Summary of 2008-09 State Budget

TO:	All Members
FROM:	Dan Heim, Vice President for Public Policy Ami Schnauber, Director of Government Relations
DATE:	April 7, 2008
SUBJECT:	Summary of 2008-09 State Budget
ROUTE TO:	Program Directors, Department Heads

ABSTRACT: Detailed summary of the final 2008-09 state health and housing budget.

Introduction
The Assembly and Senate officially passed the health and mental hygiene components of the State Fiscal Year (SFY) 2008-09 state budget last week.  Efforts are underway to act on all of the other elements of the $124 billion spending plan this week.  Given that the April 1^st start of the fiscal year has come and gone, the state is currently operating under emergency spending authority. 

NYAHSA has reviewed the relevant appropriation and Article VII bills, and has received briefings from Department of Health (DOH) officials.  This memo will provide you with details on the final budget, based on currently available information.  NYAHSA will update members as we garner additional information from our analysis, and as the remainder of the budget process concludes.

As NYAHSA previously reported in the March 31^st Special Edition of the NYAHSA Legislative Bulletin, most of the proposed budget cuts aimed at long term care providers were rejected in the final health budget.  The budget agreement restores $198.1 million of the proposed $214.8 million in nursing home funding cuts and $78 million of the $90 million in home care agency cuts. 

Given the challenging economic and fiscal environment within which the state budget was crafted and the level of cuts made to other areas, these results are certainly better than expected.  We would not have been able to achieve these significant restorations without the strong and sustained advocacy that NYAHSA members brought to bear through scores of letters to newspaper editors, thousands of letters and phone calls to legislators, and direct meetings with lawmakers and their staff persons. 

As NYAHSA continues the process of thanking all of those who helped us accomplish all of the budget restorations, we encourage members to do so as well.  We certainly would not have received as much support as we did without the help of the Senate Republicans and some key Assembly Democrats.  The Senate Republicans have been advocating on our behalf from the beginning.  NYAHSA has already expressed appreciation to Senators that have supported us throughout the budget process in the Advisor, issued a press release earlier today highlighting their involvement, and plans other communications as well. 

NYAHSA will be posting sample thank you letters on the Legislative Action Center Web page for members’ use.  Although members can send letters to all their representatives, we would like to direct special attention to the Senate Republicans and some key Assembly Democrats who were particularly supportive, including Majority Leader Ronald Canestrari (Cohoes), and Assemblymembers Joseph Morelle (Rochester), Rory Lancman (Queens) and RoAnn Destito (Utica).

Health Budget Overview
The final budget includes $828 million in health care cost savings during SFY 2008-09, out of

$1.1 billion proposed in the Executive Budget.  This will work out to a 1.1 percent increase in the state share of Medicaid spending over 2007-08, excluding the effect of the local share cap.

Total Medicaid spending is projected to be $45.6 billion.  

Other health and long term care policy elements of the 2008-09 final budget include the following:

• The budget extends the Health Care Reform Act by three years to March 31, 2011.  This includes workforce funding programs for long term care providers, the financially disadvantaged nursing home program, adult care facility funding enhancements and other programs of interest to NYAHSA members. 

• Along the lines of an Executive Budget proposal, the final budget begins a multi-year shift of Medicaid funding from hospital inpatient services to primary and preventive care settings.  On an annualized basis, over $170 million will be shifted from inpatient care to hospital clinics, emergency rooms and ambulatory care, and $170 million will be invested in community clinics, physician services, and primary care enhancements. 

• To address shortages of physicians in rural and poor urban areas, the final budget creates a $15.6 million “Doctors Across NY” program that includes a medical school loan repayment program, grants to support new physicians in practices or clinics in medically underserved communities, funding for post-baccalaureate programs for minority and economically disadvantaged students accepted to medical school programs, and funding for resident training in community-based settings.

