2005-2006 NEW YORK STATE EXECUTIVE BUDGET
HEALTH AND MENTAL HYGIENE
ARTICLE VII LEGISLATION
MEMORANDUM IN SUPPORT

CONTENTS

MEMORANDUM IN SUPPORT

A BUDGET BILL submitted by the Governor in Accordance with Article VII of the Constitution

AN ACT to amend the public health law, in relation to state aid for municipalities, implementing parental cost sharing and negotiation of rate reimbursement in certain circumstances, and collapsing the rate reimbursement structure for early intervention services; to amend the insurance law, in relation to early intervention services; to amend the tax law, in relation to the program for elderly pharmaceutical insurance coverage; to amend the elder law, in relation to medicare part d prescription drug coverage; to amend chapter 62 of the laws of 2003, amending the public health law relating to allowing for the use of funds of the office of professional medical conduct for activities of the patient health information and quality improvement act of 2000, in relation to the effectiveness of such provisions; to repeal various provisions of the public health law relating thereto; and to repeal chapter 438 of the laws of 2002, relating to a study of infection control in flexible endoscopy, relating thereto (Part A); to amend the New York Health Care Reform Act of 1996 and the public health law, in relation to extending certain provisions relating thereto; to amend the New York Health Care Reform Act of 2000, in relation to extending the effectiveness of provisions thereof; to amend the public health law, in relation to extending the distribution of pool allocations and graduate medical education; to amend chapter 2 of the laws of 1998 amending the public health law and other laws relating to expanding the child health insurance plan, in relation to extending the effectiveness of certain provisions thereof; to amend chapter 62 of the laws of 2003 amending the general business law and other laws relating to enacting major components necessary to implement the state fiscal plan for the 2003-2004 state fiscal year, in relation to extending certain provisions thereof; to amend the public health law, in relation to continuing the priority restoration adjustment; to amend chapter 731 of the laws of 1993 amending the public health law and other laws relating to reimbursement, delivery and capital costs of ambulatory health care services and inpatient hospital services, in relation to extending the effectiveness of portions thereof; to amend the social services law, in relation to extending payment provisions for general hospitals; to amend chapter 520 of the laws of 1978 relating to providing for a comprehensive survey of health care financing, education and illness prevention and creating councils for the conduct thereof, in relation to extending the effectiveness of portions thereof; to amend chapter 600 of the laws of 1986 amending the public health law relating to the development of pilot reimbursement programs for ambulatory care services, in relation to extending the effectiveness of such chapter; to amend chapter 753 of the laws of 1989 amending the public health law and other laws relating to general hospital reimbursement for inpatient and ambulatory surgery, in relation to extending the effectiveness of portions thereof; to amend the public health law, in relation to increasing surcharges and assessments; to amend the public authorities law, in relation to financing the HEAL NY program; to amend chapter 82 of the laws of 2002 amending the environmental conservation law and other laws relating to enacting major components necessary to implement the state fiscal plan for the 2002-2003 state fiscal year; to amend the insurance law, in relation to insurance conversions; to amend the state finance law, in relation to the establishment of the health care reform act (HCRA) resources fund; to amend chapter 266 of the laws of 1986 amending the civil practice law and rules and other laws relating to malpractice and professional medical conduct, in relation to extending the applicability of certain provisions thereof; to amend chapter 63 of the laws of 2001 amending chapter 20 of the laws of 2001 amending the military law and other laws relating to making appropriations for the support of government, in relation to extending the applicability of certain provisions thereof; to amend chapter 495 of the laws of 2004 amending the insurance law and the public health law relating to the New York state health insurance continuation assistance demonstration project, in relation to the effectiveness of such provisions; to repeal title 11-A of article 5 of the social services law relating to the catastrophic health care expense program; and to repeal paragraph (d) of subdivision 5 of section 2807-j of the public health law relating to civil penalties; and providing for the repeal of certain provisions of the public health law upon the expiration thereof (Part B); authorizing reimbursements for expenditures made by or on behalf of social services districts for medical assistance for needy persons and the administration thereof; to amend the tax law, in relation to sales tax revenue intercepts for Medicaid purposes and the deposit and disposition of certain revenues; to amend the social services law, in relation to state reimbursement; to amend the public health law, in relation to a preferred drug program; to amend the social services law, in relation to certain therapeutic class drugs subject to such preferred drug program or the clinical drug review program; to amend the elder law, in relation to implementing a preferred drug program and clinical drug program; to amend the social services law, in relation to requiring prior authorization of certain prescription drugs for nursing home residents; to amend the public health law, in relation to general hospitals' assessments and gross receipts; and in relation to reimbursement of specialized services for which the rate of payment is established by the office of mental health; and in relation to providing payments to certain diagnosis-related group patients discharged on and after April 1, 2005 on a per diem basis; and in relation to the assessment for general hospitals; and in relation to certain rates of payment by governmental agencies; to amend the tax law and the administrative code of the city of New York, in relation to nursing home assessment deduction; to amend the social services law, in relation to establishing the long term care demonstration program; and in relation to excluding certain services from the Family Health Plus Program; and in relation to co-payments under the Family Health Plus Program; and in relation to effecting the eligibility requirements for the Family Health Plus Program; to amend chapter 474 of the laws of 1996, amending the education law and other laws relating to rates for residential health care facilities, in relation to the April 1, 2005 state beginning fiscal year; to amend the public health law, in relation to rates of payment for residential health care facilities; to amend the social services law, in relation to the recovery of certain costs; and in relation to certain medical assistance; to amend the general municipal law and the public health law, in relation to continuing care retirement communities; to amend chapter 81 of the laws of 1995, amending the public health law and other laws relating to medical reimbursement and welfare reform, in relation to amending fiscal periods and statewide target percentages; to amend the public health law, in relation to amending fiscal periods; to amend chapter 639 of the laws of 1996, amending the public health law and other laws relating to welfare reform, in relation to certain trend factors used to project reimbursable operating costs; to amend chapter 483 of the laws of 1978, amending the public health law relating to rate of payment for each residential health care facility to real property costs, in relation to the effectiveness thereof; to amend chapter 659 of the laws of 1997, amending the public health law and other laws relating to the creating of continuing care retirement communities, in relation to the effectiveness thereof; to amend chapter 649 of the laws of 1996 amending the public health law, the mental hygiene law and the social services law relating to authorizing the establishment of special needs plans, in relation to the effectiveness thereof; to amend chapter 710 of the laws of 1988, amending the social services law and the education law relating to medical assistance eligibility of certain persons and providing for managed medical care demonstration programs, in relation to the effectiveness thereof; to amend chapter 165 of the laws of 1991, amending the public health law and other laws relating to establishing payments for medical assistance, in relation to the effectiveness thereof; to amend chapter 904 of the laws of 1984, amending the public health law and the social services law relating to encouraging comprehensive health services, in relation to the effectiveness thereof; to amend chapter 535 of the laws of 1983, amending the social services law relating to eligibility of certain enrollees for medical assistance, in relation to the effectiveness thereof; to repeal section 3-a of part Z2 of chapter 62 of the laws of 2003 amending the social services law and other laws relating to implementing the state fiscal plan for the 2003-2004 state fiscal year relating to prior authorization programs for the medical assistance program; to repeal subdivision (x) of section 165 of chapter 41 of the laws of 1992, amending the public health law and other laws relating to assessing certain health care providers relating thereto; and to repeal certain provisions of the social services law relating thereto (Part C); to amend the mental hygiene law, in relation to closing the Middletown Psychiatric Center (Part D); to amend chapter 642 of the laws of 2004, constituting chapter 35-A of the consolidated laws relating to the elderly and amending the elder law and other laws relating to the elderly, in relation to the effective date thereof (Part E); and to amend the mental hygiene law, in relation to consolidating the office of advocate for persons with disabilities into a redesignated state commission on quality of care and advocacy for persons with disabilities; and to repeal article 43 of the executive law relating thereto (Part F)

