2006-07 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 social services law, the public health law, the penal law, the criminal procedure law, the labor law, the civil practice law and rules, the public health law, chapter 58 of the laws of 2005, amending the public health law and other laws relating to implementing the state fiscal plan for the 2005-2006 state fiscal year, chapter 66 of the laws of 1994, amending the public health law, the general municipal law and the insurance law relating to the financing of life care communities, chapter 81 of the laws of 1995, amending the public health law and other laws relating to medical reimbursement and welfare reform, chapter 639 of the laws of 1996 amending the public health law and other laws relating to welfare reform, chapter 474 of the laws of 1996, amending the education law and other laws relating to rates for residential health care facilities, chapter 483 of the laws of 1978, amending the public health law relating to rate of payments for each residential health care facility to real property costs, 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, 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, chapter 165 of the laws of 1991, amending the public health law and other laws relating to establishing payments for medical assistance, chapter 19 of the laws of 1998, amending the social services law relating to limiting the method of payment for prescription drugs under the medical assistance program, chapter 659 of the laws of 1997, amending the public health law and other laws relating to creation of continuing care retirement communities, 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 health reform; and to repeal section 366-f of the social services law, subdivision 11 of section 364-j of the social services law, paragraph (c) of subdivision 3 of section 369-ee of the social services law, paragraph (j) of subdivision 2 of section 365-a of the social services law and 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 healthcare providers relating thereto (Part A); to amend the insurance law and the public health law, in relation to early intervention services; to amend the public health law, in relation to state aid for municipalities; to amend the elder law, in relation to the elderly pharmaceutical insurance coverage program; 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 of the public health law relating thereto; and repealing certain provisions of the public health law relating thereto (Part B); to establish a cost of living adjustment for designated human services programs and providing for the repeal of such provisions upon expiration thereof (Part C); to amend the public health law, in relation to allocations for worker retraining, Roswell Park, anti-tobacco program, public health programs, elderly pharmaceutical insurance coverage, excess medical malpractice, nursing home financially distressed, pharmacy, family health plus, healthcare efficiency and affordability law for New Yorkers, to amend the public health law, in relation to HCRA surcharges, assessments and covered lives assessment; bad debt and charity care; high need indigent care; state planning and research cooperative systems and the health care reform act pool reporting requirements; to amend the state finance law, in relation to the area health education centers; to amend the insurance law, the tax law and chapter 235 of the laws of 1952 relating to enabling any city of the state having a population of one million or more to adopt and amend local laws, imposing certain specified types of taxes on cigarettes, cigars and smoking tobacco which the legislature has or would have power and authority to impose, to provide for the review of such taxes, and to limit the application of such local laws, in relation to the tax on cigarettes; to amend the public authorities law in relation to the HCRA resources fund; and to repeal certain provisions of the public health law relating thereto (Part D); to amend the state finance law, in relation to the chemical dependence service fund (Part E); to amend the mental hygiene law, in relation to funding of chemical dependence and compulsive gambling services (Part F); to amend the public health law, in relation to eliminating mental health outpatient services as services that can be considered specialized services under section 2807 of the public health law (Part G); and to amend chapter 119 of the laws of 1997 relating to authorizing the department of health to establish certain payments to general hospitals, in relation to extending the authorization for the department of health to continue certain payments to general hospitals (Part H )

PURPOSE:

This bill contains provisions needed to implement the Health and Mental Hygiene portions of the 2006-07 Executive Budget.

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

Part A – Ensure a seamless transition to the new Federal Medicare prescription drug program (Part D); restructure the nursing home reimbursement methodology; implement saving measures to reduce Medicaid costs and establish the Office of Medicaid Inspector General to combat fraud, waste and abuse.

