New York's Medicaid program is the most expensive program in the nation. Serving nearly 3.7 million New Yorkers (2004-05 Division of the Budget estimates), Medicaid expenditures are projected to reach $44 billion in 2004-05 if changes are not implemented. These expenditures are paid by the Federal government, the State, and our local governments. During these tough fiscal times, the State and local governments have realized that they can no longer afford the program as it is currently structured. Recognizing that the Medicaid system must be restructured, the Assembly Minority members have been studying Medicaid and are advancing a program that will begin to restructure the Medicaid system. The initiatives included in this plan will continue to guarantee access to quality health care for New York's most needy, while making the program affordable to the State and the local real property taxpayer.

The Assembly Minority Medicaid Restructuring Plan proposes a total of $625.5 million in cost saving measures for 2004-05, including $539 million in State share savings that were proposed in the Executive Budget. In addition, Assembly Minority members believe that a restructuring of New York City's Personal Care program is in order, to reduce the excessive number of hours that are used in New York City. This initiative would produce State savings of $96 million in 2004-05. To encourage more New Yorkers to purchase long term care insurance, Assembly Minority members also call for an increase in the existing Long Term Care tax credit.

For the past two years, Assembly Minority members have also called for the complete State takeover of local Medicaid costs over a five-year period. The Assembly Minority Conference believes that the best way to help pay for the cost of a takeover is to "swap" a portion of the local Sales Tax revenues (up to one percent), in exchange for the State taking over the local share of Medicaid. Under this plan, a State takeover would begin in 2005. In order for the State to assume the entire local share of Medicaid, there must be an ongoing commitment to control Medicaid spending as well as identifying additional revenues to pay for the State takeover. To stimulate this discussion, this plan includes recommendations advanced by the Governor's Health Care Reform Working Group and the New York State Senate's Medicaid Reform Task Force. Assembly Minority members will also continue to explore other revenue streams that could support a State takeover.

A major component of the Assembly Minority member's Roadmap to Renewal is the complete State takeover of local Medicaid expenditures over a five-year period. To pay for the State assumption of these costs, this plan calls for the adoption of $625.5 million in Medicaid cost containment (outlined above) as well as requiring counties to forego ("swap") an amount of their local Sales Tax revenues in exchange for the State picking-up the local costs of Medicaid.

Assumptions Made in Developing Proposals

• A State takeover will begin in a local government's 2005 fiscal year.
• Medicaid spending has been trended forward from 2003 expenditures as follows:

  2004 growth	15 percent Rest of State; 10 percent New York City
  2005 growth	10 percent Statewide;
  2006 & 2007 growth	8 percent;
  2008 growth	7 percent; and
  2009 growth	6 percent.

• Sales Tax revenues have been trended forward from 2003 collections as follows:

  2004 growth	7.7 percent
  2005 growth	2.9 percent; and
  2006-2009 growth	3.5 percent.

• New York City will dedicate specific revenues to a State takeover in exchange for their Medicaid costs being picked up by the State.
• A total of $625.5 million in Medicaid cost containment should be adopted in the final budget agreement.

The Assembly Minority State Takeover Finance Plan

The Assembly Minority Plan proposes that counties "swap" the equivalent of one percent of their local Sales Tax collections in exchange for the State assuming the local share of Medicaid. This plan would continue to swap one percent of Sales Tax revenue over time, allowing for any Sales Tax growth to partially offset any growth in Medicaid expenditures. The State would begin to takeover the local share of Medicaid in 2005, and no county would have to swap more Sales Tax revenue than its Medicaid costs.

A significant element of any State takeover is the cost associated with New York City. Under this plan, New York City will dedicate specific revenue streams (Personal Income; Hotel; Utility; and Auto Use) that will be the equivalent to the City's Medicaid expenses in City Fiscal Year (CFY) 2005-06. It is projected that New York City's local share of Medicaid in CFY 2005-06 will total $4.9 billion, growing to $6.1 billion in 2008-09. Using the City's forecast for these four taxes, the additional costs to the State are as follows:

Fiscal Impact

With the Assembly Minority Plan being phased-in over a five-year period, there is no additional cost to the State in the next two fiscal years. This can be accomplished by utilizing the Governor's budgeted cost projections associated with his proposed long term care takeover proposal.

