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2009-10 Enacted Budget Gap-closing Plan – Health Care

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Health Care Initiatives

The Enacted Budget implements a Medicaid and health care savings and reform plan that includes $2.3 billion in 2009-10 savings including actions taken in the Deficit Reduction Plan, the largest amount in state history.   The budget includes major, permanent reforms to the way health care is delivered in New York to rationalize the State’s Medicaid reimbursement system and provide increased investment in primary and preventative care.

Recommendations aimed at rationalizing ineffective reimbursement methodologies include:

Gap Closing Actions

Enacted Budget Health Care Gap-closing Actions and Investments
Proposal 2009-10
($ in millions)		 2010-11
($ in millions)
Hospital Savings $306.4 $365.8
Nursing Home Savings $224.6 $302.6
Home Care Savings $67.6 $84.5
Pharmacy Savings $27.7 $64.6
Insurance Savings $743.5 $477.9
Medicaid Fraud Prevention $175.0 $175.0
Utilization Management Savings $13.3 $19.7
Managed Care Savings $151.8 $179.5
Other Actions $540.5 $6.3
All Other Public Health Actions $104.6 $56.7
Total — Savings Proposals $2,355.0 $1,732.5
Investments ($59.0) ($138.1)
Grand Total — Savings & Investments $2,296.0 $1,594.4

Hospital and Community-based Services

A series of proposals focus on continuing the multi-year hospital reimbursement reform started last year which will properly redirect resources and improve access to primary and preventive care while achieving savings through a more rational inpatient payment system.
These actions will save $306.4 million in 2009-10 and $365.8 million in 2010-11.

Nursing Homes

New York spends $7 billion on nursing homes, far more than any other state and about the same as California and Pennsylvania combined. Medicaid underwrites 72 percent of nursing home costs in New York – exceeding the national average of 65 percent. The Long Term Care Reform Act creates a more rational reimbursement system that is simple, transparent and uses an average price adjusted for the needs of the residents, not the individual facility’s costs. These proposals will improve quality and efficiency and help control rising nursing home costs, making New York’s payments more consistent with other states over time, and save $224.6 million in 2009-10 and $302.6 million in 2010-11.

Home Care

Home care is the fastest growing area in Medicaid. New York currently spends far more on home care than any other state in the nation. The Enacted Budget will save $67.6 million in 2009-10 and $84.5 million in 2010-11.

Pharmacy Services

Proposals in this area reduce state spending and maximize non-state revenues by directly negotiating with manufacturers for drug rebates and by accessing federal Medicare Part D coverage for New York’s seniors. Common sense measures employed by commercial drug plans to ensure patients receive cost-effective high quality care are also proposed. These proposals will save $27.7 million in 2009-10 and $64.6 million in 2010-11.

Insurance

Targeted assessments on the Insurance industry are recommended to reflect the need to receive contributions from each sector of the state’s healthcare system for gap-closing purposes. These actions will reduce spending by $743.5 million in 2009-10 and $477.9 million in 2010-11.

Medicaid Fraud Prevention

Over the last two years, the state has substantially increased resources used in identifying fraud and abuse in the Medicaid system. The number of staff targeted to fighting fraud in the Office of the Medicaid Inspector General has been significantly increased (more than 200 since 2006-07) and the computer systems have been upgraded, utilizing state-of-the-art technology to detect fraudulent practices before payments are made. These investments are paying dividends with the state share of collections from Medicaid fraud enforcement expected to reach a record level of $870 million in 2009-10, an increase of $175 million or 25 percent over last year.

Utilization and Management of Services

These proposals continue efforts commenced in recent years to manage the provision of Medicaid services to ensure that they are appropriate, meet patient need, are provided in a cost efficient manner and generate savings of $13.3 million in 2009-10 and $19.7 million in 2010-11.

Managed Care

These proposals maximize the use of federal money and control the growth of spending while ensuring that managed care plans are able to provide access to quality care for Medicaid beneficiaries. These measures would save $151.8 million in 2009-10 and $179.5 million in 2010-11.

Other Budget Actions

A variety of other actions are proposed to achieve health care savings totaling $540.5 million in 2009-10 and $6.3 million in 2010-11.

Public Health and Aging Programs

The Department of Health and the State Office for Aging administer a number of programs which support New York’s public health and senior care systems. The budget achieves savings by recommending operating efficiencies, generating revenues, and reducing spending on less essential and lower priority programs. These measures combined will save $104.6 million in 2009-10 and $66.7 million in 2010-11.

In addition, the State uses approximately $1 billion of the $5 billion state FMAP benefit provided through Medicaid to allow the restoration of health care savings proposals. This includes funding for hospitals ($393 million), nursing homes ($174 million), home care ($133 million), insurance ($112 million), pharmacy ($72 million) and other health care savings ($97 million).

Critical Investments

The Executive Budget recommendations include funding for several targeted investments that are priority areas and critically necessary. These investments will cost $59.0 million in 2009-10 and $138.1 million in 2010-11.

Transitioning to a stronger health care system

Savings actions allow New York to invest in primary and preventive care and avoid unnecessary and expensive hospitalizations, creating a higher quality and more sustainable system. New outpatient investments include:

The Enacted Budget recognizes the fact that hospitals will face challenges when adapting to a more rational reimbursement system, creating efficiencies in their operations, and re-aligning their business models towards primary care. To assist them, this budget includes a $75 million Transitional Reform Fund. This “bridge to reform” provides affected institutions with a greater opportunity to adjust their operations through enhanced resources as they realign their delivery model away from expensive inpatient care and towards primary and preventive care and maintain services for uninsured patients. Other initiatives include:

Further, the budget includes a designated pool of $25 million in discretionary HEAL funding (which becomes a total of $50 million when matched with federal funding through the Federal-State Health Reform Partnership (FSHRP)) to assist struggling safety net and other hospitals with the capital for restructuring necessary to transition to a new reimbursement system. Finally, the budget authorizes the Department of Health to pursue a waiver from the federal government, as part of the State’s renewal on its current 1115 waiver this year, to seek enhanced federal matching dollars to support hospital and primary care reform.

Long Term Care Investments

Alternatives to nursing home care are expanded to allow seniors and the disabled to remain in the community by:

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