This bill continues the State’s efforts to restructure the Medicaid program and implement reforms to improve quality of care and make it more affordable by:

• Eliminating duplicative requirements for prescription drug coverage and ensuring a safe and seamless transition to the new Medicare Part D program;
• Updating and restructuring the nursing home reimbursement methodology; and
• Implementing various cost containment measures which:
  • advance a multifaceted Medicaid integrity plan to combat fraud, waste, and abuse;
  • modify reimbursement rates and certain benefits to encourage program efficiencies;
  • maximize revenues; and
  • close program eligibility loopholes.
• Section 1 eliminates any requirement of duplicate coverage and allows for a six month transition period for coverage of drugs that are not available to dual eligible recipients (i.e., individuals eligible for both Medicaid and Medicare) through the new Medicare Part D prescription drug program and continues a permanent “wrap around” benefit for certain critical drugs (i.e., anti-retrovirals).
• Sections 2 through 3 advance a five-year proposal to restructure the nursing home reimbursement methodology by updating the 1983 base year using 2003 cost data. This proposal would be contingent on:
  • Requiring a Medicaid only case mix in calculating the rates; and
  • Eliminating outdated rate adjustments which include a rate add-on for facilities that have 300 or more beds and that are hospital based facilities.
• Sections 4 through 22 advance a multifaceted Medicaid integrity plan by:
  • Establishing the Office of Medicaid Inspector General to prevent, detect, and investigate fraud, waste, and abuse and coordinate control activities for all State agencies;
  • Strengthening criminal penalties for certain fraudulent health care practices (e.g., defrauding a health plan in connection with the delivery of payment for health care benefits, items or services, etc);
  • Establishing criminal penalties for possession of diverted prescription drugs (current statute only addresses issues of selling diverted drugs) and clarifying other related penalties;
  • Providing “whistleblower” protection for employees who report health care fraud;
  • Increasing penalties for Medicaid providers who engage in fraudulent activities from $2,000 to $10,000 (for first time offense) and $7,500 to $30,000 (for subsequent offenses) for each falsified claim; and
  • Designating the Supreme Court in Albany as the only venue where providers may challenge Medicaid actions brought by DOH.
• Section 23 allows for Chemung County to establish a demonstration program to improve care coordination and reduce inappropriate utilization.
• Section 24 through 28 amend Article 2-a of the Public Health Law in relation to the Preferred Drug Program by:
  • Eliminating the physician’s right of final determination in both the Preferred Drug Program and the Clinical Drug Review Program; and
  • Including cost as criteria in the drug review process, granting the Commissioner the authority to prior authorize drugs, and establishing a more rigorous process for exceptions.
• Sections 29 through 30 eliminate drugs used in the treatment of erectile dysfunction (ED) from the State Medicaid program consistent with recent Federal legislation to eliminate Federal reimbursement for such drugs.
• Sections 31 decreases pharmacy reimbursement for the Medicaid program from average wholesale price (AWP) less 12.75 percent to AWP less 15 percent for brand name drugs and AWP less 16.5 percent to AWP less 30 percent for generic drugs.
• Section 32 through 36 propose savings by instituting reductions to Hospital reimbursement by:
  • Reducing Graduate Medical Education (GME) payments to facilities that no longer have actual costs sufficient to support their current GME reimbursement levels;
  • Streamlining legislative mandates to enhance programs and increase out year savings;
  • Eliminating the length of stay volume relief;
  • Eliminating specialty rates for certain mental health outpatient programs; and
  • Authorizing the Department of Health to reimburse hospital capital costs up to the fair market value.
• Sections 37 through 38 reform inpatient uncomplicated detox services by modifying price incentives and individual behavior by:
  • Reducing detox reimbursement — over three years — to a rate more consistent with community based providers; and
  • Providing a monetary incentive to hospitals to assess and transfer individuals to a community based provider.
• Section 39 requires hospitals to establish policies and procedures regarding financial assistance to indigent patients in order to receive HCRA pool distributions.
• Sections 40 through 41 extend hospital intergovernmental transfer (IGT) payments to public hospitals, including Health and Hospital Corporation and State-operated facilities.
• Section 42 eliminates the 2006 inflationary trend cost increases for hospitals and nursing homes.
• Section 43 amends the Public Health Law to provide AIDS Adult Day Health Care Clinics an annual Cost of Living Adjustment (COLA) effective October 1, 2006 through March 31, 2009.
• Section 44 modifies the nursing home reimbursement methodology to reduce provider gaming by:
  • Limiting reimbursement for working capital interest when the borrowing for such purposes is determined to be unnecessary
  • Reducing rates for providers who inappropriately inflate base year spending (when facility costs are rebased) and subsequently reduce costs; and
  • Requiring the calculation of cost based rates (rather than the higher budget based rate) when a facility is unable/unwilling to achieve 90 percent occupancy after a five-year period.
• Section 45 permanently continues the reimbursable Nursing Home assessment at six percent which is currently set to expire on March 31, 2007.
• Section 46 reimburses Adult Day Heath Care Programs based on actual costs (rather than on a budget) once they have achieved, or have had a fair opportunity to achieve, 90 percent occupancy.
• Sections 47 through 48 increase the penalty for late submission of hospital, nursing home and home care providers’ cost reports (more than 30 days late) from 2 percent to 10 percent of the providers’ rate.
• Sections 49 through 52 reduce the long term care system’s reliance on Medicaid financing by closing existing eligibility loopholes, including:
  • Eliminating the provision that allows a spouse or parent to refuse to contribute any assets toward the costs of health care services, except under certain circumstances;
  • Establishing an asset transfer penalty for home care as it now exists for nursing home care and extending the look back period from 36 to 60 months for both nursing home and home care;
  • Changing the start of the transfer penalty period to the date the individual begins to access services rather than the date of the transfer of assets; and
  • Expanding the definition of estate, for purposes of Medicaid recoveries, to include all non-probate assets (e.g., life insurance and annuities).
• Sections 53 through 57 amend the Family Health Plus and Managed Care programs by:
  • Requiring mandatory Family Health Plus co-pays and increasing co-pays for inappropriate emergency room visits from $3 to $25 to curtail the use of more expensive services;
  • Prohibiting coverage for individuals working for businesses with more than 100 employees;
  • Eliminating six months guaranteed eligibility for the Family Health Plus and Managed Care programs; and
  • Changing the minimum requirement for managed care plans from two to one to allow for mandatory enrollment in rural counties.
• Section 58 reclassifies Medicaid transportation service to an administrative service.
• Sections 59 through 61 make technical amendments to the local cap on Medicaid costs (Chapter 58 of the Laws of 2005) to clarify that the Medicare Part D state contribution payment is used in calculating local share expenditures under the cap and that the Indigent Care Adjustment (ICA) is exempted. Lastly, this amendment authorizes reimbursement for amounts overpaid by local social services districts as a result of long-term inpatients in mental hygiene facilities “621” misclassifications.
• Sections 62 through 68 make other various technical amendments, including: continuation of nursing home IGT payments; charitable contribution of State monies; IDA financing for Continuing Care Retirement Communities; Managed Care plans and providers; and other administrative actions.
• Sections 69 through 98 continue prior year cost containment for hospitals, nursing homes, home care and other extenders (including Managed Care).