PURPOSE:

This bill contains provisions needed to implement the Health and Mental Hygiene portions of the 2005-06 Executive Budget.

SUMMARY OF PROVISIONS, EXISTING LAW, PRIOR LEGISLATIVE HISTORY AND STATEMENT IN SUPPORT:

Part A – Improve public health services by eliminating low-priority programs, implementing cost saving measures and facilitating access to the Medicare prescription drug benefit for low-income EPIC enrollees.

This bill enacts the various provisions necessary to implement the 2005-06 Executive Budget recommendations for the State’s public health programs, including initiatives to restructure the General Public Health Works (GPHW) Program from an entitlement to a grant program; achieve savings in the Early Intervention (EI) and the Elderly Pharmaceutical Insurance Coverage (EPIC) programs; facilitate access to the new Medicare drug benefit for EPIC enrollees; eliminate lower priority programs; and extend funding authorization for activities of the Patient Health Information and Quality Improvement Act of 2000.

• Sections 1 through 5 restructure the General Public Health Works Program from an entitlement to a grant program, effective January 1, 2006.

The proposed changes would reduce administrative and cash flow burdens faced by counties as follows:

• County planning and health assessment documents would be due every four years, rather than the current requirement of every two years.
• Reimbursement for vector-borne diseases would be streamlined.
• Counties would receive a pre-determined State Aid allocation (with annual inflationary increases set to the CPI similar to Medicaid).
• Section 6 creates a public health emergency contingency appropriation of $10 million that counties could access upon approval by both the Department of Health (DOH) and the Division of the Budget, effective April 1, 2005.
• Sections 7 through 10 amend the Insurance and Public Health Laws to implement a series of measures to strengthen the Early Intervention Program and ensure that it is cost efficient. These include:
  • Increasing health insurance reimbursement for medical services provided through EI by clarifying that insurers cannot deny coverage for a medical service that is normally covered under the terms of the policy because of any of the following: the provider is out of network, the services are provided at the child’s home, or the child’s condition is not amenable to significant improvement. The changes also require insurers to accept the child’s service plan, certified by the county Early Intervention Official, as proof of medical necessity without requiring prior approval or recertification. Further, insurers are required to inform municipalities of the extent to which services are covered.
  • Allowing counties to more effectively manage EI costs by giving them the option of using the rates established by the State or negotiating lower rates with providers. Negotiated rates are commonly used in managed care and have the potential to save EI costs.
  • Establishing fees for families making more than 250 percent of the Federal Poverty Level (FPL). The income-based fees will range from $25 to $215 per month. Fee waivers — based on hardship — would be available to ensure that necessary services to severely disabled children are not interrupted. Parental sharing of costs is appropriate and has precedents in 15 other states’ EI programs, as well as in most medical insurance plans.
  • Modifying provider rates by restructuring the reimbursement for home visits to establish a single rate. The existing fee structure for home visits (basic & extended fees) is not cost efficient in that it provides an incentive for providers to extend visits to obtain additional reimbursement.

