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Senator Bruno discusses the Senate proposal at a news conference in Albany. |
Takeover of Family Health Plus Costs Would Reduce Local Property Taxes
Tuesday, December 23, 2003
The Senate Medicaid Reform Task Force today recommended that the state take over the local share of the Family Health Plus program and implement other reforms and cost containment that would save state and local taxpayers $2.5 billion over five years. The takeover was recommended as part of the first comprehensive overhaul of the state Medicaid program since it was enacted.
Counties and local property taxpayers would receive nearly $2 billion of the savings that would result from the more than 40 proposals to fundamentally restructure Medicaid to make it more efficient, improve the quality of care and provide fiscal relief to state and local taxpayers.
"When Family Health Plus was first proposed in 2000, the Senate strongly advocated for the state to pay for the program, with no local share, just as it does for Child Health Plus," Senate Majority Leader Joseph L. Bruno said. "Since that time the world has changed, with the horrible impact of the September 11th attacks and the weakening of the economy, the need to relieve local taxpayers of this mandate is even greater now. In just a year�s time, enrollment in Family Health Plus has increased 91 percent and the cost has increased 625 percent. Local governments can no longer bear the financial burden of the extraordinary growth rate in this program without compromising other essential services. By taking over these costs, we expect local governments to pass the savings on to taxpayers."
In addition to the takeover of the local share of Family Health Plus, the Task Force recommendations include substantial reforms that will save state government $600 million on top of the nearly $2 billion in local savings over five years. The panels� recommendations include reforms to the Long Term Care program, including stronger estate planning provisions; reforms to the control skyrocketing pharmaceutical costs including the establishment of a preferred drug list; establishment of disease management programs to better coordinate care and improve the efficiency of the Medicaid program; and establish comprehensive utilization review to closely monitor patient use of the system and provider billing of the Medicaid system.
"Over the past three years local Medicaid costs have increased 34 percent, crippling county budgets and driving massive local property tax increases," Senator Bruno said. "Medicaid spending in New York is a runaway train, but the recommendations of this Task Force can bring it under control."
Senator Bruno and Task Force Co-Chairs Senator Kemp Hannon (R-C, Garden City) and Senator Ray Meier (R-C, Western) released the Task Force report at a Capitol news conference today. The Executive Committee of the Senate Task Force on Medicaid Reform also includes Senators James Wright (R-C-I, Watertown), Elizabeth Little (R-C-I, Queensbury), Mary Lou Rath (R-C, Williamsville), Frank Padavan (R-C, Bellerose) and Senate Minority Leader David Paterson (D-Manhattan).
"The Task Force is also recommending a fundamental restructuring of Medicaid that will establish a sensible and coherent set of public policy principles to make Medicaid operate more efficiently so it can better serve New Yorkers who depend on it, to control the future growth of Medicaid and to protect local property taxpayers," Senator Bruno said.
"I want to congratulate Senators Hannon and Meier, all the members of the Task Force Executive Committee and the Task Force Advisory Council for their hard work," Senator Bruno said. "This has been an exhaustive process, but they have reached out to everyone impacted by the Medicaid system, they have researched, asked questions, and, most importantly, they have listened. The result of their hard work will be more efficient health care for Medicaid clients and savings for taxpayers."
"This report recognizes the Medicaid program needs structural change and that the tools of technology can help us provide better and effective care," Senator Hannon said. "This was an arduous undertaking, but one that concluded successfully. This report reflects the shared goals of enhancing the quality of health care delivered to the poor and allowing government to receive better value for its health care dollar."
"The recommendations of the Task Force envision a Medicaid system which respects patients and taxpayers, uses technology to deliver and manage effective care and not just pay bills, introduces personal involvement and responsibility on the part of the recipient, and particularly reforms the long term care system to de-emphasize institutional care and to permit responsiveness to consumer needs," Senator Meier said. "At the same time, these reforms will provide fiscal relief within the state budget and will enable us to provide relief to local governments and taxpayers."
The Task Force report, which includes more than 40 specific policy recommendations, follows six months of public round table meetings across the state, open discussions and information gathering.
The bipartisan panel worked with a 43 member Advisory Panel, held five public roundtable discussions with 53 participants, received more than 70 document submissions totaling more than 1,000 pages, held 10 public working group meetings, listened to health care providers, consumers, local government officials, academics, advocates and representatives of every sector of society impacted by our health care system regarding the role Medicaid plays in this system.
The Task Force also recommended that state and local officials, together with the New York Congressional Delegation request that federal funds provided through the Federal Government to increase the Federal Medical Assistance Percentage (FMAP) be extended, which could provide State and local governments $900 million in additional Medicaid relief next year and $1.3 billion the following year.