Existing laws related to the proposed provisions are contained in the following sections of State statute. Specifically,

• Penal Law: Section 178 relates to criminal penalties for sale and possession of diverted prescription drugs.
• Social Services Law: Section 145-b relates to monetary penalties for those engaging in fraudulent activities; Sections 365-(a) and 367-(a) pertain to the elimination of certain drugs from Medicaid reimbursement and increasing AWP reductions for the Medicaid prescription program; Section 366 specifies certain eligibility requirements for individuals requiring institutional and community-based long term care services; Section 369-(ee) and 364-(j) relate to the Family Health Plus and Managed Care programs.
• Civil Practice Laws and Rules: Section 506 relates to the venue of Article 78 proceedings involving Medicaid providers.
• Public Health Law: Sections 273 and 274 relate to New York State’s preferred drug and prior authorization program; and Section 2807- (c) and (d) relates to nursing home provider assessments which began in 1991 and were gradually phased out by December 1999 but re-established in 2002.

Prior year Medicaid cost containment actions were enacted in 1996 (Chapter 85 of the Laws of 1996) and extended subsequently several times since then, most recently in 2005 (Chapter 58 of the Laws of 2005).

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:

• Ensuring the integrity of the Medicaid program by eliminating fraud, waste and abuse so that taxpayer resources are appropriately being used to further improve the quality of health care for all New Yorkers;
• Controlling growth in hospital and nursing home costs which are more than any other state in the nation and far exceed the two most populous states combined;
• Restructuring the long term care system which is too expensive, overly reliant on Medicaid and will only be further strained as the elderly population grows; and
• Expanding Medicaid managed care and other cost savings related to Family Health Plus to encourage program efficiencies.

These cost savings 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 $47.6 billion in 2006-07.

