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MEMORANDUM IN SUPPORT

A BUDGET BILL submitted by the Governor in
Accordance with Article VII of the Constitution

AN ACT to repeal chapter 174 of the laws of 1990, constituting the youth opportunity program act (Part A); to amend the executive law, in relation to community services for the elderly, and to repeal certain provisions of such law relating thereto (Part B); to amend the state finance law, in relation to the Alzheimer’s disease fund; to repeal subdivision 2-a of section 89-e of the state finance law relating to the Alzheimer’s disease fund; to repeal chapter 438 of the laws of 2002 relating to sterilizing flexible endoscopies, to repeal article 27-I of the public health law, relating to reflex sympathetic dystrophy syndrome; to repeal title 5 of article 2 of the public health law relating to obesity prevention; and to repeal article 4-A of the public health law relating to the licensing and regulation of tattooing and body piercing parlors (Part C); to amend the public health law, the domestic relations law and the state finance law, in relation to increasing fees charged for vital records services; and repealing section 4178 of the public health law relating thereto (Part D); to amend the public health law, in relation to eliminating the use of funds of the office of professional medical conduct for activities of the patient health information and quality improvement act of 2000 (Part E); to amend the mental hygiene law, in relation to the closure of the Nathan S. Kline Institute for Psychiatric Research and consolidate its functions into the New York State Psychiatric Institute and the closure of the Institute for Basic Research in Developmental Disabilities (Part F); to amend the mental hygiene law, in relation to the reinvestment of funds into community-based programs for persons with serious mental illness, including children and adolescents with serious emotional disturbances, based upon inpatient bed closures and the closure of state-operated psychiatric centers; to provide community mental health support and workforce reinvestment; and to provide for the repeal of certain provisions upon expiration thereof (Part G); to amend chapter 119 of the laws of 1997 relating to authorizing the department of health to establish certain payments to general hospitals, in relation to extending the authorization for the department of health to continue those payments to general hospitals (Part H); to amend the public health law, in relation to limitations on state aid to municipalities for public health services (Part I); to amend the executive law, in relation to the program for elderly pharmaceutical insurance coverage (Part J); to amend the social services law and the public health law, in relation to expanding Medicaid coverage and rates of payment for residential health care facilities; to amend the executive law, in relation to integrated settings for qualified persons with disabilities; to amend chapter 1 of the laws of 2002, amending the public health law, the social services law and the tax law relating to the Health Care Reform Act of 2000, in relation to the effective date thereof; to amend chapter 474 of the laws of 1996, amending the education law and other laws relating to rates for residential health care facilities, in relation to extending the effectiveness of such rates; to amend chapter 81 of the laws of 1995, amending the public health law and other laws relating to medical reimbursement and welfare reform, in relation to the effectiveness thereof; to amend chapter 629 of the laws of 1986, amending the social services law relating to establishing a demonstration program for the delivery of long-term home health care services to certain persons, in relation to the effectiveness thereof; to amend chapter 165 of the laws of 1991, amending the public health law and other laws, relating to establishing payments for medical assistance, in relation to making certain provisions permanent; to amend chapter 433 of the laws of 1997, amending the public health law and other laws relating to the rate of reimbursement paid to hospitals and residential health care facilities, in relation to extending the provisions thereof; to amend chapter 639 of the laws of 1996 amending the public health law and other laws relating to welfare reform, in relation to trend factor elimination; to amend chapter 483 of the laws of 1978, amending the public health law relating to rate of payment for each residential health care facility to real property costs, in relation to the effectiveness thereof; to amend chapter 649 of the laws of 1996, amending the public health law, the mental hygiene law and the social services law, relating to authorizing the establishment of special needs plans, in relation to making provisions permanent; to amend chapter 710 of the laws of 1988, amending the social services law and the education law relating to medical assistance eligibility of certain persons and providing for managed medical care demonstration programs, in relation to making certain provisions permanent; to amend chapter 904 of the laws of 1984, amending the public health law and the social services law, relating to encouraging comprehensive health services, in relation to extending the provisions thereof; to amend chapter 535 of the laws of 1983, amending the social services law relating to eligibility of certain enrollees for medical assistance, in relation to making provisions permanent; to amend chapter 19 of the laws of 1998, amending the social services law relating to limiting the method of payment for prescription drugs under the medical assistance program, in relation to extending the provisions thereof; and to repeal subdivision 21 of section 364-j and section 364-jj of the social services law relating to rate adjustments for certain managed care providers and to the special advisory review panel on Medicaid managed care, and repealing paragraph (x) of section 165 of chapter 41 of the laws of 1992 amending the public health law and other laws relating to health care provider reimbursement rates, relating to the effectiveness of certain provisions of such chapter (Part K); to amend chapter 639 of the laws of 1996 relating to the Health Care Reform Act of 1996, and to amend chapter 1 of the laws of 1999 relating to the New York Health Care Reform Act of 2000, in relation to extending certain provisions relating thereto; to amend the public health law, in relation to hospitals; to amend chapter 433 of the laws of 1997 amending the public health law and other laws relating to rates of reimbursement paid to hospitals and residential health care facilities, in relation to allocation for grants; to amend chapter 2 of the laws of 1998 amending the public health law, the social services law and the insurance law relating to expanding the child health insurance plan, in relation to extending the effectiveness thereof; to amend the public health law, in relation to the definition of covered health care services; to amend the social services law, in relation to the family health plus program; to amend the insurance law, in relation to stop loss funds; to amend chapter 82 of the laws of 2002 amending chapter 1 of the laws of 2002 amending the public health law, the social services law, and the tax law relating to the Health Care Reform Act of 2000 relating to health care reform, in relation to authorizing the commissioner of health to utilize existing cash balances in certain pools or transfer money from certain funds; to amend the public health law, in relation to patient services payments; to amend chapter 63 of the laws of 2001 amending chapter 20 of the laws of 2001 amending the military law and other laws relating to making appropriations for the support of government, the public health law and the social services law, in relation to making technical corrections relating thereto; to amend the insurance law, in relation to non-profit medical and dental indemnity, or health and hospital service corporations; to amend chapter 731 of the laws of 1993 amending the public health law and other laws relating to reimbursement, delivery and capital costs of ambulatory health care services and inpatient hospital services, in relation to extending certain provisions relating thereto; to amend the social services law, in relation to extending certain provisions of the medical assistance information and payment system; to amend chapter 520 of the laws of 1978 relating to providing for a comprehensive survey of health care financing, education and illness prevention and creating councils for the conduct thereof, in relation to extending the time period for the inpatient financing system; to amend chapter 600 of the laws of 1986 amending the public health law relating to the development of pilot reimbursement program for ambulatory care services, in relation to extending the effectiveness of such chapter; and to amend chapter 753 of the laws of 1989 amending the public health law and other laws relating to general hospital reimbursement for inpatient and ambulatory surgery, in relation to extending the effectiveness of certain provisions relating thereto; to amend the public health law, in relation to patient services payment; to repeal title 11-A of the social services law relating to the catastrophic health care expense program; and to repeal paragraph (g) of subdivision 2 of section 2511 of the public health law relating to the child health insurance plan (Part L); to amend the public health law and the penal law, in relation to control of forged and altered prescriptions; and to repeal sections 3335 and 3336 of the public health law relating to written prescriptions (Part M); and to amend the insurance law and the public health law, in relation to establishing early intervention program third party insurance standards and instituting parental cost sharing on a sliding fee scale (Part N)


