Approved State Budget Makes Investments, but Avoids Looming Issues

As far as state budgets go, the 2018-2019 one passed by the state March 31, 2018 was not really remarkable, but rather a mixture of some good stuff and not so good stuff for New York’s hospitals and patients.  The $168 billion 2018-2019 state budget enables hospitals to maintain their level of programming and servicing, at least for now.  This is good news for the millions of New Yorkers served by these hospitals.  Provisions in the budget include a variety of funding streams and policy decisions that allow hospitals to build upon quality prevention and treatment programs, to upgrade decades-old buildings, and to invest in new technologies.  However, the devil is always in the details.

The approved budget lays out more specific guidelines about safety net hospitals.  These hospitals often face financial distress because of the high-volume of uninsured, underinsured, and Medicaid patients they serve.  Budget language expands the definition of safety net hospitals to include not only hospitals with a high volume of Medicaid and uninsured patients, but public hospitals operated by a county, municipality, public benefit corporation, or the State University of New York.  It also includes Critical Access Hospitals (CAH) and Sole Community Hospitals (SCH). The budget offers $100 million in new funding for these enhanced safety net providers, ensuring access to care for all.   However, there are several other hospitals that serve high numbers of poor and indigent patients in the nine counties east and north of New York City that do not meet the new definition.

The budget also provides $525 million in new funding for the Statewide Healthcare Facility Transformation program, which awards grants for capital projects and debt retirement.  Hospitals will be eligible for $400 million of this amount.  This is significant because New York’s hospital buildings and physical plants are some of the oldest in the nation.  Money to assist in modernization projects allows hospitals to devote more of their financial resources toward designing innovative treatment programs/services, staffing needs, and building upon community-based programs that link patients to such services as housing, transportation, and food access.

On the downside, $425 million for the Transformation program comes from a reduction in the Medicaid Global Spending Cap allowance.  The global Medicaid cap was instituted in 2011 and is intended to limit all Medicaid spending growth to the Consumer Price Index.  Only a limited number of providers will be awarded capital grants through the $525 million in funds allotted in this budget, but all providers will be impacted by the ongoing limitation of Medicaid spending imposed by an even lower cap.  New York providers have come dangerously close to piercing the cap and, now that it is lowered, that possibility becomes more real.  If the cap is pierced, the state departments of health and budget are authorized to cut providers even more.  Medicaid spending continues to rise due to increased enrollment, not provider payments.

Finally, the budget missed an opportunity to buffer New York State against the loss of federal funds for the Essential Health Plan, Cost Sharing Reduction (CSR) payments, as well as sharp cuts in the  Medicaid Disproportionate Share hospital (DSH) payments that will kick in late in 2019.   The Essential Health Plan is low-cost insurance available on New York’s marketplace to those with modest incomes, but earn too much to qualify for Medicaid.  CSRs are payments made by the federal government to health insurers to help low-income Americans afford their co-payments and deductibles. DSH payments are supplementary payments to hospitals that care for high numbers of uninsured and indigent patients.  Given the uncertainly in federal politics, these may not be the only cuts our state will face.

Governor Cuomo had proposed a Healthcare Shortfall Fund to address federal losses.  Instead, the final budget agreement calls for $2 billion to be distributed over a multi-year period through a new Healthcare Transformation Fund that can be used for a variety of healthcare investments, but is no longer linked to federal cuts.  This fund will best serve all residents of the state as long as it is equitably distributed throughout different regions, taking into account the unique challenges that urban, suburban, and rural hospitals face.  This fund is under the control of the executive branch, with no input from the Legislature, and therefore, it limits transparency.   The Suburban Hospital Alliance will be advocating for regional parity, both for this fund and the capital grants, so that the Hudson Valley and Long Island get their fair share of funding

Capital funding and other investments in the transformation of the delivery system are welcome, but at some point we must address that provider’s costs are rising while Medicaid reimbursements are standing still.  It has been a decade since healthcare providers have received what is known as the trend factor increase, an annual adjustment tied to the rate of inflation that’s supposed to take effect automatically.  For 10 years, state budgets have blocked the annual increase. This equates to a 15 percent cut in reimbursement when adjusted for inflation.  According to economic analyses offered by the Healthcare Association of New York State, Medicaid pays about 74 cents on the dollar, resulting in a shortfall for hospitals.  Failing to increase reimbursements in line with inflation while at the same time expecting hospitals to take on more and more responsibility for patients’ non-healthcare needs is unsustainable.  These needs are known as the social determinants of health – transportation, housing, education- and these have been shown to greatly influence health outcomes.

We can be glad that the 2018-2019 budget arrived on-time, before the start of the next state fiscal year on April 1st.  We thank our state legislators for their hard work during this budget process: Senators Jamaal Bailey, Didi Barrett, John Bonacic, Philip Boyle, John Brooks, David Carlucci, Thomas Croci, John Flanagan, Kemp Hannon, Todd Kaminsky, Jeffrey Klein, William Larkin, Kenneth LaValle, Carl Marcellino, Terence Murphy, Elaine Phillips, Susan Serino, and Andrea Stewart-Cousins.  Assembly Members: Thomas Abinanti, Karl Brabenec, David Buchwald, Kevin Byrne, Kevin Cahill, Brian Curran, Anthony D’Urso, Steven Englebright, Michael Fitzpatrick, Sandra Galef, Andrew Garbarino, Aileen Gunther, Earlene Hooper, Ellen Jaffee, Kimberly Jean-Pierre, Kiernan Lalor, Charles Lavine, Shelley Mayer, David McDonough, Melissa Miller, Michael Montesano, Dean Murray, Steven Otis, Anthony Palumbo, Amy Paulin, Christine Pellegrino, Gary Pretlow, Edward Ra, Andrew Raia, Philip Ramos, Frank Skartados, James Skoufis, Michelle Solages, Fred Thiele, and Kenneth Ze

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