In addition, the 2006-07 Executive Budget advances a comprehensive, multi-year proposal to restructure nursing home reimbursement using a 2003 base year which would be contingent on the elimination of out-dated rate add-ons (e.g., for 300 plus beds and hospital-based facilities) and require the use of Medicaid only case-mix in calculating the rates for patient acuity.

The Executive Budget also ensures that all dual eligible individuals have a safe and seamless transition to the new Federal Medicare prescription drug program (Part D) by: 1) supporting a six month transition period (through July 1, 2006) during which the Medicaid program will continue to fund all medically necessary drugs not provided through Part D (i.e., “wrap around”); and 2) continuing the “wrap around” benefit under Medicaid for certain critical drugs used in the treatment of mental illness, HIV/AIDS and organ transplants.

Part B – Improve public health services by eliminating low-priority programs, implementing cost saving measures, strengthen fiscal and programmatic oversight and make new investments in local public health programs.

This bill enacts the various provisions necessary to implement the 2006-07 Executive Budget recommendations for the State’s public health programs, including initiatives to strengthen the fiscal and program management of the Early Intervention (EI) Program; restructure the General Public Health Work (GPHW) Program; modify the Elderly Pharmaceutical Insurance Coverage (EPIC) Program to maximize Federal reimbursement for eligible low-income seniors under the Medicare Prescription Drug Program, reduce pharmacy reimbursement levels and limit the availability of erectile dysfunction drugs; and continue certain financing authorization for the Professional Medical Conduct Account.

• Sections one through seven amend the Insurance and Public Health Laws to implement a series of measures to increase EI Program revenues and strengthen fiscal and programmatic oversight, effective April 1, 2006.  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 (unless the provider has an adequate network of approved EI providers that have capacity to accept the referral), the services are provided at the child’s home, or the child’s condition is not amenable to significant improvement within specified time periods; and
  • Mandating the use of an Early Intervention fiscal agent by county governments, at the State’s option, to standardize the fiscal management, improve third party revenue collections and enhance the utilization review process.

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. Such proposals have not been enacted. 

• Sections eight through 14 amend Public Health Law to restructure the General Public Health Work Program and make new investments in local public health programs, effective January 1, 2007. This includes:
  • Raising reimbursement for optional services from 30 to 36 percent for counties that meet performance requirements outlined by the Department of Health (DOH);
  • Increasing the State-supported base grant level by $100,000--from $450,000 to $550,000, or 55 cents per capita;
  • Reducing the frequency of mandated county reporting under the General Public Health Work Program from every two years to every four years;
  • Including vector-borne diseases (e.g., carried by insects) to the list of disease control activities eligible for reimbursement to allow greater county flexibility in addressing their unique needs;
  • Eliminating the statutory provision that requires the State to provide funding to counties above minimum levels, if appropriations are available; and
  • Providing funding for the State to respond to public health emergencies and 50 percent state aid reimbursement to counties to respond to public health emergencies, as approved by the Commissioner and the Director of the Budget.
• Sections 15 through 23 amend the Public Health Law to modify or repeal program requirements that have been recently enacted, but not yet implemented. This includes:
  • Repealing the requirement for DOH to post prescription drug retail price lists on its website, enacted in 2005 (Section 276-A of the Public Health Law). Currently, pharmacies are required to make available their price lists upon request from the consumer and no funding was made available to implement this labor- and resource-intensive requirement;
  • Repealing the requirement that DOH regulate Durable Medical Equipment (DME) providers (Chapter 618 of the Laws of 2002). This provision is duplicative of other efforts to control the use of DME and the fees established to finance this effort are insufficient to cover the costs of the program;
  • Modifying the requirement that DOH regulate tattoo and body piercing. Chapter 562 of the Laws of 2001 is amended to eliminate the requirement that these facilities operate under a permit, but maintains the Department’s ability to investigate complaints related to these facilities; and
  • Modifying the specific requirements for Reflex Sympathetic Dystrophy Syndrome Outreach (Chapter 429 of the Laws of 2002) and Health Care and Wellness Education Outreach–Lymphedema (Chapter 414 of the Laws of 2005) to allow these functions to be combined with other DOH education and outreach activities and completed based upon program priorities.
  • 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.
• Sections 24 through 35 modify Elder Law in relation to the EPIC Program to:
  • Require low-income subsidy-eligible seniors to enroll into the Medicare Prescription Drug benefit as a condition of maintaining EPIC eligibility;
  • Reduce pharmacy reimbursement levels for brand name and generic prescription drugs that are reimbursed through the EPIC Program (from average wholesale price minus 16.5 percent to 30 percent for generics and from average wholesale price minus 12.75 percent to 15 percent for brand name drugs);
  • Limit the availability of erectile dysfunction drugs; and
  • Make technical corrections related to the conversion of Executive Law to Elder Law in 2004. 
• Section 36 amends the Public Health Law to permanently allow the Professional Medical Conduct Account to be used to finance the Physician’s Profiling Program.  Use of this account to finance physician profiling activities is consistent with its purpose — which is to ensure quality health care for New Yorkers.  In addition, the account has sufficient revenues to finance the Physician Profiling Program. The 2003-04 through 2005-06 Enacted Budgets granted such authority for one year only. 