Chapter 428 of the Laws of 1992 established EI to provide services to children with developmental delays from birth until age three with costs shared equally by the counties and State. Efforts have been made in previous Executive Budgets to control costs by proposing legislation that mandated insurance coverage of EI services and required parents to pay up to 20 percent of the cost of their child’s EI services. Such proposals have not been enacted.

• Sections 11 and 12 amend the Tax Law to require the Department of Taxation and Finance to provide the Department of Health with income tax information for EPIC enrollees to ensure that enrollees are eligible for the benefits they are receiving.
• Sections 13 through 16 amend the Executive Law to authorize DOH to coordinate EPIC benefits with Medicare Part D. Specifically, EPIC would be authorized to waive existing participant fees for low-income EPIC enrollees (those with incomes below 135 percent of the FPL); auto enroll EPIC enrollees into the Medicare Part D prescription drug program (with an opt out provision) and serve as their representative for coverage determinations; endorse one or more Part D prescription drug plans; and enter into a sole source contract with a prescription drug plan under Part D for the purpose of coordinating benefits.
• Sections 17 through 20 amend the public health law to repeal the following requirements that have been recently enacted, but not yet implemented:
  • Endoscopy Study — Chapter 438 of the Laws of 2002 requires the Health Commissioner to conduct studies on the efficacy of various methods of sterilizing flexible endoscopies and report findings to the Governor and the Legislature.
  • Reflex Sympathetic Dystrophy Syndrome — Chapter 429 of the Laws of 2002 requires DOH to establish a Reflex Sympathetic Dystrophy Syndrome Prevention and Education Program to promote awareness of the causes of this disease, encourage early detection, identify possible treatments and research measures to identify, diagnose and test for the disease.
  • Tattooing and Body Piercing — Chapter 562 of the Laws of 2001 requires the Health Commissioner to license and regulate tattoo parlors and body piercing establishments and to create a fee structure for licenses and permits.
  • Durable Home Medical Equipment (DME) — Chapter 618 of the Laws of 2002 requires DOH to regulate the provision of DME and established an inspection fee to finance the regulatory program. Chapter 127 of the Laws of 2003 increased the triennial inspection fee from $500 to $1,150. The fees are not sufficient to cover the program’s costs.

Although these are laudable public health initiatives, they are not essential to health and safety and the limited resources available to DOH at this time must be dedicated to higher priority programs.

• Section 21 amends the Public Health Law to permanently allow the Professional Medical Conduct Account to be used to finance the Physician’s Profiling Program. The 2003-04 and 2004-05 Enacted Budgets granted such authority for one year only. Use of this Account to finance physician profiling activities is consistent with its purposes — which is to ensure quality health care for New Yorkers. In addition, the account has sufficient revenues to finance the Physician Profiling Program.
• Section 22 sets the effective dates.

Part B – Reauthorize the Health Care Reform Act (HCRA) and enact proposals to preserve its fiscal stability, advance health care reform initiatives and authorize additional non-profit insurance company conversions.

This bill amends and reauthorizes the Health Care Reform Act (HCRA) in concert with the 2005-06 Executive Budget. This bill also amends the Insurance Law to authorize additional non-profit insurance company conversions to for-profit entities and invests a portion of proceeds from such conversions in HCRA.