The figures in this table have been derived by calculating the amount that each county and the City of New York will be spending on Medicaid (using 2003 as the base year) for the years 2005 through 2009, as well as what local Sales Tax collections will be for the period 2005-2009. (Please refer to: Assumptions Made in Developing Proposals). In the case of New York City, specific revenues have been identified that will be swapped with the State (Personal Income Tax; Hotel Tax; Auto Use Tax; and Utility Tax). These revenue streams have been trended forward based upon growth projections calculated by New York City.

To calculate the County Savings column, in each of the five years of this plan, a county's Medicaid cost is compared to the amount of Sales Tax revenues that are to be swapped (20 percent in 2005; 40 percent in 2006; 60 percent in 2007; 80 percent in 2008; and 100 percent in 2009) up to one percent. If a county's Medicaid costs exceed their Sales Tax collections to be swapped, the county will realize a County Savings.

Preferred Drug Program/Prior Authorization - New York should join 30 other states in implementing a preferred drug program. The preferred drug program includes: a Pharmacy and Therapeutics Committee; a prior authorization process; a supplemental rebate program; an alternative rebate demonstration program; a clinical drug review program; education and outreach provisions; and a review and reporting system. The preferred drug program would seek to encourage the use of drugs that are therapeutically appropriate and cost effective. This program could be expanded in 2006-07 to include the EPIC program (Proposed in 2004-05 Executive Budget; proposals also introduced by Senate and Assembly). State share savings: $37.1 million in 2004-05; $118.6 million in 2005-06.

Prior Approval of Certain Nursing Home Drugs - Require a prior authorization for prescription drugs that are reimbursed over and above the nursing home rates (Proposed in 2004-05 Executive Budget). State share savings: $2.0 million in 2004-05; $2.0 million in 2005-06.

Forge-Proof Prescription Drug Program - Requires non-reproducible prescription forms for all prescriptions to reduce the illegal marketing of prescription drugs; strengthens criminal penalties for possessing or falsifying prescriptions and engaging in drug diversion; and eliminates the fees that physicians are charged for prescription forms for controlled substances (Proposed in 2004-05 Executive Budget). State share savings: $6.9 million in 2004-05; $28.7 million in 2005-06.

Six Percent Gross Receipts Assessment - Increases to six percent the monthly gross receipts assessment on nursing homes and makes the assessment permanent. The assessment, imposed under Chapter 1 of the Laws of 2002, was scheduled to decrease from 5 percent to 2.5 percent in 2004-05 (Proposed in 2004-05 Executive Budget). State share savings: $124.9 million in 2004-05; $258.3 million in 2005-06.

AIDS Nursing Homes - Requires that all AIDS nursing home facilities must refinance their debt at lower interest rates (Proposed in 2004-05 Executive Budget). State share savings: $2.6 million in 2004-05; $2.6 million in 2005-06.

Wage Equalization Factor Update - Updates the Wage Equalization Factor (WEF) by changing the base year to 2001. This would provide a financial benefit to more than 280 facilities. The WEF update would also include a "hold harmless" provision to ensure that nursing homes are not negatively impacted by this update. To pay for the WEF update, the rate adjustment provided to nursing home facilities with 300 or more beds will be phased-out over the next four years and the rate add-on provided to hospital based nursing home facilities should be eliminated (Proposed in 2004-05 Executive Budget).

0.7 Percent Gross Receipts Assessment - Re-establishes a permanent 0.7 percent non-reimbursable monthly gross receipts assessment on certified home health agencies, long term care home health care programs and personal care programs (licensed home care services will also be assessed if it is deemed necessary to comply with Federal provider tax rules). (Proposed in 2004-05 Executive Budget). State share savings: $15.0 million in 2004-05; $17.0 million in 2005-06.

Home Care Targets - Increases the current home care savings target from $33.4 million to $44 million in the following areas: New York City; Nassau; Ulster; and Westchester (Proposed in 2004-05 Executive Budget). State share savings: $11.0 million in 2004-05; $11.0 million in 2005-06.