Part C – Provide a three year Cost of Living Adjustment (COLA) for designated human services programs.

This bill provides a three-year, annual Cost of Living Adjustment (COLA) for designated human services programs indexed to the Federal Consumer Price Index.

This bill establishes in Unconsolidated Law a three-year, annual COLA for designated human services programs under the auspices of the Office of Mental Health, Office of Mental Retardation and Developmental Disabilities, the Office of Alcoholism and Substance Abuse Services, the Department of Health, the State Office for Aging and the Office of Children and Family Services. The COLA will be based on an estimate of the Consumer Price Index (CPI) for all urban consumers published in the U.S. Congressional Budget Office Economic and Budget Outlook and will be reconciled to the actual CPI. The first COLA will be effective October 1, 2006, the second COLA on April 1, 2007, and the third COLA on April 1, 2008.

The COLA is expected to improve recruitment and retention of workers employed by voluntary providers as well as provide for inflationary cost increases. Such providers have only received limited COLAs over the past 11 years — in fact a cumulative 7.5 percent increase contrasted to the comparable cumulative 29.4 percent trend factor afforded hospitals and nursing homes — which has created serious workforce and other operating pressures, regulatory compliance and quality of care issues, and concerns about addressing community expansion needs. The three-year COLA is intended to help alleviate these issues.

Currently, there is no COLA in existing law, and this language has not previously been proposed. However, a COLA has been proposed on an ad hoc basis over the years for certain programs.

Part D – Modify the Health Care Reform Act (HCRA) and enact proposals to preserve its fiscal stability, and authorize additional non-profit insurance company conversions.

This bill amends the Health Care Reform Act (HCRA) in concert with the 2006-07 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 addition, Tax Law is amended to increase the per pack tax on cigarettes.

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, 2003 and 2005. In 2005, HCRA was reauthorized 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 the current extension period. In addition, this bill makes several modifications to the public health law to make technical corrections to HCRA. Specifically:

• Section one amends Section 2807-l of the Public Health Law (PHL) to reduce prospective Worker Retraining allocations by 50 percent;
• Sections two through ten modify various Sections of 2807-v of the PHL to reflect technical corrections, proposed cost containment and new investments including:
  • Anti-Tobacco Program: Increasing the annual allocation to $95 million, including $15 million to Roswell Park to support operating costs associated with cancer research.
  • Excess Medical Malpractice: Increasing the annual allocation to $130 million.
  • Healthcare Efficiency and Affordability Law for New Yorkers (HEAL NY): Increasing the annual allocation to $113.8 million in 2006; of which $25 million is dedicated to Roswell Park.
  • Elderly Pharmaceutical Insurance Coverage (EPIC) Program: Reducing the annual allocation to $565.7 million in 2006 as a result of savings from low-income enrollment in Part D and reducing AWP reimbursement for drugs.
  • Family Health Plus (FHP): Reducing the annual allocation to $294.7 million in 2006 as a result of savings from increased co-pays and prohibiting large employers from enrolling individuals in the program.
  • Roswell Park Cancer Institute: Modifies allocation language to adjust the timing of payments and address facility cash flow needs.
• Section eleven amends Section 2807-b of the PHL to require the Department of Health (DOH) to bill delinquent payments for the Covered Lives Assessment, Surcharges, and the One-Percent Assessment 90 days following each calendar quarter;
• Sections twelve through eighteen make technical modifications to sections 2807-c, d, j, k, t and w of the PHL to clarify the following: surcharge/assessment revenue exemption provisions; that the six year limit on provider payments does not apply to DOH pursuing delinquencies or refund requests; and DOH’s enforcement authority of Bad Debt and Charity Care (BDCC) certification requirements within the High Need Indigent Care Program;
• Section nineteen authorizes the Commissioner of Health to collect federally mandated data on ambulatory care facilities through the State Planning and Research Cooperative Systems (SPARCS) to assist the State in obtaining Federal approval on pending State Plan Amendments;
• Section twenty modifies section 99-dd of the State Finance Law directing the State Comptroller to distribute the Area Health Education Centers (AHEC) payments rather than the pool administrator;
• Section twenty-one amends Section 2807-s to eliminate the School Health Policy exemption from the Graduate Medical Education (GME) point-of-service surcharge and thus requires previously exempt individuals to pay HCRA surcharges;
• Sections twenty-two through twenty-seven authorize DOH to calculate and bill providers and payors for underpayments of the Covered Lives Assessment, Surcharges, and the One-Percent Assessment to HCRA;
• Sections twenty-eight through twenty-nine provide the necessary language to authorize additional insurance conversions and dedicate any proceeds from such conversions to HCRA;
• Sections thirty through thirty-four increase the State cigarette tax to $2.50 per pack and reduce the New York City tax to $0.50, dedicating the additional revenue to HCRA;
• Section thirty-five amends the Public Authorities Law in relation to HEAL-NY and authorizes the State Comptroller to make transfers from the HCRA resources fund to the capital projects fund; and
• Sections thirty-six through thirty-nine allow for waiver authority, severability and set effective dates.