"Constant cost increases for Medicaid hurt funding for other areas, including education and public safety. More importantly, we can't keep passing the costs on to our local counties and cities," Senator Frank Padavan (R-C, Bellerose) said. "Through this Task Force, the Senate has taken the lead on Medicaid reform. I look forward to working in the new year to implement our recommendations and reduce costs."
"Long-term care spending easily represents the largest piece of New York�s Medicaid pie," said State Senator Mary Lou Rath (R-C, Amherst), chair of the Task Force�s Long-Term Care Working Group. "The average cost of care for elderly and disabled Medicaid recipients is nine times more than the average cost of covering a child. New York�s long-term care health delivery system focuses on placing patients in situations that do not necessarily represent the best option for the patients. The system is hard to understand and often places people in levels of care which overlook their desire to remain independent. The recommendations we are making today will start the process of streamlining and right-sizing the system. These reforms will benefit both patients and local taxpayers."
"There needs to be a long term commitment to Medicaid reform that addresses the fiscal impact on local and state governments, as well as ensuring that medical services are available to Medicaid recipients," said Senator Jim Wright (R,C,I-Watertown). "The recommendations in the task force�s
report are the first important steps to initiating these necessary reforms."
"The recommendations we're offering today not only provide short- and long-term savings for taxpayers, but improve the delivery and quality of services for those in need of help," said Senator Betty Little (R,C,I-Queensbury). "The Task Force succeeded in achieving these two objectives because the hundreds of health care providers, local officials, academics, consumers and others who participated in the process, while representing their own interests, shared our complete commitment for finding realistic, practical and cost-saving solutions."
HIGHLIGHTS OF TASK FORCE RECOMMENDATIONS
(a complete list of recommendations is contained in the report):
FAMILY HEALTH PLUS TAKEOVER AND MODIFICATIONS
Between November 2002 and October 2003, Family Health Plus spending totaled $797 million, including $218.7 million each for the State and local governments. This spending level represents a 625 percent increase over the previous 12 month period, when State and local costs totaled $30.1 million each. In October 2003, there were 283,019 individuals enrolled in Family Health Plus, reflecting an increase of 135,000 individuals, or 91 percent, from October 2002.
The state takeover of the local share of Family Health Plus costs would be fully implemented over two years. The takeover would save local taxpayers $168.5 million in 2004-05 and $398 million in 2005-06. Total local savings reach almost $1 billion by 2008-09.
In an attempt to control the growth of this program, while continuing to provide health care coverage to those in need, modifications should be made to Family Health Plus. While income eligibility levels would remain the same, the existing benefit package would be modified and modest cost sharing measures, on a sliding scale according to income, would be required. An asset test for eligibility should also be established. Also, a buy-in provision at full cost for individuals above the eligibility limit should be authorized. These and other efforts to restructure, reform and implement cost containment would save local governments more than $900 million, and State government an additional $560 million, by 2008-09.
CONTROL PHARMACEUTICAL COSTS
In State Fiscal Year 2003-04, Federal, State and local Medicaid spending for pharmaceuticals are estimated at $3.7 billion. This figure reflects an increase of 19 percent over the previous year total of $3.1 billion. Moreover, during the most recent five years, Medicaid pharmaceutical spending has grown by over 113 percent, making it one of the fastest growing components of the Medicaid budget.
While the argument has been made that increased use of pharmaceuticals leads to reduced costs for other medical services, including inpatient hospitalizations and physician services, it is still the State�s obligation to assure that pharmaceutical expenditures are made in the most quality conscious and cost effective manner possible. The following recommendations provide the most comprehensive approach to implementing improvements to the Medicaid pharmaceutical program, with respect to both assuring appropriate utilization and controlling costs.
Recommendations to control pharmaceutical costs include the following:
Establish a preferred drug list and prior authorization program to assure the most effective utilization of prescription drugs and to reduce the cost of drugs by generating supplemental rebates from drug manufacturers. Establishment of a preferred drug list would save state and local governments almost $730 million over five years ($364.3 million state/$364.3 million local).
Expand use of the 340B Federal Drug Discount Program, which is designed to offer eligible drug purchasers (various types of health care providers) outpatient pharmaceuticals at discounted rates;
Explore re-importation of drugs from Canada, as clarified by the Medicare Prescription Drug Improvement and Modernization Act of 2003; and
Expand the use of generic drugs.
Reform the Long Term Care System
At an average cost of over $200 a day, or in excess of $70,000 per year, a family members� nursing home stay can be financially devastating. The lack of affordable and reasonable options for private financing of long term care, combined with the high cost of long term care services, creates a strong incentive for families to transfer assets in order to qualify for government financing of their long term care needs. As a result, Medicaid has become the primary payor of long term care costs in New York State.
