Health, Department of

Note: Most recent estimates as of 12/16/08.

Mission

The Department of Health ensures that high quality appropriate health services are available to all New York State residents at a reasonable cost. Department functions and responsibilities include:

• Promoting and supervising public health activities throughout the State;

• Ensuring high quality medical care in a sound and cost effective manner for all residents;

• Reducing infectious diseases such as food and waterborne illnesses, hepatitis, HIV, meningitis, sexually transmitted infections, tuberculosis, vaccine-preventable diseases and chronic disabling illnesses such as heart disease, cancer, stroke and respiratory diseases; and

• Directing a variety of health-related homeland security measures in conjunction with the Office of Homeland Security. As part of this mission, the Department works with the State’s health care community to ensure appropriate readiness and response to potential public health threats.

The Department of Health is also the principal State agency that interacts with the Federal and local governments, health care providers and program participants for the State’s Medicaid program. In addition, the Office of Health Insurance Programs is responsible for developing and implementing strategies to improve access to health insurance coverage for the uninsured and providing for an integrated approach to oversight and administration of the Medicaid program to strengthen coordination within the Department and among State agencies.

Budget Highlights

MEDICAID

Without any new cost controlling measures, total Medicaid spending in New York would grow to $48.2 billion in 2009-10. The 2009-10 Medicaid budget reflects a commitment to an effective and affordable delivery system that promotes high quality health care, protects patients, and ensures access to appropriate services to meet the health care needs of the State’s most vulnerable residents.

Medicaid costs represent the single largest spending area in the State’s budget. Commensurate with the recent economic decline, Medicaid enrollment has increased in the current year and spending growth continues at a rate that places an unaffordable burden on State and local governments. Accordingly, the 2009-10 Executive Budget includes funding to support the Medicaid cap legislation which provides significant fiscal relief to local governments by capping their share of Medicaid costs up to the amount they will have spent in 2005, as modified by a predictable growth factor. To help control and refocus Medicaid spending, the budget recommends a series of actions to limit Medicaid cost increases keeping the program affordable for State taxpayers while ensuring continued access to needed health care services for recipients. This Budget continues efforts to control costs and furthers the fundamental retooling of New York’s health care system by:

• Implementing a Deficit Reduction Plan to achieve savings across all sectors of New York’s health care system;

• Recommending a series of measures to control health care costs, reforming Medicaid reimbursement for hospitals, nursing homes and home care and making needed investments in outpatient services, primary and preventive care, community-based services and quality initiatives;

• Requiring insurers to pay their fair share of health related costs;

• Including several pharmacy initiatives to ensure that the State maximizes manufacturer rebate revenues and Federal funding;

• Realizing efficiencies in Managed Care;

• Advancing measures to appropriately manage utilization of health services;

• Achieving additional savings by fighting Medicaid fraud;

• Recommending several actions to insure that HCRA is fiscally sound;

• Reducing or eliminating lower priority programs;

• Streamlining access to health insurance coverage by eliminating unnecessary steps in the enrollment process; and

• Providing additional resources through the HEAL NY program to support reform and restructuring efforts.

Acute Care

The Health Care Reform Act (HCRA) serves as the statutory basis governing hospital financing. Under HCRA, most non-Medicaid payors negotiate rates with hospitals, encouraging competition in the health care industry. The Budget recommends a series of actions - including increases in the tobacco retail fee and sales tax on non-diet soft drinks - to ensure that HCRA is financially balanced. Absent efforts to control growth, State Medicaid spending on acute care services will reach $2.9 billion in 2009-10. The Budget continues to rationalize reimbursement methodologies, promote increased transparency and accountability in how funding is utilized and makes needed investments. In addition to the savings realized through the Deficit Reduction Plan, the Budget reflects net State savings of $164 million in the acute care area through the following actions:

• Restructure Hospital Inpatient Reimbursement. Continues the hospital reform initiated in 2008-09 that redirects hospital inpatient savings to make investments in primary and ambulatory care. Hospital inpatient rates will be reduced to bring reimbursement closer to costs, the inpatient detoxification reimbursement reform enacted in 2008-09 will be accelerated and other reimbursement reforms implemented.