• In 1996, New York enacted landmark health care reform legislation – the Health Care Reform Act (HCRA) of 1996 – that replaced the hospital reimbursement system established in 1983 with a deregulated system. This Act was designed to improve the fiscal health of hospitals and support critical public health programs. The Act was subsequently extended and modified in 2000, 2002 and 2003. This legislation reauthorizes the Act through June 30, 2007.
• This bill makes further amendments to HCRA programs and allocations to maximize the use of available revenue sources, modify programs and secure the fiscal viability of HCRA through its two-year extension. In addition, this bill makes several modifications to the public health law that authorize further changes in the health care reimbursement system. Specifically:
  • Sections one through two amend the effective date sections of HCRA 1996 (Chapter 639 of the Laws of 1995), HCRA 2000 (Chapter 1 of the Laws of 1999) and HCRA 2003 (Chapter 62 of the Laws of 2003) respectively, to extend these sections by 2 years - through June 30, 2007 - including the continuation of the inpatient hospital reimbursement methodology for Medicaid and other governmental payors and the collection of surcharges and the covered lives assessments;
  • Section three amends Section 2807-v of the Public Health Law to continue distributions from the Tobacco Control and Insurance Initiatives Pool (Tobacco Pool) including new allocations to support the newborn screening and immunization programs, the purchase and operation of mobile dental vans, and increases in the number of disease management programs and childhood obesity prevention activities;
  • Sections four through twelve modify programmatic language for the Workforce Recruitment and Retention and the Home Care Demonstration Programs;
  • Section thirteen amends Section 47 of Chapter 2 of the Laws of 1998 to restructure the Nursing Home Quality Improvement Grants Program to reward homes that demonstrate performance outcomes;
  • Sections fourteen through seventeen extend the Child Health Plus (CHP) program, authorize the extension of current CHP contracts without a request for proposal, freeze premiums for the period April 1, 2005 through March 31, 2006, and make other technical amendments;
  • Section eighteen modifies Section 2807-c of the Public Health Law to continue the priority restoration adjustment;
  • Section nineteen amends Section 2807-l of the Public Health Law to continue distributions from the Health Care Initiatives pool;
  • Sections twenty through twenty-one amend the Social Services Law to eliminate the Catastrophic Health Care Expense program, which is no longer needed given the implementation of the Family Health Plus and Healthy New York programs;
  • Sections twenty-one-a through twenty-three amend sections 2952 and 2958 of the Public Health Law to modify language for the Rural Health Care program;
  • Sections twenty-four through twenty-eight allow for the extension of various programs, including the Health Occupation Program, Council on Health Care Financing and Ambulatory Care Pilot Program;
  • Section twenty-nine amends Section 2807-s of the Public Health Law to increase the Graduate Medical Education (GME) point of service surcharge to be consistent with the recommended increase in HCRA surcharge levels;
  • Sections thirty through thirty-eight increase the covered lives assessment by $50 million from $725 million to $775 million and uniformly increase the HCRA surcharge levels, including those on private payors to 8.95 percent (from 8.85 percent) and Medicaid and other governmental payors to 6.54 percent (from 6.47 percent) for periods on and after January 1, 2006 - including language to assure audits of assessments are performed on a timely basis;
  • Sections thirty-nine through forty-one amend Section 2807-m of the Public Health Law extending GME allocation amounts and supplemental distributions;
  • Sections forty-two and forty-four amend Sections 2807-k and 2807-w of the Public Health Law, respectively, to extend the methodologies for making hospital indigent care and high need indigent care distributions as well as extending authority to provide funding for the 2807-k pool (Indigent Care Pool);
  • Section forty-five amends Section 1680-j of the Public Authorities Law to finance the Health Care Efficiency and Affordability Law for New Yorkers (HEAL NY) Capital Program at $750 million through the issuance of bonds;
  • Sections forty-six through fifty modify the Insurance Law to expand existing language to authorize the conversion of health insurance plans, similar to Empire Blue Cross, to for-profit entities and directs 95 percent of the proceeds from such conversions to the Tobacco Pool;
  • Section fifty-one removes the connection between the $200 million General Fund loan repayment and language authorizing flexibility to make transfers between HCRA pools;
  • Sections fifty-two through fifty-eight provide consolidated funding for pool administration;
  • Section fifty-nine amends Section 34 of Part A3 of Chapter 62 of the Laws of 2003 to provide for the administrative costs of the Department of Health (DOH);
  • Sections sixty through sixty-seven amend various sections of the CHP program to provide twelve months of continuous coverage, move rate setting authority from the State Insurance Department to DOH, provide access to the state wage reporting system for income verification upon initial application and eliminate presumptive enrollment into CHP for Medicaid eligible children except in certain circumstances;
  • Section sixty-eight requires hospitals to have policies regarding how they serve indigent patients in order to receive an Indigent Care Pool distribution;
  • Section sixty-nine establishes a Pay for Performance demonstration program that was recommended by the Governor’s Health Care Reform Working Group. The initial phase of the program will establish a workgroup to study clinical measure criteria necessary to improve the quality of care provided by those delivering health care services;
  • Sections seventy through seventy-four extend the Excess Medical Malpractice program for an additional two years — through June 30, 2007;
  • Sections seventy-five and seventy-six modify language for the Disease Management program to remove the limitation on the number of demonstration programs and establish a fund to collect private payments and donations that can be used to offset program costs;
  • Section seventy-seven amends language in the Public Health Law to provide the Commissioner of Health the authority to begin to collect ambulatory care data for hospital-based outpatient and freestanding clinics in the Statewide Planning and Research Cooperative System (SPARCS) in order to obtain a more comprehensive view of the health care system. This proposal was recommended by the Governor’s Health Care Reform Working Group.
  • Section seventy-eight modifies language to allow expansion of the number of Managed Long-Term Care Demonstration programs;
  • Section seventy-nine extends the Health Insurance Continuation Assistance Demonstration Program (HICADP), which provides health insurance coverage for dislocated workers including those in the entertainment industry for an additional two years through June 30, 2007;
  • Section eighty adds new language to authorize the establishment of Transitional Care Units in general hospitals to provide sub acute care for patients transitioning to a lesser level of care. This initiative was proposed by the Governor’s Health Care Reform Working Group and provides a cost effective method of providing transitional care within an acute care setting for patients entering a more long term care setting;
  • Section eighty-one adds new language to authorize grants to purchase and operate new mobile dental clinics in underserved areas of the State;
  • Section eighty-two provides new language to enhance childhood obesity prevention activities;
  • Section eighty-three establishes a new fund in the State Finance Law — the HCRA Resources Fund — to provide a structure within the central accounting system to allow the appropriation of all HCRA allocations, including those previously off-budget;
  • Section eighty-four provides the Commissioner with authority to issue regulations to revise the distribution methodology of hospital indigent care payments; and
  • Sections eighty-five through eighty-nine allow for waiver authority and severability, and set effective dates.