• To address the large numbers of uninsured children, the final budget fully funds an expansion of the Children’s Health Insurance Program from 250 percent to 400 percent of the Federal Poverty Level at a cost of $25 million.  A new State Medicaid Enrollment Center will also be created to streamline enrollment and renewal.

• DOH is provided with $2.15 million in new funding to: (1) enhance resources for processing nursing home rate appeals; (2) study policy, statutory and regulatory reforms for nursing homes given increased acuity, decreased length of stay and innovative models; and (3) analyze data to support long term care financing approaches, including developing uniform data sets for community-based settings.  An additional $2 million is included for enhanced oversight and improved coordination of hospital and nursing home surveillance, involving as many as 30 additional surveyor positions.

• DOH is also provided with $7 million for local health care planning activities including: (1) examining racial and ethnic disparities in health care provision; (2) developing a process for measuring and integrating consumer health care needs in health care provider planning; (3) assessing future long term care needs taking into account consumer preferences; and (4) reviewing the impact of the migration of services from hospitals to ambulatory care providers.  DOH can award up to $2 million to health planning agencies   for these purposes. 

Following is a summary of the provisions in the final budget affecting NYAHSA members, particularly as they compare with the proposals contained in the Executive budget. 

Nursing Homes
The amended Executive Budget had proposed $117.4 million in state savings from nursing homes during SFY 2008-09.  The proposed actions would have, if adopted, reduced direct funding to providers by $214.8 million and saved another $20 million from system changes.  The final budget restores $198.1 million of the proposed $214.8 million in provider cuts.  The final disposition of the nursing home budget measures and other budget issues is summarized below:

Nursing Home Medicaid Budget Measures

Proposal	Effective Date	Annualized Provider Impact of Proposed Budget ($ millions)	Annualized Provider Impact of Final Budget ($ millions)
Reduce Rebasing Transition Payments	1/1/08	($170.0)	$0
Reduce 2008 Trend Factor by 35%	4/1/08	($44.8)	($44.8)
Berger Commission Savings	4/1/08	$0	$0
Restore Recruitment & Retention Funds	4/1/08	n/a	+$28.1
TOTAL		($214.8)	($16.7)

1.     Reduce “Rebasing” Transition Payments:  The proposed state budget would have eliminated the $137.5 million of transition funding in calendar year (CY) 2007, and another $32.5 million in CY 2008 and the first three months of 2009.  In doing so, it would have also effectively delayed the start of the new system by three months (i.e., from 1/1/09 to 4/1/09).  This proposal was entirely rejected in the final budget.  As a result, transition payments totaling $137.5 million in CY 2007 and $167.5 million in CY 2008 will be made as soon as DOH receives federal approval of the transition payments and other elements of the new reimbursement system.  NYAHSA was just informed this past Friday that DOH has sent its written response to the federal government on questions related to the Medicare “upper payment limit” issue and other elements of the new system.

2.     Reduce 2008 Trend Factor by 35%:  For SFY 2008-09, this proposal would reduce the 2008 trend factor increase of 2.3 percent by 35 percent (i.e., to 1.495%) beginning April 1, 2008 for all nursing homes, except for facilities that have discrete Medicaid rates for pediatric patients.  The proposal also affects adult day health care and other Medicaid services.  This reduction is included in the final budget, as proposed.  It is projected to save the state $22.4 million, and impact nursing homes and adult day health care programs by $44.8 million.  This change will not affect the rates paid for the first three months of 2008, which will continue to reflect the full 2008 trend factor increase of 2.3 percent. 

3.     Berger Commission Savings:  The state would realize an estimated Medicaid savings of $10 million attributable to the implementation of the Berger Commission recommendations for downsizings and closures of nursing homes.  This estimated savings was included in the final budget.  It will not have a Medicaid reimbursement impact on nursing homes and did not require additional legislative authority; rather, it represents an estimated savings in the state fiscal plan from an estimated reduction in the number of residents in facilities slated to close or reduce beds.