• Invest in Primary and Outpatient Care. Consistent with inpatient reimbursement reform, additional ambulatory care investments are recommended to increase physician/practitioner fees, augment hospital, community, mental hygiene and substance abuse clinic rates and support other primary care enhancements.

• Redirect Graduate Medical Education Funds. State-funded Graduate Medical Education moneys will be re-directed to draw down matching Federal funds to support indigent care needs. This action will generate State savings of $141 million and maintain the same level of aggregate funding for the hospitals, though distributed based on higher priority indigent care needs rather than for Graduate Medical Education.

Long Term Care

State spending on nursing home and community-based care comprises more than half the General Fund Medicaid budget - or an estimated $5.9 billion in 2009-10. The Executive Budget reflects net State savings of $215 million, in addition to the Deficit Reduction Savings, through the following actions:

• Modify Nursing Home Reimbursement. The Budget replaces the current outdated provider-specific cost-based reimbursement system with a regional pricing model based on quality and efficiency, phases out 6,000 nursing home beds over a five-year period and makes other reimbursement modifications. Under this proposal, the planned update of cost-based rates from 1983 to 2002 would not proceed.

• Reform Home Care Reimbursement. Changes from a provider-specific cost based system to a new pricing methodology based upon patient condition, similar to Medicare, and makes investments to improve quality.

• Invest in Nursing Homes and Community-Based Care. The Budget includes funding for a number of initiatives including quality incentive pools for both nursing homes and home care, 6,000 new assisted living slots, a falls prevention program, support for geriatric nursing training, cash and counseling demonstration programs (to support personally directed home care) and the development of a uniform assessment tool for home care. In addition, the Budget further supports community-based care by lifting moratoriums on the approval of new adult day health care and Certified Home Health Care providers.

• Establish 0.7 Percent Assessment. The Budget establishes a 0.7 percent assessment on home care provider revenues. An assessment of 0.6 percent previously existed from 1995-96 through 1998-99.

Pharmacy

Absent efforts to control growth, State Medicaid spending on pharmacy services will reach $1.5 billion in 2009-10. The budget includes a number of recommendations to control the growth of pharmacy costs. Major budget actions include:

• Modify Supplemental Rebate Program. Discontinue participation in the National Medicaid Pooling Initiative allowing the State to negotiate supplemental rebates directly with manufacturers. This generates State savings: of $1.8 million in 2009-10.

• Require Step Therapy for Certain Drugs. This requires patients to try equally effective lower cost drugs before using higher cost alternatives, generating State savings of $600,000 in 2009-10.

• Allow Denials Based on Medical Necessity. Allow denial of drugs when the prescriber cannot demonstrate medical necessity. This produces 2009-10 State savings of $2 million.

• Establish Drug Utilization Review. Adopt standards developed by the Office of Mental Health in dispensing psychotropic drugs. This action will save $1.8 million in 2009-10.

• Limit Drug Quantity, Frequency and Duration. Use the existing Medicaid prior authorization process to limit the number of units of certain medications that are subject to fraud or misuse. State savings of $9.4 million are estimated for 2009-10.

Managed Care

The State’s Medicaid managed care program - currently authorized through March 2012 - ensures that the neediest people receive high quality, accessible health care. In addition, the program has Special Needs Plans which provide comprehensive services to individuals infected with HIV/AIDS. Medicaid managed care also incorporates a comprehensive set of consumer protections to ensure that all recipients obtain enrollment assistance and quality care, and understand their rights and responsibilities under managed care plans. To date, New York City and 57 counties are operating managed care programs. New York City and 37 of these counties currently require mandatory enrollment. Managed care enrollment is projected to reach approximately 2.21 million by the end of 2008-09 and 2.26 million in 2009-10. The Budget recommendations will generate savings of $84 million in 2009-10. Major recommended actions include:

• Maximize Federal Funding for Family Planning. The Department will claim costs for family planning services provided by managed care organizations which are eligible for enhanced Federal reimbursement of 90 percent.