It is estimated that Medicaid costs for nursing homes and home care will exceed $10.5 billion in Federal, State and local spending in State Fiscal Year 2003-04. As New York State�s senior population grows, the current publicly-financed Long Term Care system threatens to jeopardize the financial stability of the Medicaid program. However, in order for the State to reform existing estate planning practices, which allow for asset transfers and refusal to pay the cost of care, it is imperative that meaningful and affordable alternatives to publicly-financed long term care services be developed.
Long Term Care reforms recommended by the Task Force include the following:
Encourage purchase of private Long Term Care insurance by expanding existing financial incentives.
Encourage the use of equity available through life insurance policies to cover the costs of long term care, by allowing the acceleration of life insurance benefits. The use of reverse mortgages could also be encouraged for the same purpose.
Encourage the development of integrated Long Term Care programs such as Continuing Care Retirement Communities (CCRC�s) and alternate models. CCRCs provide a combination of comprehensive health care and residential services along a continuum on a single site. Through a prearranged, privately financed agreement, the CCRC agrees to provide all phases of long term care for the individual. Other states have encouraged the growth of the CCRC model, however current statutory and regulatory barriers in New York State stifle their development.
Expand efforts to maximize third party insurance coverage for Long Term Care, and implement a system to require Medicare appeals prior to Medicaid payment being authorized, to assure that Medicaid is the payor of last resort whenever appropriate.
Substantially restrict the ability of a spouse to refuse to contribute to the cost of long term care for their partner under all but very limited circumstances.
Restrict asset transfers by extending the look back period, applying these restrictions to non-institutional care as well.
Re-examine the maximum income and resource limits for the spouse of an institutionalized Medicaid recipient. New York State�s allowances are the most generous in the country and contribute substantially to increased Long Term Care related Medicaid costs.
Require direct payment of a nursing home resident�s Federal SSI funds to the nursing home, in order to assure that facilities receive the full amount of funding they are entitled to.
Establish Disease Management Programs
A small population of chronically ill patients are responsible for the overwhelming majority of Medicaid spending, yet they are exempt from managed care. Development of several disease management demonstration programs for chronically ill populations would shift Medicaid from a system focused on paying providers to a system that emphasizes coordinated care, improving both the quality and cost-effectiveness of care.
Establish Comprehensive Utilization Review
In order to assure quality care, and personal and fiscal responsibility within the Medicaid system, appropriate utilization of medical care should be a goal of patients, providers, and payers alike. Numerous studies indicate that over-utilization and under-utilization of medical services can produce negative outcomes for patients. The establishment of a comprehensive utilization review program, that focuses on medical necessity and outcomes, can help determine the appropriate frequency, mix and intensity of Medicaid services, and provide for close monitoring of how patients are using the health care system and how providers are billing the Medicaid system.
This information would allow the development of best practice strategies and coordination with the development of disease management programs to respond to over-utilization, under-utilization or poor patterns of care, as well as to uncover potential cases of Medicaid fraud.
Other recommendations of the Task Force include:
> Authorize mandatory Medicaid managed care in rural areas
> Promote greater consistency and standardization of managed care programs
> Authorize use of Medical Savings Accounts
> Establish a Health Care Monitoring Entity to track financial stability of providers
> Review the Certificate of Need process
> Implement Regulatory Reform
> Explore Tort Reform
> Work with the Federal government to increase the Federal share of Medicaid funding
MEDICAID FACTS AT A GLANCE
> New York State spends $13 billion a year on Medicaid.
> When the local and federal shares are figured in, the total cost of New York�s Medicaid program is $41 billion.
> Over the past three years, New York�s State share of Medicaid has grown at an average annual rate of 10.5 percent, while the rate of inflation has increased by only 2.2 percent.
> Medicaid spending in New York is $1,378 per capita, more than double the national average of $598 per capita.
> At the local level, Medicaid spending has increased 34 percent over three years, from $3.7 billion in 1999 to $4.9 billion in 2002.
> Nearly 80 percent of all nursing home residents in New York are Medicaid beneficiaries, compared to the national average of 64 percent.
> Medicaid costs for nursing homes and home care will exceed $10.5 billion in Federal, State and local spending in State Fiscal Year 2003-04.
> The elderly and disabled comprise 30 percent of the State�s Medicaid recipients and account for 78 percent of all Medicaid costs.
> Local governments in New York State support a greater portion of Medicaid costs than local governments of any other State. Although local governments are responsible for approximately 16 percent of the total cost of Medicaid in New York State, New York�s local share of Medicaid represents 84 percent of the local share paid by all localities nationwide.
> In 2003, 28 counties had to resort to property tax increases in excess 10 percent, with an average increase of 12 percent. Although many of the counties have yet to pass their 2004 budgets, it is expected that many will again adopt double digit property tax increases which according to the counties are mainly as a result of the continuing growth in the cost of Medicaid.
LINKS
Report of the Senate Medicaid Reform Task Force
Charts on Growth and Savings
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