 million)
Allow Denials Based on Medicaid Necessity. The Medicaid program will deny a prescription when the prescriber cannot demonstrate medical necessity. (Assembly Bill 158, Part C; 2009-10 Savings: $2.0 million; 2010-11 Savings: $2.8 million)
Require Use of Brand Drugs When Less Costly. The use of brand-name drugs will be required when the cost, less rebates, is less than the generic equivalent. (Assembly Bill 158, Part C; 2009-10 Savings: $1.8 million; 2010-11 Savings: $4.0 million)
Incent e-Prescribing. Incentives will be provided for prescribers and pharmacies to electronically send and receive prescriptions. (Assembly Bill 158, Part C; 2009-10 Savings: $1.3 million; 2010-11 Savings: $2.7 million)
Eliminate Part D Drug Wrap. Wrap-around coverage in EPIC for drugs covered by Medicare Part D will be eliminated. Wrap-around coverage in Medicaid for four remaining categories still covered will also be eliminated. Wrap-around coverage will continue for drugs not covered by Medicare Part D (e.g., barbiturates, benzodiazepines). (Assembly Bill 158, Part C; 2009-10 Savings: $52.7 million; 2010-11 Savings: $72.5 million)
Discontinue Financial Exemption for EPIC Part D Mandate. The exemption that does not require EPIC enrollees to enroll in Medicare Part D if they would have additional out-of-pocket costs is discontinued. (Assembly Bill 158, Part C; 2009-10 Savings: $9.9 million; 2010-11 Savings: $23.6 million)
Require Eligible EPIC Seniors to Enroll in Medicare Savings Program. Approximately 20,000 EPIC seniors who are income eligible, will be required to enroll in the Medicare Savings program to reduce costs both for them and the state. (Assembly Bill 158, Part C; 2009-10 Savings: $3.6 million; 2010-11 Savings: $14.5 million)
Utilization and Management of Services
These proposals continue efforts commenced in recent years to manage the provision of Medicaid services to ensure that they are appropriate, meet patient need, are provided in a cost efficient manner and generate savings of $24 million in 2009-10 and $39.9 million in 2010-11.
Limit Case Management Services. Limiting participation in case management to one service per enrollee will eliminate any unnecessary duplication of services. (Assembly Bill 158, Part C; 2009-10 Savings: $3.3 million; 2010-11 Savings: $4.7 million)
Require Radiology Prior Approval. Prior approval for selected high cost radiological procedures will be required. (2009-10 Savings: $2.6 million; 2010-11 Savings: $5.8 million)
Establish Transportation Managers. The Department will contract with an external organization to manage non-emergency transportation services. (Assembly Bill 158, Part C; 2009-10 Savings: $9.3 million; 2010-11 Savings: $20.2 million)
These proposals maximize the use of federal money and control the growth of spending while ensuring that managed care plans are able to provide access to quality care for Medicaid beneficiaries. These measures would save $83.7 million in 2009-10 and $91.1 million in 2010-11 and include actions such as capping marketing costs (Assembly Bill 158, Part C), shifting Child Health Plus rate setting Authority and increasing family contributions for Child Health Plus.
Other Budget Actions
A variety of other actions are proposed to achieve health care savings totaling $555.9 million in 2009-10 and $21.8 million in 2010-11.
Implement Deficit Reduction Bill. This budget includes provisions to achieve savings by eliminating certain trend factors and other measures. (Assembly Bill 162, Part G; 2009-10 Savings: $69.6 million; 2010-11 Savings: $0 million)
Delay Medicaid Cycle Payment. The last Medicaid payment due in 2009-10 will be delayed by one day to April 1, 2010. (2009-10 Savings: $400 million; 2010-11 Savings: $0 million)
Reduce HCRA Spending for Selected Programs. AIDS Drug Assistance Program spending will be financed from available drug rebates and federal funds rather than HCRA funds ($65.0 million). In addition, anti-tobacco funding for Roswell Park research ($14.5 million) and unnecessary telemedicine ($2.0 million) funding will be eliminated. (2009-10 Savings: $81.5 million; 2010-11 Savings: $16.5 million)
Public Health and Aging Programs
The Department of Health and the State Office for Aging administer a number of programs which support New York's public health and senior care systems. The budget achieves savings by recommending operating efficiencies, generating revenues, and reducing spending on or increasing state revenues by less essential and lower priority programs. These measures combined will save $525.9 million in 2009-10 and $681.0 million in 2010-11.
The most significant is a proposed 18 percent sales tax on certain high caloric, low nutritional beverages like non-dietetic soft drinks and sodas. (Assembly Bill 160, Part HH; 2009-10 Savings: $404 million; 2010-11 Savings: $539 million)
It also proposed to raise the Retail Tobacco Fee . The current $100 annual fee will be changed to a graduated fee ($100 to $5,000) based on the level of a tobacco retailer's total sales. (Assembly Bill 158, Part C, 2009-10 Savings: $18.5 million; 2010-11 Savings: $13.6 million)
The Executive Budget recommendations include funding for several targeted investments that are priority areas and critically necessary. These investments will cost $60.3 million in 2009-10 and $152.8 million in 2010-11.
Extend HEAL NY. HEAL NY will be extended for two-years, including capital funding for Roswell Park Cancer Institute, and appropriations for this purpose will be increased by $650 million. (Assembly Bill 158, Part C; 2009-10 Cost: $31 million; 2010-11 Cost: $118 million)
Expand Access to Coverage. FHPlus coverage for adults will be expanded to 200 percent of the federal poverty level provided federal waivers are granted and no new state funding is required. (Assembly Bill 158, Part C)