Part E – Authorize regulatory enforcement action fines to be deposited in the Chemical Dependence Service Fund.

This bill amends section 97-w of the State Finance Law to add penalties and fines as revenues eligible for deposit in the Chemical Dependence Service Fund and allow moneys of the fund to be used in support of receivership and enforcement and compliance activities.

This bill enables Office of Alcoholism and Substance Abuse Services (OASAS) to reinvest revenues derived from penalties and fines levied against under-performing and/or fraudulent providers to support staff added to enhance the agency’s ability to combat Medicaid fraud and abuse. However, OASAS does not presently have the authority to make expenditures out of the Chemical Dependence Service Fund in support of State operations activities.

Therefore, this bill amends section 97-w of the State Finance Law to add penalties and fines received through OASAS enforcement and compliance activities as moneys eligible for deposit into the Chemical Dependence Service Fund. In addition, this section enables OASAS to use such moneys in support of receivership activities as well as State operations enforcement and compliance expenses.

Part F – Authorize OASAS to make State aid payments to entities which assume either temporary or permanent responsibility for certain chemical dependency programs.

This bill amends section 26 of the Mental Hygiene Law (MHL) to permit OASAS to make State aid payments to receiver/management entities.

The Office of Alcoholism and Substance Abuse Services (OASAS) does not currently have the authority to make State Aid payments to entities operating chemical dependence and/or compulsive gambling programs under a receivership agreement. Since many providers of services acting in this capacity may be unable to leverage Medicaid and/or other revenues to defray operating costs, it is imperative that OASAS be allowed to make State Aid payments to these providers to ensure the health and safety of the clients under their care. Further, the expanded OASAS capacity to combat fraud and abuse may result in increased incidences of programs under receivership.

Therefore, this bill adds Paragraph (k) to MHL §26.00 to permit OASAS to make State Aid payments to a receiver/management entity, including for-profit providers of services.

Part G – Eliminate mental health outpatient services as services that can be considered specialized under section 2807 of the Public Health Law.

This bill eliminates services for which the rate of payment is established by the Office of Mental Health (OMH) from the list of services that can be considered “specialized” under Section 2807 of Public Health Law.

Currently, Section 2807 of the Public Health law limits the operating rates of payment by government agencies for general hospital outpatient services to $67.50 per visit. However, it also permits a waiver of this limit for certain specialized services, as determined by the Commissioner of Health.

This bill amends subparagraph (i) of paragraph (g) of subdivision 2 of Section 2807 of the Public Health Law, to exclude any services for which rates are established by OMH pursuant to Section 43.02 of mental hygiene law, from being considered by the Commissioner of Health as being a specialized service.