• Cap Marketing and Administrative Costs. The Budget caps marketing expenses at the statewide average for Medicaid managed care, Family Health Plus and Child Health Plus and caps administrative costs for Managed Long Term Care plans.

• Other Savings Actions. The Budget realizes additional savings by maximizing the enrollment of dual eligibles (those eligible for Medicaid and Medicare) in managed care, shifting Child Health Plus rate setting authority from the Insurance Department to the Department of Health, including personal care services in managed care and other actions.

Medicaid Administration

The Department of Health is responsible for overall management of the Medicaid program, including the State’s interaction with Federal and local governments, health care providers and Medicaid recipients. Counties will continue their role in making Medicaid eligibility determinations and contracting with providers of Medicaid services. Payments to health care providers are made through the State’s computerized payment system - commonly known as eMedNY - that is operated by a private company with oversight by State personnel. The new eMedNY Medicaid System replaced both the Medicaid Management Information System (MMIS) and the Electronic Medicaid Eligibility Verification System (EMEVS) with an integrated claims processing system. The new system provides updated technologies and brings New York State into compliance with new Federal reporting requirements. In addition, eMedNY is being used to substantially enhance front-end detection of Medicaid fraud.

CHILD HEALTH PLUS

New York’s Child Health Plus (CHPlus) program continues to set a national standard for children’s health insurance coverage for children up to age 19. Federal funds combined with State HCRA moneys allow CHPlus to provide comprehensive health insurance benefits for nearly 370,000 children. The Budget continues to provide State-only funds to fully finance the recent expansion of Child Health Plus from 250 percent to 400 percent of the Federal Poverty Level. Family contribution levels will be increased in the Budget on a graduated scale based on income.

FAMILY HEALTH PLUS

The Family Health Plus (FHP) program offers access to comprehensive health coverage for eligible low-income adults who do not have insurance through their employers, yet have incomes that do not qualify them for other publicly financed health programs. Under Family Health Plus, health coverage is provided to families with incomes up to 150 percent of the Federal Poverty Level (FPL). For individuals without children, coverage is offered to those at 100 percent of the FPL. FHP provides comprehensive health insurance benefits to approximately 528,000 adults, utilizing matching Federal funds to finance the program. This budget continues implementation of the Family Health Plus Buy-In Program, which began in April 2008, that gives employers the option to "buy-in" to Family Health Plus coverage for their employees. The State shares in the cost for employees that would have been eligible for Family Health Plus coverage.

OTHER PUBLIC HEALTH PROGRAMS

General Fund appropriations finance 17 percent of the Department of Health’s total budget of $5.3 billion in 2009-10 after excluding Medicaid and HCRA program costs. Other revenue sources, including: 1) reimbursement for patient care provided at the Department’s health care facilities; 2) regulatory fees and audit recoveries; 3) management fees for hospital and nursing home construction projects financed through bond proceeds; and 4) registration, testing and certification fees for various public health services, support 36 percent of the Department of Health’s budget, including the Professional Medical Conduct Program, clinical and environmental laboratory certification activities, and health care facilities’ operating costs. The remaining 47 percent is provided by Federal grants and Enterprise funds.

Capital Project appropriations promote the efficient operation of healthcare facilities statewide and preserve and maintain the Department’s hospitals, nursing homes, and the three separate laboratory facilities in Albany County that constitute the Wadsworth Center for Laboratories and Research. The costs of projects at the health care facilities are funded from the General Fund, HCRA and/or facility revenues.

This overall recommendation ensures that public health priorities are preserved. Major budget actions include:

• Reducing Cost-of-Living Adjustments: The recommendation generates savings by reducing the 2008-09 Human Services Cost of Living Adjustment (COLA) from 3.2 percent to 2.2 percent effective January 1, 2009 (savings of $3.4M). Additionally, the Executive Budget recommends no COLA for 2009-10 (savings of $16.7M). To continue the State’s long-term commitment, these adjustments are planned to resume April 1, 2010, and this budget also recommends extending the COLA for a third year in 2012-13.

