State Senate and Assembly Budget Bills Add another Dimension to Budget Negotiations

More money for Medicaid, no additional MTA tax, repeal of a harmful Medicaid pharmacy benefit all help struggling hospitals

But health plan reforms, workforce initiatives also needed to ease financial pressures

The release of the State Senate and Assembly one-house budget bills in mid-March brings us that much closer to arriving at a final budget by the April 1, 2023 deadline. But these negotiations usually go to the eleventh hour, so it’s not unlikely that this year we may miss that April deadline.

In the meantime, between now and then, the hospital industry hopes the final budget will include the 10 percent increase in Medicaid rates proposed by both chambers, as well as the additional funding for distressed and safety net hospitals, and elimination of the governor’s proposed increase to the MTA payroll tax. Both budget bills also seek repeal of the 340B Medicaid managed care pharmacy benefit change that will result in financial harm and affect access to affordable prescriptions for vulnerable populations when the change takes effect April 1, 2023.

What’s in a Medicaid Dollar?

For hospitals, it is only 60 cents. That means 40 percent of the cost of care for Medicaid patients is not covered by the state. Hospitals have long argued and demonstrated that this gap erodes a hospital’s financial stability. As Medicaid enrollments have increased in recent years, due to the state’s expansion of eligibility income limits, reimbursement simply has not kept pace with this expansion. Except for a one-time one percent rate increase last year, Medicaid reimbursements rates have not budged in some dozen years or so. This is in spite of recent spikes in inflation, which all industries and all consumers have felt in higher prices for groceries, utilities, and other staple goods. To fill the gap, hospitals are forced to negotiate higher and higher prices with commercial insurers. Often, the result is higher premium prices for the rest of us. Safety net hospitals – the ones that care for very large numbers of Medicaid and uninsured patients – are really shortchanged because their commercial insurance base is minimal. This is why supporting these safety hospitals through enhanced funding is so critical in this budget.

A statewide survey conducted last fall details just how tight the finances are for hospitals. It found that 85 percent of hospitals expected to have negative or unsustainable operating margins in 2022. In our suburban regions of Long Island and the Hudson Valley, 98 percent expected this poor outcome.

The Little Known Pharmacy Benefit with the Big Payoff

The federal 340B drug program allows hospitals to purchase certain drugs at deeply discounted rates. The resulting savings help hospitals reinvest in community benefit programs, such as nutritional food assistance, transportation services, and even supportive housing needs for the most vulnerable and needy. Two years ago, as part of the enacted state budget, a provision was passed to change this Medicaid managed care pharmacy benefit back to a fee-for-service reimbursement model. The policy’s adoption was delayed two years and now takes effect April 1, 2023. Under the state fee-for-service model, the savings on 340B drugs would accrue to the state, not providers.  The governor is committed to moving forward with implementation of this provision, unless the legislature acts to delay or repeal what is commonly called the Medicaid pharmacy benefit “carve-out.” Both the Senate and the Assembly proposed budget bills seek repeal of this Medicaid managed care pharmacy benefit. If left in place, it will result in financial harm to providers and affect access to affordable prescriptions for vulnerable populations.    

Why Do Insurers Hold Payments?

For insurers, the practice of delaying or even denying payment for medically necessary in-network emergency care until a claims review is conducted has become commonplace. The governor’s proposed “pay and review” proposal is a common sense solution to this problem. However, neither chamber supported this proposal in their one-house bills. The governor’s proposal calls for payment upfront to the hospital while health plans conduct medically-necessary reviews post-payment. Health insurers continually post big profits, while hospitals continue to struggle with meeting daily operational costs. Insurers have an obligation to pay for medically necessary, in-network emergency care when that care is rendered, not many months later.

No MTA Tax Increase

Both the Senate and House budget bills reject the governor’s proposed increase in the metropolitan commuter transportation tax, otherwise known as the MTA tax, which was enacted in 2009. This is most important for hospitals in Rockland, Orange, Putnam, Dutchess, Westchester, Nassau and Suffolk counties because, as employers, they pay this payroll tax. There is little appreciable benefit to our regions from this tax. It is a tremendous burden on suburban hospitals and all employers in our regions.

Stepping Up to Workforce Shortage Challenge

Unfortunately, both chambers rejected the governor’s proposals to expand scope of practice for nurses, pharmacists, physician assistants, and others and the recommendation to join the Interstate Medical Licensure and Nurse Licensure Compacts. The proposal allowing temporary practice permits for clinicians licensed in other states was also eliminated.  However, the legislature’s acceptance of the governor’s proposal to establish oversight of temporary staffing agencies and capping agency fees, as the Assembly bill proposes, is welcomed by hospitals.  Agencies charge hospitals very high fees for temporary staff, especially nursing staff.

I can’t emphasize enough the financial and operational strain our hospitals endure due to this unrelenting workforce shortage.

Next Steps

The budget negotiation process is now well underway – with literally just days left until April 1. My hospital colleagues and I keep reaching out to our legislators to remind them, once again, of the importance of keeping these positive provisions in the final budget and adding others that will serve to strengthen healthcare in both of our suburban regions.

About the Suburban Hospital Alliance of New York State

The Suburban Hospital Alliance of New York State advocates on behalf of hospitals in the Hudson Valley and Long Island regions. It engages key lawmakers and regulatory decision-makers in Albany and Washington to ensure reasonable and rational health care policy prevails.

About the Nassau-Suffolk Hospital Council (NSHC)   

The Nassau-Suffolk Hospital Council represents the not-for-profit and public hospitals on Long Island. It works in conjunction with the Suburban Hospital Alliance of New York State to advance legislative and regulatory priorities.  NSHC serves as the local and collective voice of hospitals on Long Island.

About the Northern Metropolitan Hospital Association (NorMet)  

The Northern Metropolitan Hospital Association represents the not-for-profit and public hospitals in the Hudson Valley region. It works in conjunction with the Suburban Hospital Alliance of New York State to advance legislative and regulatory priorities.  NorMet serves as the local and collective voice of hospitals in the Hudson Valley.

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