Close Various Loopholes for Medicaid Eligibility - It is imperative to modify Medicaid eligibility requirements for long-term care by closing various loopholes. Specific changes include: imposing an asset transfer penalty on home and community-based care; eliminating"spousal refusal"; extending the "look-back" period from 36 to 60 months for asset transfers; and strengthening the penalties for individuals who transfer assets to qualify for Medicaid in nursing homes (Proposed in 2004-05 Executive Budget). State share savings: $25.0 million in 2004-05; $82.0 million in 2005-06.

Reduce New York City Personal Care Hours - According to a recent study published by the Citizens Budget Commission (Confronting the Tradeoffs in Medicaid Cost Containment, February 2004), New York spends an average of $7,412 annually for personal care, more than triple the average of $2,079 in the rest of the nation. The gap in spending is the result of a higher number of hours being used for personal care in New York as compared to the nation (30 hours per week compared to 11 hours per week).

There is also a gap with respect to utilization and expenditures between New York City and the rest of the State. According to the Citizens Budget Commission report, 78 percent of personal care recipients live in New York City, and they account for 85 percent of total spending. From the perspective of utilization, New York City far exceeds the rest of the State as it relates to the number of hours used per recipient (see table on page 4). A total of only 18 percent of New York City recipients use 50 or fewer hours per month, compared to 55 percent in the rest of the State. In contrast, 18.5 percent of New York City recipients use between 301 and 800 hours per month, compared to only 6.4 percent in the rest of the State.

Excerpt from: Confronting The Tradeoffs in Medicaid Cost Containment

New York City recipients have this unusually high number of hours of care because HRA (Human Resources Administration) has created a procedural bias toward more generous authorization of hours of care for new cases. In addition, HRA has difficulty reducing the number of hours of care for under-care cases.

The process for determining the appropriate number of hours of care involves separate assessments by a nurse from one of the not-for-profit agencies, as well as an assessment by the HRA Community Alternative Service Agency (CASA) case manager. These two assessments are forwarded to the CASA Medical Review Team, which, based on the two assessments, approves a number of hours of service. The agency actually assigned the case then performs its own assessment to see whether they agree with the level of service authorized, before they accept the case. If the agency disagrees with the approved level of service, negotiations may ensue with a second review by CASA staff or a referral to a second vendor whose staff will make a separate assessment. Because all of the parties involved feel they may be criticized or opposed for approving too few hours, and because vendors have a direct economic stake in authorizing more services, there is a tendency to err on the side of higher service levels.

The Assembly Minority members recommend that the average number of personal care hours be reduced from 30 hours per week to 27 hours per week. This initiative would generate State share savings to Medicaid in the amount of $96 million.

Increase the Long Term Care Insurance Credit - Taxpayers currently may claim a credit equal to 10 percent of the premiums paid for long-term care insurance policies approved by the New York State Department of Insurance. To encourage more New Yorkers to purchase long-term care insurance, the credit should be increased from 10 percent to 15 percent (Proposed by Assembly Minority members). Fiscal Impact: The cost of this credit will increase from $18 million to $27 million in State Tax Year 2004 (based on 60,000 claims). Assuming an additional 40,000 claims are filed in Tax Year 2005, the total cost to the State to provide the 15 percent credit will be $45 million.

Restructure the Family Health Plus Program - Modify the Family Health Plus program to resemble private insurance and the Healthy New York program. This is to be done by: imposing co-payments ($10 for physicians and other outpatient services; $50 for inpatient services; $25 each for ambulance and emergency room services; and $5 for brand name drugs and $3 for generic drugs); modifying the benefit package by eliminating vision care and adult dental services; establishing an assets test for eligibility similar to Medicaid's asset test; requiring a 12-month waiting period for individuals who previously had health insurance; and establishing "crowd-out" provisions so that the program does not become a substitute for employer-based health care coverage (Proposed in 2004-05 Executive Budget). State share savings: $31.1 million in 2004-05; $42.5 million in 2005-06.

Shift Children from Medicaid to Child Health Plus - Children ages 6-19 years old with family incomes from 100 percent to 133 percent of the poverty level should be shifted to Child Health Plus (Proposed in the 2004-05 Executive Budget). State share savings: $13.8 million in 2004-05; $39.5 million in 2005-06.