• Early Intervention: The Budget includes $160 million for the State share of Early Intervention (EI) which provides services to infants and toddlers under the age of three who have developmental delays. The Budget establishes parental fees at the same levels as recommended for Child Health Plus; requires EI providers to pay an application fee and directly bill third party payors; finances a portion of EI costs with insurance assessments; and modifies EI speech eligibility using evidenced-based criteria.

• General Public Health Works: The Budget includes $201 million for the General Public Health Works Program to reimburse counties for core services. The Budget restructures the GPHW program by discontinuing reimbursement for certain optional services (emergency medical services, laboratories, medical examiners and long-term home health care programs). This generates savings of $16 million in 2009-10.

• Elderly Pharmaceutical Insurance Coverage (EPIC) Program: The Budget includes $415 million for EPIC to ensure that 315,000 senior citizens receive crucial prescription drug insurance. To ensure that Medicare Part D provides appropriate coverage for EPIC seniors, the Budget eliminates wrap-around coverage for drugs not covered by an individual’s Part D plan and requires all EPIC seniors, with no exceptions, who are eligible to enroll in Part D. EPIC will continue to cover Part D premium and "donut hole" costs. Additionally, EPIC would require eligible seniors to enroll in the Medicare Savings Program and cover EPIC mail order purchases. Finally, while EPIC will no longer cover lifestyle drugs, coverage will be offered for mail order purchases. These actions generate savings of $64.4 million in 2009-10.

• Support for EPIC Seniors: The Budget includes $10 million to reduce out-of-pocket expenses for EPIC seniors with incomes below 150 percent of the Federal Poverty Level by eliminating their EPIC fees, and capping co-payments at $15. Currently, that benefit is provided to those with incomes below 135 percent of FPL. Funding of $2 million will be provided to local Area Agencies on Aging and community-based organizations, through the State Office for the Aging’s Budget, to assist EPIC seniors in obtaining appropriate Medicare Part D prescription drug coverage.

• Wadsworth Center/Clinical Laboratories: Maintains funding for the Wadsworth Center for Laboratories and Research to purchase critical equipment, as well as $8 million for capital improvements. The Budget restructures the clinical laboratories fee methodology by replacing the current method of determining fees with a one percent assessment on each laboratory’s gross annual receipts.

• Physician Registration Fees: The Budget increases the biennial physician registration fee, last raised in 1996, from $600 to $1,000 to support ongoing activities.

• Other Savings Actions: The Budget saves $9 million in 2009-10 by reducing non-essential spending for certain public health programs and achieving savings in state operations spending.

• HIV/AIDS: The Budget sustains the State’s commitment to fighting the AIDS epidemic by providing statewide spending of $3.5 billion for AIDS programs, including $125 million for the AIDS Institute. Emphasis will continue to be placed on prevention and specialized services which target resources to populations with the greatest risk of infection.

• HEAL NY: The Healthcare Efficiency and Affordability Law for New Yorkers (HEAL NY) is extended for two years for an additional investment of $650 million, bringing the total investment in this program to $1.7 billion. HEAL supports healthcare projects to upgrade information and healthcare technology, enhance the efficiency of facility operations and support facility improvement, reconfiguration and consolidation.

• Emergency Preparedness: The Budget continues the $40 million reserve appropriation to address any public health emergencies and provides funding to maintain pharmaceutical supplies and medical equipment in the event of an emergency.

• Lead Poisoning Prevention: The Budget recommends a new investment of $2.5 million to enhance the Department’s current Childhood Lead Poisoning Prevention program provide for the screening of a wider spectrum of individuals in targeted areas across the State.

• Roswell Park Cancer Institute: The Budget recommends $101.4 million for the Roswell Park Cancer Institute from HCRA, including $25 million from HEAL for capital projects. Anti-tobacco funding of $14.5 million from HCRA for research studies is eliminated.

• Certificate of Need (CON) Reform: The Budget includes several changes to the Certificate of Need fee schedule that will generate approximately $4 million in new revenue to be used for various enhancements to the CON process, including the development of an electronic submission process.

• Other Public Health Investments: The Budget recommends additional funding to increase awareness and reduce obesity levels, conduct cancer screenings and support food banks.

2009-10 Executive Budget — Agency Presentation
Health, Department of (PDF)