Part C – Restructure the State’s Medicaid Program through measures that reduce costs, enhance revenues and maintain access to health care services and advance an initiative to limit local Medicaid costs, leading to a full State takeover in 2008.

The purpose of this legislation is to continue the State’s efforts to restructure the Medicaid program and to implement measures to make it more affordable by lowering reimbursement rates, enhancing revenues, modifying certain benefits in a manner consistent with traditional health plans and closing eligibility loopholes for the Family Health Plus (FHP) program. In addition, the bill would provide significant fiscal relief to counties and local taxpayers by limiting local governments’ contributions to the financing of the Medicaid program.

• Sections 1 through 7 cap local government’s Medicaid costs up to 2005 actual expenditure levels — with annual adjustments — effective January 1, 2006. The annual adjustments to the 2005 cap are 3.5 percent in 2006; 3.25 percent in 2007; and 3 percent in 2008, and each year thereafter. Effective January 1, 2008, the State will assume full responsibility for local Medicaid costs. To partially offset this cost, local governments will be given the option to continue with the cap or allow the State to intercept a portion of the county sales tax (or Personal Income Tax in the case of New York City).
• In addition, the bill will allow counties to participate in demonstration programs and share savings with the State if such efforts result in cost effective improvements to the delivery of Medicaid services. Also, at the discretion of the Budget Director, counties will be allowed to benefit from any future enhancements to Federal Medical Assistance Percentage (FMAP).
• Section 8 accelerates the full State takeover of local Family Health Plus (FHP) costs from January 1, 2006 to October 1, 2005 for the counties outside of New York City. Under existing law, the State will assume fifty percent of the counties’ Family Health Plus costs effective January 1, 2005 and 100 percent effective January 1, 2006.
• Section 9 authorizes transitional Medicaid funding to counties outside of New York City — $20 million in 2005-06 and $10 million in 2006-07.
• Sections 10 through 16 establish a Preferred Drug Program for the Medicaid Program and restore the Department of Health’s (DOH) ability to prior-authorize certain high-risk / high-cost drugs to ensure appropriate and cost effective utilization.
• Section 17 reduces hospital Graduate Medicaid Education (GME) payments to actual costs.
• Section 18 authorizes DOH to selectively contract with hospitals for targeted high-cost procedures for non-managed care patients.
• Section 19 eliminates “specialty rates” for mental health outpatient programs.
• Section 20 reduces inpatient detoxification rates for uncomplicated cases to encourage more cost-effective treatment options.
• Section 21 removes inflationary cost increases from the hospital and nursing home rates.
• Sections 22 through 23 permanently re-establish a 0.7 percent non-reimbursable assessment on total hospital revenues.
• Sections 24 through 25 permanently increase the reimbursable assessment on nursing home receipts from 5 percent to 6 percent and direct these moneys (and the hospital assessment revenues) to a Special Revenue Account.
• Section 26 allows residents of nursing homes who pay for the cost of care with their own resources to deduct the cost of the 6 percent assessment from their State personal income tax.
• Sections 27 through 28 establish a regional pricing system for nursing homes and the adult day health care program.
• Section 29 removes the cost of Medicare and all other non-Medicaid patients from the Medicaid nursing home rates, an adjustment that is no longer necessary due to changes in Federal reimbursement policy.
• Section 30 removes drug costs from the nursing home rates and shifts these costs to the new Federal Medicare Part D program.
• Sections 31 through 32 eliminate the $1.5 million limit on State savings resulting from the existing cap on Certified Home Health Care providers’ administrative costs and impose a cap on administrative costs for the Long Term Home Health Care Program.
• Section 33 authorizes various home care demonstration projects to provide services in community-based rather than institutional settings. Under this proposal, home care rates would be enhanced and the State will seek a Federal waiver to provide other services – including respite – through these projects.
• Sections 34 through 41 implement various FHP reforms, including:
  • Reducing the FHP benefit package to be generally consistent with Healthy New York;
  • Closing eligibility loopholes including, decreasing the resource level, prohibiting coverage for individuals working for government or large businesses, and requiring a 12 month waiting period for those who previously had group health coverage; and
  • Eliminating facilitated enrollment, which provides assistance to potential recipients.
• Sections 42 through 46 continue hospital Intergovernmental Transfers (IGT) and Upper Payment Limit (UPL) payments and require that such payments remain with these facilities and cannot be transferred to local government entities.
• Sections 47 through 49 increase the Medicaid pharmacy co-payment from $0.50 to $1.00 for generics and from $2.00 to $3.00 for brand name drugs.
• Section 50 reclassifies transportation as an administrative service, thereby providing counties and DOH with greater flexibility to contract with lower cost providers and encourage greater use of existing public transportation.
• Section 51 establishes utilization thresholds for mental health continuing day treatment services.
• Sections 52 through 57 amend the Social Services Law to reduce the long term care system’s reliance on Medicaid financing by closing existing loopholes. The amendments:
  • Eliminate the provision that allows a spouse or parent to refuse to contribute any assets towards the costs of health care services, except under certain circumstances. In addition, the State Attorney General’s Office would be required in certain circumstances to recover available assets to offset the cost of Medicaid funded health care services;
  • Establish an asset transfer penalty for home care as it now exists for nursing home care and extend the look back period from 36 to 60 months for both nursing home and home care; and
  • Modify the penalty period from the date the individual begins to access services rather than from the date of the transfer of assets.
• Sections 58 through 61 eliminate non-emergency adult dental services (except in Article 28 clinic settings), certain adult services (private duty nursing, psychologists, and audiologists) that are not mandated by the Federal government, and podiatry as stand alone Medicaid clinic visits.
• Sections 62 through 63 clarify that fee for service Continuing Care Retirement Communities (CCRCs) may obtain Industrial Department Agency (IDA) financing consistent with recently enacted legislation.
• Section 64 makes a technical amendment to the expanded options under the Partnership for Long Term Care insurance program to close a potential loophole that provides full asset protection rather than limiting the protection to the level of the insurance coverage purchased.
• Sections 65 through 88 continue prior year cost containment for hospitals, nursing homes, and home care.
• Sections 89 through 94 permanently extend the Medicaid Managed Care Program which is currently set to expire on March 31, 2005.
• Section 95 gives the Commissioner of Health broad authority to seek waivers, emergency regulations and state plan amendments.
• Many of these provisions, which have been proposed in prior Executive Budgets, are contained in the following sections of the law. Specifically,
• Section 368-(a) of the Social Services Law allocates responsibility for payment of the non-Federal share of the costs of Medicaid services/programs between the State and local governments.
• Section 1261 of the Tax Law relates to revenues resulting from taxes administered by the commissioner and Section 1313 relates to deposit of disposition of revenues.
• Sections 2807-(c) and (d) of the Public Health Law articulate the rates of payments made to providers for inpatient and outpatient services. This law also established hospital provider assessments, which began in 1991 and were phased out by December 1999.
• Section 2807- (v) of the Public Health Law as amended by Chapter 58 of the Laws of 2004 establishes the annual nursing home assessment at 5 percent effective for the April 1, 2004 through March 31, 2006 period.
• Article 28 of the Public Health Law contains various components of the Medicaid nursing home reimbursement methodology.
• Section 366 of the Social Services Law relates to eligibility requirements.
• Section 367-a(6) of the Social Services Law establishes co-payments at $0.50 on generics or $2.00 on brand name and establishes a limit that annual co-pays cannot exceed $100 per recipient.
• Section 854 of the General Municipal Law, as amended by Chapter 2 of the Laws of 2004, authorizes IDA financing for the Continuing Care Retirement Community (CCRC) program.
• Chapter 412 of the Laws of 1999 (HCRA 2000), as amended by Chapter 62 of the Laws of 2003, includes a series of cost containment measures to reduce hospital, nursing home and home care expenditures.