When OMH assumed rate-setting responsibilities for Article 28 mental health outpatient programs, certain hospitals had been granted a waiver for their mental health outpatient programs and were receiving a specialty rate for those services. However, all Article 28 mental health outpatient providers, including those who receive a specialty rate, are required to meet the same programmatic standards and this bill would resolve the inequity of differing reimbursement levels for providers who essentially deliver the same services.

This language has been proposed by the Executive in the past but has not been enacted.

Part H – Authorize OMH/OASAS voluntary hospitals to receive Federal disproportionate share payments.

This bill extends Chapter 119 of the Laws of 1997, as amended by Chapter 62 of the Laws of 2003, through March 31, 2009 to allow voluntary Article 28 hospitals to continue replacing, through Federal Disproportionate Share (DSH) payments, reductions in State Aid grant funds provided by the Office of Mental Health (OMH) and the Office of Alcoholism and Substance Abuse Services (OASAS).

This bill extends the authorization of annual Federal DSH payments to support the provision of mental health and substance abuse services by Article 28 hospitals, by amending section three of Chapter 119 of the Laws of 1997. The legislation for annual DSH payments has previously been extended at three-year intervals, and this bill would extend the authorization from March 31, 2006 to March 31, 2009.

In the absence of DSH funding, Article 28 hospitals would have to significantly curtail services they provide to persons with mental illness and/or substance abuse. Alternatively, to maintain current service levels, the State would need to replace DSH revenues with additional General Fund support. Therefore, extending the current DSH statute, as provided for in the legislation, is crucial to the maintenance of service delivery, the financial well-being of the hospitals and the State’s current Financial Plan.

BUDGET IMPLICATIONS:

Part A – Ensure a seamless transition to the new Federal Medicare prescription drug program (Part D); restructure the nursing home reimbursement methodology; implement saving measures to reduce Medicaid costs and establish the Office of Medicaid Inspector General to combat fraud, waste and abuse.

Enactment of this bill is necessary to ensure State Financial Plan savings and cost avoidance totaling $775.8 million in 2006-07 and over $1.4 billion in 2007-08 as follows:

• $246.4 million cost avoidance in 2006-07 ($405 million in 2007-08) to protect New York from Medicare Part D commercial plans inappropriately shifting utilization to the Medicaid program and State taxpayers ultimately paying twice for the costs of these drugs. Factoring in this cost avoidance, the Budget still retains funding of $201.2 million in 2006-07 ($119.8 million in 2007-08) for a full six months transition and ongoing coverage for certain HIV/AIDS, mental health and organ transplant drugs.

• $20 million savings in 2006-07 ($66 million in 2007-08) to provide for a five year plan for updating and restructuring nursing home reimbursement, investing State resources of $13 million in 2006-07, $94 million in 2007-08 and growing to more than $333 million by 2010-11. These investments will be offset by State savings of $33 million in 2006-07 and $160 million in 2007-08 for the elimination of inappropriate case mix rate adjustments and rate add-ons. Once fully implemented, the Governor’s proposal will provide new State resources to the Industry of $173 million ($346 million gross).

• $509.4 million savings in 2006-07 ($971.3 million in 2007-08) to implement other cost containment savings to: modify reimbursement rates and certain benefits; maximize revenues; close eligibility loopholes; and other actions.

In addition, this bill extends prior year cost containment proposals which provide State savings of $504.9 million annually — resulting in a total savings and cost avoidance of $1.28 billion in 2006-07 growing to $1.95 billion in 2007-08 from the enactment of this bill.

Part B – Improve public health services by eliminating low-priority programs, implementing cost saving measures, strengthen fiscal and programmatic oversight and make new investments in local public health programs.

Enactment of this bill is necessary to implement the 2006-07 Executive Budget which recommends net savings of $104.2 million in 2006-07 as follows: 

• The proposed modifications to the EI Program are projected to result in State costs of $2M in 2006-07;
• The restructured General Public Health Work Program is expected to result in savings of $25.6M in 2006-07;
• The elimination or modification of non-essential programs generates $4.5M in 2006-07 savings;
• EPIC initiatives will generate $72.3 million in savings in 2006-07; and
• Use of the Professional Medical Conduct Account to finance the Physician Profiling Program saves $3.8M annually.

Part C – Provide a three year Cost of Living Adjustment (COLA) for designated human services programs.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget to provide a 2.5 percent COLA to eligible human services programs, for a total cost of $33.8 million. The COLA will grow to $130 million in 2007-08 and $192.5 million by 2008-09.