4.     Restore Recruitment and Retention Funds:  This proposal was not included in the Executive Budget.  Under the 2007-08 final budget, funding for the HCRA nursing home workforce recruitment and retention (R&R) program was to be phased-out over three years beginning in 2007.  The final budget restores $15 million of state funding for R&R during the 2008-09 fiscal year.  This will result in $1.9 million of additional funding to public nursing homes and $26.2 million for non-public nursing homes.    

Other proposals/issues affecting nursing homes and their disposition in the final budget are discussed below:

• Financially Disadvantaged Facility Funding:  The Executive Budget proposed to make public facilities ineligible for funding; to otherwise tighten up the program eligibility criteria; and to require recipients to have restructuring plans overseen by chief restructuring officers.  NYAHSA had opposed several of these provisions.  The final budget continued program funding at existing levels (i.e., $30 million annually) through March 31, 2011, and rejected the proposed new program criteria entirely.   

• Assessment Recoupments:  The Executive Budget proposed a change to the current law to accelerate collection of unpaid assessments in cases when facilities are behind in payments and have not filed monthly assessment reports.  Under current law, DOH estimates the amount due, and the facility can contest the amount before it is actually recouped or otherwise recovered.  The budget proposal would have eliminated this step and made such DOH estimates final.  NYAHSA strongly objected to this as eliminating due process for facilities and worsening the cash flow plight of affected facilities.  The final budget revised this proposal.  It will give affected facilities thirty days after receiving the DOH estimate to submit their assessment reports and contest the estimate. 

On a related note, NYAHSA aggressively advocated for another assessment “amnesty” provision, this one to cover unpaid assessments for the period January 1, 2007 through February 29, 2008 that were paid in full and accompanied by the required reports by no later than January 1, 2009.  Although our proposal appeared in the Senate one-house budget bill, it was not included in the final budget legislation.  We will be working during the balance of the legislative session to obtain passage of a separate bill to offer amnesty.

• Limitations on Equity Withdrawals/Fund Transfers:  The Executive Budget proposed to require prior DOH approval for any equity withdrawal (proprietary operators) or transfer to another entity (not-for-profit operators) of over 3 percent of Medicaid revenues in any given year.  NYAHSA strongly opposed this change, as proposed.  The final budget requires a facility to give DOH prior notification (not to seek DOH prior approval) of such withdrawals or transfers.  The notification would need to be made by certified or registered mail, and be given before making any equity withdrawal or transferring funds to another entity that in the aggregate exceed 3 percent of the total Medicaid revenues for the year.  This new requirement is effective April 1, 2008, and we will be seeking more clarity from DOH on its implementation.

• Repeal or Delay Medicaid-only Case-mix Index (CMI):  Under existing law, the new reimbursement system will be implemented on January 1, 2009 using an all-payor CMI (as is the current policy), but would revert to a Medicaid-only CMI effective April 1, 2009.  NYAHSA strongly pushed for repeal or a least delay of this provision, which could significantly impact reimbursement under the new system.  Although the Senate agreed to a minimum one-year delay in the provision, the final budget legislation makes no change to the April 1, 2009 implementation date.  We will be working on this issue during the remainder of the legislative session as well, and reiterate our concerns in future meetings of the legislatively-authorized nursing home reimbursement workgroup.

• Grants to Public Facilities:  The final budget continues funding for the state-funded grant program for public nursing homes originally enacted in the 2006-07 budget.  The allocation for 2008-09 is slated to be the full $35 million authorized under existing law.

• DOH Bond Financing Fee:  The final budget repeals a bond issuance charge of 0.3 percent imposed by DOH on financings of Article 28 facilities (i.e., nursing homes, hospitals and clinics) through the Dormitory Authority and local industrial development agencies.  Other existing fees apply in such cases.  

Nursing Home Restoration Estimates

NYAHSA is making available to its members facility-specific estimates of the funding restored in the final state budget for rebasing and for R&R, as well as the impact of the trend factor reduction that was authorized. 