Currently, New York State taxpayers support the most expensive Medicaid program in the nation, one that provides a generous array of services to approximately 4 million recipients. Many steps have been taken over the last decade to control Medicaid costs through innovative reforms, including the mandatory managed care program, targeted cost containment measures and efforts to maximize non-General Fund resources. However, the need to control Medicaid costs and implement systemic reforms continues. Accordingly, the Executive Budget advances a series of measures aimed at:

• Providing fiscal relief to local governments and taxpayers who can no longer support the cost of the Medicaid program;
• Controlling the rising cost of prescription drugs which has been increasing by 20 percent annually in recent years;
• Providing capital funding to improve and reconfigure the State’s healthcare infrastructure to make it more efficient and cost effective;
• Restructuring the long term care system which is too expensive, overly reliant on Medicaid, and difficult for consumers to access. This system will only be further strained as the elderly population grows; and
• Modifying benefit packages and closing eligibility loopholes to ensure affordable and sustainable healthcare programs.

These new measures will make New York’s Medicaid program more affordable while maintaining the State’s position as a national leader in providing high quality health care services. Absent these measures, total Medicaid program spending — Federal, State and local government combined — would reach $47.4 billion in 2005-06. Specific proposals advanced in the Executive Budget include:

• Capping the local share of Medicaid up to 2005 expenditure levels — as modified by a cost of living adjustment — and accelerating the takeover of FHP program costs (from January 1, 2006) to October 1, 2005 for counties outside of New York City. In addition, $20 million in transition funding will be provided to counties outside of New York City to provide fiscal relief to local governments. To make these actions more affordable to New Yorkers, it is necessary that this fiscal relief to local governments be contingent on the enactment of the recommended cost containment measures.
• Implementing a Preferred Drug Program to encourage the appropriate use of prescription drugs in the Medicaid program. Approximately 35 other states have implemented similar programs. Also, the Budget increases co-payments for drugs, which have not been adjusted since 1995.
• Reducing the cost of institutional care, which includes:
  • Implementing GME reform for hospitals, eliminating mental health “specialty rates”, reducing inpatient detox reimbursement, and eliminating inflationary increases;
  • Restructuring the nursing home reimbursement by establishing a new regional average reimbursement system to ensure a more equitable payment system, and other actions including eliminating Medicare from the case mix adjustments and not adjusting rates for inflationary trends will bring costs more in line with other states. Offsetting these reductions, nursing facilities will benefit by nearly $112 million from the Budget proposal to remove drug costs from the rates due to the recently enacted Medicare Part D legislation; and
  • Re-establishing the non-reimbursable hospital assessment at 0.7 percent and increasing the reimbursable nursing home assessment to 6.0 percent, which is necessary to address the State’s current financial situation.
• Restructuring long term care which includes:
  • Limiting administrative costs for home care programs similar to other Medicaid providers.
  • Authorizing new home care demonstration programs which will receive enhanced reimbursement levels to serve at-risk elderly individuals in community based settings (rather than nursing homes).
  • Closing eligibility loopholes to eliminate an individual’s ability to refuse to contribute any of their assets towards the cost of health care services except under certain circumstances is necessary to reduce the overdependence on Medicaid as a source of financing (currently 74 percent of nursing home and home care costs in the State are financed with Medicaid funds).
• Modifying Family Health Plus programs — consistent with the Senate Medicaid Task Force recommendations — to mirror the program’s benefit package and co-pay structure consistent with Healthy New York. In addition, closing eligibility loopholes is necessary to prevent inappropriate enrollment in the program.
• Eliminating certain adult dental and other optional services (e.g., private duty nursing, psychologists, audiologists, and podiatry as a billable clinic visit) to be more in line with private health plans and services offered by other states.