Lag Medicaid Provider Payment - Lag for two days, the last Medicaid payment to providers, pushing the payment into the 2005-06 fiscal year (Proposed in the 2004-05 Executive Budget). State share savings: $190 million in 2004-05; $190 million cost in 2005-06.

Continue 2003-04 Reduction of Mentally Disabled Payment - Continue through the 2004-05 fiscal year, a $19.5 million reduction in State aid to counties for services provided to mentally disabled individuals (Proposed in the 2004-05 Executive Budget). State share savings: $19.5 million in 2004-05.

Limit Enteral Payments - Conform with Medicare policy payments made for enteral nutrition products and food supplements with certain exceptions (Proposed in the 2004-05 Executive Budget). State share savings: $5.2 million in 2004-05; $10.3 million in 2005-06.

Enroll Dual Eligibles in Managed Care - Authorizes prescription drug coverage for dually eligible recipients in health plans that provide both Medicaid and Medicare coverage (Proposed in the 2004-05 Executive Budget). State share savings: $0.1 million in 2004-05; $2.1 million in 2005-06.

The following measures, which do not require legislative approval, have been proposed in the 2004-05 Executive Budget:

• Manage Utilization of High Cost Specialty Populations;
• Pay Medicare Part A premiums for Dual Eligibles; and
• Authorize Voluntary SSI Managed Care Enrollment

Assembly Minority members are also advocating that the following initiatives be explored to determine whether or not there can be any measurable savings to the State's Medicaid program:

Pharmacy Initiatives
Establish Trial Periods (14 day supply) for first-time users of a long-term pharmaceutical. Under current practice, doctors authorize a larger supply that may be wasted if the individual does not respond favorably to the drug (recommended by the Senate Task Force).

Explore the possible re-use or return of unopened prescription drugs, including individually packaged pharmaceuticals, used by health care institutions, to avoid unnecessary waste of prescription drugs (recommended by the Senate Task Force).

Long-Term Care Reforms
Expand Long Term Care Insurance Opportunities - The Insurance Law is amended to establish a demonstration program to evaluate different approaches to increase the use of private long-term care insurance. The New York State Long Term Care Partnership is also being modified to make private long-term care insurance more accessible. A total of $15 million in the Health Care Reform Act (HCRA) is made available for these initiatives (proposed in the 2004-05 Executive Budget). State share savings: There is no State share Medicaid savings projected from this initiative.

Create Long-Term Care Savings Accounts - These accounts could be used alone or with a long-term care insurance policy to assist individuals in assuming personal responsibility for their long-term care needs (recommended by the Governor's Working Group on Health Care).

Encourage Development of Continuing Care Retirement Communities (CCRCs) - CCRCs, an alternative proposed by the Assembly Minority Conference in the early 1990s, provide a combination of comprehensive health care and residential services along a continuum on a single site (recommended by the Senate Task Force).

Authorize Nursing Home Right-Sizing - Subject to cost-effectiveness and access tests, facilities would be authorized to convert a portion of available bed capacity to other service categories, such as: assisted living; long term, home health care; or adult day care (recommended by the Senate Task Force).

Efficiencies to the Medicaid System
Mandatory Medicaid Managed Care for Rural Areas - Current law requires that Medicaid recipients have the choice of at least two health plans to participate in Mandatory Medicaid managed care. This makes it difficult for rural areas to offer managed care. Rural areas should be allowed to implement mandatory managed care, even if two health plans are not available (recommended by the Senate Task Force).

Medicaid Optional Services - New York provides one of the most generous Medicaid programs in the nation. In an effort to make the Medicaid program more like coverage provided by private health insurers, the State should take a comprehensive look at the Medicaid optional services that are currently being provided under New York's Medicaid program.

Revenues

Make Permanent the Federal Medical Assistance Percentage (FMAP) Increase - The Federal government provided fiscal relief to states through a 15-month temporary increase in the Federal Medicaid share of 2.95 percent. New York State and its local government will have received $1.5 billion in additional Federal Medicaid support between April 1, 2003 and June 30, 2004. State and local government officials should lobby the Federal government for a permanent increase in Federal support (recommended by the Senate Task Force).