You can view your facility’s estimates by clicking on the attachment “Final Impact Estimates” that appears towards the bottom left of your screen when viewing this memo.  Facilities are identified in the listing by operating certificate number.  The estimated amounts are arrayed in four columns.  The first column shows the restored rebasing funding (i.e., +$170 million); the second shows the additional R&R funding (i.e., +$28.1 million); the third column shows the impact of the 35 percent trend factor reduction (i.e., -$44.8 million); and the fourth shows the net total ($153.3 million).  Please note that these estimates reflect 2008-09 budget actions, but do not include the remaining rebasing funding for 2008 that was not proposed to be cut, or previously authorized R&R funding amounts.  

Adult Day Health Care Programs
As with nursing homes and other Medicaid providers, there will be a 35 percent reduction in the 2008 trend factor (i.e., from 2.3 percent to 1.495 percent) effective April 1, 2008.

The final budget includes $500,000 (reduced from $1 million proposed in the Executive Budget) for up to twenty competitive grants for an “enriched social adult day services demonstration project.”  The project will operate from January 1, 2009 (delayed from April 1, 2008 in the Executive budget) through March 31, 2011 and be jointly administered by the State Office for the Aging (SOFA) and DOH.  It will be available to non-Medicaid eligible people aged 60+ years who need services exceeding what is offered in social adult day programs but not at the level of adult day health care.  Enriched services would include total assistance with toileting, mobility, transferring and eating, medication dispensing by a registered nurse, health education, counseling, case management and therapies. An evaluation report will be due January 30, 2011. 

NYAHSA and the Adult Day Health Care Council lobbied for a minimum one-year delay in the transition from budget-based to cost based rates.  This was an effort to assist approximately 50 adult day health care programs that were facing reductions to their payments, retroactive to April 1, 2007.  The Senate one-house bill included our proposal, but the final budget did not.  We continue to pursue this issue in the context of separate legislation.   

Home Care Agencies
The Executive Budget, as amended, had proposed $90 million in funding cuts to home care agencies during SFY 2008-09, and failed to include $16 million of home care infrastructure funding for the upstate and Long Island regions.  The final budget restores $78 million in funding for these purposes.  The final disposition of the home care budget measures and other budget issues is summarized below:

Home Care Medicaid Budget Measures

Proposal	Effective Date	Annualized Provider Impact of Proposed Budget ($ millions)	Annualized Provider Impact of Final Budget ($ millions)
Personal Care (PC) Utilization Management	10/1/08	($12.0)	$0
CHHA and LTHHCP A&G Cost Caps	4/1/08	($24.0)	$0
CHHA Cost Ceilings and Cost Base	4/1/08	($26.0)	$0
Cut Home Care and PC Trend Factors by 35%	4/1/08	($28.0)	($28.0)
Home Care Infrastructure Funding	4/1/08	$0	+$16.0
TOTAL		($90.0)	($12.0)

1.     Personal Care Utilization Management:  This Executive Budget proposal would have authorized a private contractor to authorize services and monitor utilization for new personal care recipients in New York City (NYC) beginning October 1, 2008.  This proposal was rejected in its entirety in the final budget.  The NYC Human Resources Administration will retain this function. 

2.     CHHA and LTHHCP A&G Cost Caps:  This proposal would have reduced the administrative and general (A&G) cost caps for Certified Home Health Agencies (CHHAs) and Long Term Home Health Care Programs (LTHHCPs) for those programs with more than $10 million in total annual reported expenses.  For affected programs, the A&G cap imposed would have been 20 percent of each agency’s total reimbursable base year costs.  This proposal was rejected in its entirety in the final budget.