Part D – Close the Middletown Psychiatric Center on April 1, 2006 and require that all savings from the facility closure be reinvested to expand State-operated community services.

This bill authorizes the closure of Middletown Psychiatric Center and requires that one hundred percent of the facility closure savings be used for the expansion of State-operated community programs.

This bill authorizes the closure of Middletown Psychiatric Center on April 1, 2006 and requires that all the savings from the facility closure be reinvested to expand State-operated community programs located within the Center’s catchment area.

The Community Mental Health Support and Workforce Reinvestment Program (Chapter 62 of the Laws of 2003) re-established that reinvestment funds be made available in the same proportion by which the General Fund appropriations are reduced as a result of adult non-geriatric inpatient bed closure and/or facility closure. The Program also expanded the formula to include children’s inpatient bed closures.

The State institutional system, by far the largest in the nation in terms of infrastructure, continues to have excess inpatient capacity due to improved treatment approaches and significant expansion of community mental health services to assist clients in avoiding hospitalization. In the past few years alone, there have been several initiatives to reorganize and significantly expand the capacity of community mental health services including the Assisted Outpatient Treatment Program, the Enhanced Community Services Program, the NY/NY II housing agreement, and other housing initiatives.

This bill recognizes that there is no longer a need to operate 17 adult civil psychiatric centers across the State providing intermediate and long-term inpatient psychiatric care. The Middletown Psychiatric Center — which once served 3,000 patients — now serves only 115. By closing this unneeded psychiatric center and transferring inpatient bed capacity to vacant space at a nearby facility, the State continues to maintain its commitment to those requiring inpatient care while achieving administrative and operating efficiencies. In addition, the closure of Middletown will avoid significant capital improvements, which would be required if patients remained in the current physical space.

This bill also recognizes the need for the State to provide a one year notice for the facility closure and conduct a thorough local planning process to explore investments in community services and discuss alternate use plans for the campus. Furthermore, one hundred percent of the savings achieved with this closure will be reinvested into State-operated services in the Middletown catchment area.

Part E – Reauthorize the Naturally Occurring Retirement Community (NORC) Program for two years.

This bill extends the authorization for the Naturally Occurring Retirement Community (NORC) Supportive Services Program to December 31, 2007.

This bill extends the expiration date of the NORC Supportive Services Program from December 31, 2005 to December 31, 2007.

Chapter 170 of the Laws of 1994 enacted the NORC Supportive Services Program as a pilot program, with an expiration date set two years after enactment. This Program has continued to be extended for two-year intervals. It provides supportive services to the elderly to make it possible for them to maintain their independence and avoid institutionalization. Funded services include case management, care coordination, counseling, health assessment and monitoring, transportation, socialization activities and home care facilitation and oversight

Part F – Merge the Office of Advocate for Persons with Disabilities and the Commission on Quality of Care for the Mentally Disabled.

This bill authorizes the merger of the State Commission on Quality of Care for the Mentally Disabled (CQC) and the Office of Advocate for Persons with Disabilities (APD) into a single agency, the Commission on Quality of Care and Advocacy for Persons with Disabilities. The bill’s provisions are as follows:

• Effective April 1, 2005, Section one repeals Article 43 of Executive Law that originally established APD as an Executive agency. Section six of the bill subsequently incorporates functions of APD into Mental Hygiene Law and confers them to the new agency.
• Sections two, three, four and nine of this bill amend Article 45 of Mental Hygiene Law to rename CQC, expand the definition to encompass physical and mental disabilities, and require that members of the CQC Advisory Council have expertise in programs and services impacting persons with all disabilities.
• Sections five, seven, eight, ten and eleven make technical amendments to Mental Hygiene Law including a change to conform the definition of impacted adult homes to existing DOH regulations.
• Sections 12 through 18 relate to standard merger provisions for contracts, functions, obligations, authority, appropriations, and employees of CQC and APD.
• Section 19 establishes an effective date of April 1, 2005 for the proposed merger.