Part D – Modify the Health Care Reform Act (HCRA) and enact proposals to preserve its fiscal stability, and authorize additional non-profit insurance company conversions.

Enactment of this bill is necessary to implement the 2006-07 Executive Budget, which assumes $118.5 million of related General Fund savings in 2006-07 and $188.4 million in 2007-08 consisting of:

• EPIC Savings: $72.3M in 2006-07; $145.1M in 2007-08
• FHP Savings: $11M in 2006-07; $20.7M in 2007-08
• Other Actions: $35.2M in 2006-07; $22.6M in 2007-08

In addition, HCRA will save $44.9 million in 2006-07 ($82 million in 2007-08) and make targeted investments of $271.8 million in 2006-07 ($255.4 million in 2007-08).

Part E – Authorize regulatory enforcement action fines to be deposited in the Chemical Dependence Service Fund.

Enactment of this bill is necessary to achieve Medicaid State share savings of $8.9 million, consistent with the 2006-07 Executive Budget Financial Plan.

Part F – Authorize OASAS to make State aid payments to entities which assume either temporary or permanent responsibility for certain chemical dependency programs.

Given the unpredictability as to when OASAS will be required to engage an organization under a receivership agreement, the Executive Budget recommends $1 million in “dry” appropriation authority to support State Aid payments for programs in receivership. To supplement this Mental Hygiene Law change, Local Assistance General Fund appropriation language will also be modified to permit such payments.

Part G – Eliminate mental health outpatient services as services that can be considered specialized under section 2807 of the Public Health Law.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget to provide an annual State share savings of approximately $4 million.

Part H – Authorize OMH/OASAS voluntary hospitals to receive Federal disproportionate share payments.

Enactment of this bill is necessary to implement the 2006-2007 Executive Budget as it provides an annual net State savings totaling approximately $28.1 million. The two State agencies impacted are the Office of Mental Health (saving $16.7 million) and the Office of Alcoholism and Substance Abuse Services (saving $11.5 million).

EFFECTIVE DATE:

Part A – Ensure a seamless transition to the new Federal Medicare prescription drug program (Part D); restructure the nursing home reimbursement methodology; implement saving measures to reduce Medicaid costs and establish the Office of Medicaid Inspector General to combat fraud, waste and abuse.

This bill takes effect April 1, 2006 with the following exceptions:

• Eliminating the six month transition period for Part D (Section 1); AWP reduction (Section 31); the mandatory Managed Care enrollment and Family Health Plus co-pays (Sections 53-57) will be effective July 1, 2006;
• Authorizing a Cost of Living Adjustment for AIDS Adult Day Health Care programs (Section 43) will be effective October 1, 2006;
• Strengthening anti-fraud activities (Sections 5-22) will be effective November 1, 2006; and
• Updating the nursing home rates to the 2003 base year contingent on the elimination of various rate add-ons (Section 2-3) and establishing indigent care reporting requirements (Section 39) will be effective January 1, 2007.

Part B – Improve public health services by eliminating low-priority programs, implementing cost saving measures, strengthen fiscal and programmatic oversight and make new investments in local public health programs.

This bill takes effect April 1, 2006.  However, sections ten through fourteen, regarding Article VI of Public Health Law, will be effective January 1, 2007 and sections 31 through 35 will be effective July 1, 2006.

Part C – Provide a three year Cost of Living Adjustment (COLA) for designated human services programs.

This bill takes effect April 1, 2006 and expires April 1, 2009.

Part D – Modify the Health Care Reform Act (HCRA) and enact proposals to preserve its fiscal stability, and authorize additional non-profit insurance company conversions.

This bill takes effect immediately.

Part E – Authorize regulatory enforcement action fines to be deposited in the Chemical Dependence Service Fund.

This bill takes effect April 1, 2006.

Part F – Authorize OASAS to make State aid payments to entities which assume either temporary or permanent responsibility for certain chemical dependency programs.

This bill takes effect April 1, 2006.

Part G – Eliminate mental health outpatient services as services that can be considered specialized under section 2807 of the Public Health Law.

This bill takes effect April 1, 2006.

Part H – Authorize OMH/OASAS voluntary hospitals to receive Federal disproportionate share payments.

This bill takes effect April 1, 2006.