3.     CHHA Cost Ceilings and Cost Base:  This proposal would have reduced the Medicaid cost ceilings and frozen the base year costs applicable to CHHA services, except for those services provided to AIDS patients.  The cost ceilings would have been reduced from 110 percent to 100 percent of the applicable weighted average cost of all CHHAs in each agency’s peer group.  In addition, each CHHA’s allowable costs and the applicable cost ceilings would have been frozen based on 2005 cost reports, rather than being updated to 2006 reports.  This proposal was rejected in its entirety in the final budget.

4.     Cut Home Care and PC Trend Factors by 35%:  This proposal would reduce the 2008 trend factor increase of 2.3 percent by 35 percent (i.e., to 1.495%) beginning April 1, 2008 for all CHHAs, LTHHCPs, except those that provide services to AIDS patients, and personal care programs.  This reduction is included in the final budget.  It is projected to save the state $14 million, and impact agencies by $28 million. This change will not affect the rates paid for the first three months of 2008. 

5.     Home Care Infrastructure Funding:  The final budget restores state funding of $8 million ($16 million in total payments) for SFY 2008-09 for the home care infrastructure initiative for CHHAs, LTHHCPs, AIDS home care programs and personal care/private duty nursing programs outside of New York City.      

Other proposals/issues affecting home care agencies and their disposition in the final budget are discussed below:

• Home Care Recruitment and Retention:  The final budget continues the R&R adjustment for CHHAs, LTHHCPs, AIDS home care programs, hospice programs and managed long term care plans through March 31, 2011.  The annual funding level will remain at $100 million, and funds could continue to be used for R&R of non-supervisory home care workers, home health aides or other workers with direct patient care responsibilities, including employees of licensed agencies under contract with CHHAs.  All unpaid, previously authorized R&R funds have been re-appropriated, as the state awaits receipt of needed approvals from the federal government.  NYAHSA is closely monitoring the status of these funds.

• Personal Care R&R:  The final budget also continues through March 31, 2011, the workforce R&R adjustments for personal care workers for NYC agencies ($340 million annualized) and personal care providers outside of NYC ($28 million annualized). 

• Technology Funding:  The final budget allocates $5 million for “home health telehealth and information technology demonstration programs.”  We understand this is the funding for Medicaid reimbursement of telehealth services.

• Home Care Technical Advisory Council:  The Executive Budget proposal to establish a council in law to recommend reforms to the state’s home care laws, regulations and policies (including Medicaid reimbursement) was not included in the final budget.

• Spousal Impoverishment Budgeting:  The final budget amends state law to make community spouses of Traumatic Brain Injury waiver participants ineligible for spousal impoverishment protections.  CMS has revised its policy on allowing spousal protections in connection with Medicaid Section 1915(c) waivers, and NYAHSA and several other groups are working to secure federal legislation reversing this policy.  In the meantime, we had asked state officials to hold off on proposing to remove spousal impoverishment budgeting from the LTHHCP, pending federal action, and are pleased this change was not included in the budget.

Managed Long Term Care
The Executive Budget proposed to administratively reduce 2008 rate increases for Managed Long Term Care (MLTC) plans by 50 percent, resulting in an estimated provider impact of $16 million ($8 million state savings).   

Although we were initially told that the tentative budget agreement would partially restore the 50 percent cut by reducing it to a 35 percent cut (consistent with trend factor cuts to other providers), unfortunately the partial restoration was not included in the final budget.   DOH has advised us that they intend to reduce the 2008 premium increases by 50 percent to achieve this savings.  NYAHSA will continue in its efforts to secure a partial restoration of this cut administratively if there is room in the state Fiscal Plan.

The Executive Budget legislation also would have required many individuals who are dually eligible (“dual eligibles”) for Medicare and Medicaid who are enrolled in a Medicare managed care plan to enroll in the same plan for their Medicaid benefits.  The final budget modifies this proposal as follows:

• When DOH approves Medicaid managed care “program features and rates” for dual eligibles, these individuals will no longer be categorically excluded from mandatory enrollment into Medicaid managed care if they are enrolled or enroll in a Medicare managed care plan offered by organization that also offers Medicaid managed care;