This merger strengthens advocacy for all persons with disabilities by maximizing resources and eliminating duplication as the missions of CQC and APD are complementary and both provide similar services, including advocacy and information and referral. Furthermore, this bill builds on a 2004-2005 initiative that consolidated certain administrative and support functions of both agencies, including human resources, procurement services and grants management. The complete merger of program activities will strengthen and enhance the State’s ability to serve persons with mental and physical disabilities. Importantly, this merger will enable the State to claim Federal reimbursement for certain activities performed by APD that are currently supported through the General Fund, thereby generating additional revenue to support programs that serve persons with disabilities.

BUDGET IMPLICATIONS:

Part A – – Improve public health services by eliminating low-priority programs, implementing cost saving measures and facilitating access to the Medicare prescription drug benefit for low-income EPIC enrollees.

Enactment of this bill is necessary to implement the 2005-06 Executive Budget because the Financial Plan includes savings of $26.9 million in 2005-06 and $92 million in 2006-07 as follows:

• The restructured General Public Health Works Program is expected to result in savings of $10.4 million in 2005-06 and $22 million in 2006-07.
• The proposed modifications to the EI Program are projected to generate State savings of $23.5 million in 2006-07. Counties, which pay the full cost of EI in the first instance (and are reimbursed by the State for its share on a lag basis), will save those amounts one year earlier.
• The EPIC proposals are expected to generate savings of $12 million in 2005-06 and $42 million in 2006-07.
• The elimination of low-priority programs generates $700,000 in annual savings.
• Use of the Professional Medical Conduct Account to finance the Physician Profiling Program saves $3.8 million annually.

Part B – Reauthorize the Health Care Reform Act (HCRA) and enact proposals to preserve its fiscal stability, advance health care reform initiatives and authorize additional non-profit insurance company conversions.

Enactment of this bill is necessary to implement the 2005-06 Executive Budget, which assumes $321 million of related General Fund savings in 2005-06 and $187 million in 2006-07.

Part C – Restructure the State’s Medicaid Program through measures that reduce costs, enhance revenues and maintain access to health care services and advance an initiative to limit local Medicaid costs, leading to a full State takeover in 2008.

Enactment of this bill is necessary to ensure State savings totaling $837 million in 2005-06 growing to over $1.4 billion in 2006-07. In addition, this bill extends prior year cost containment which provides State savings of $337 million annually.

Moreover, local governments will save $446 million in 2005-06 resulting from cost containment measures ($232M); capping the local share of Medicaid ($121M); enhancing payments to public hospitals ($48M); accelerating Family Health Plus ($25M); and providing transitional funding ($20M).

Part D – Close the Middletown Psychiatric Center on April 1, 2006 and require that all savings from the facility closure be reinvested to expand State-operated community services.

This bill achieves $7.0 million in savings on a full annual basis as a result of the closure of Middletown Psychiatric Center. Under this bill’s provisions, the full $7 million will be used to expand State-operated community programs located within the catchment area. Closing Middletown will also avoid some $28 million in required capital investment and debt service that would eventually cost taxpayers $46 million or more.

Part E – Reauthorize the Naturally Occurring Retirement Community (NORC) Program for two years.

Enactment of this bill is necessary to implement the 2005-2006 Executive Budget which includes $1.2 million in General Fund support for this program.

Part F – Merge the Office of Advocate for Persons with Disabilities and the Commission on Quality of Care for the Mentally Disabled.

The newly consolidated agency will generate about $160,000 in additional Federal reimbursement to enhance advocacy, oversight, and services to persons with disabilities in 2005-06, growing to a $320,000 full annual reimbursement in 2006-07.

EFFECTIVE DATE:

Part A – Improve public health services by eliminating low-priority programs, implementing cost saving measures and facilitating access to the Medicare prescription drug benefit for low-income EPIC enrollees.

This bill takes effect April 1, 2005, except as specified. However, the following sections shall be effective January 1, 2006:

• Sections one through five, regarding Article VI of Public Health Law;
• Section nine, regarding parental fees; and
• Sections eleven and twelve, regarding the elderly pharmaceutical insurance coverage program income tax match.

Part B – Reauthorize the Health Care Reform Act (HCRA) and enact proposals to preserve its fiscal stability, advance health care reform initiatives and authorize additional non-profit insurance company conversions.

This bill takes effect immediately.

Part C – Restructure the State’s Medicaid Program through measures that reduce costs, enhance revenues and maintain access to health care services and advance an initiative to limit local Medicaid costs, leading to a full State takeover in 2008.

This bill takes effect April 1, 2005 except that: Sections 48 through 49 related to increasing Medicaid co-payments for pharmacy; Section 50 related to the reclassification of transportation as an administrative service; Section 54 and 57 related to closing eligibility loopholes; and Sections 58 through 60 related to eliminating adult dental and other practitioners will take effect July 1, 2005.

Part D – Close the Middletown Psychiatric Center on April 1, 2006 and require that all savings from the facility closure be reinvested to expand State-operated community services.

This bill takes effect immediately; however, the actual Middletown Psychiatric Center closure will occur on April 1, 2006.

Part E – Reauthorize the Naturally Occurring Retirement Community (NORC) Program for two years.

This bill takes effect April 1, 2005.

Part F – Merge the Office of Advocate for Persons with Disabilities and the Commission on Quality of Care for the Mentally Disabled.

This bill is effective April 1, 2005.