PURPOSE:

This bill contains provisions needed to implement the Health and Mental Health portion of the 2003-04 Executive Budget.

SUMMARY OF PROVISIONS, EXISTING LAW, PRIOR LEGISLATIVE HISTORY AND STATEMENT IN SUPPORT:

Part A – Discontinue the Youth Opportunity Program

This bill repeals Chapter 174 of the Laws of 1990, otherwise known as the Youth Opportunity Program (YOP) Act, to achieve budgetary savings.

The YOP Act was codified into law under Chapter 174 of the Laws of 1990, placing full administrative and funding responsibility for the program in the Office of Mental Retardation and Developmental Disabilities (OMRDD). Prior to the chapter’s passage, authorization was provided through annual budget appropriations in both OMRDD and the Office of Mental Health (OMH). The current YOP, while funded in OMRDD, operates through both agencies.

The YOP has not achieved its statutory goal of encouraging high school students to pursue careers in the State’s mental hygiene system. While many YOP participants have furthered their education through the program, few participants have pursued employment in health-related fields. Given this lack of YOP graduates in OMRDD’s and OMH’s workforce, it is inappropriate for OMRDD to fund and oversee a program of questionable merit and benefit to either agency’s mission to serve their respective populations.

The YOP duplicates other programs which provide after-school employment to high school students, such as the Youth Education, Employment and Training Program of the Department of Labor and the Youth at Risk/Community Partnership Program of the State Education Department.

Part B – Consolidate various State Office for the Aging programs into a new Community Services Program

This bill consolidates the Office for the Aging’s Community Services for the Elderly Program and the Expanded In-home Services for the Elderly programs into a single program to restructure its financing and streamline the management of the program.

This bill:

Chapter 894 of Laws of 1986 established the Community Services for the Elderly Program and the Expanded In-home Services for the Elderly Program.

These services reach 115,000 elderly people and their families each year, helping them stay in their own homes by providing personal assistance, meals, and other basic living assistance. This bill addresses escalating costs for these important activities by consolidating programs, eliminating burdensome administrative requirements and thereby requiring local governments to pay an increased share of the cost for services provided in their communities.

Part C – Abolish several-low priority programs administered by the Health Department

This bill eliminates several public health programs that the State is unable to implement due to the lack of resources.

This bill amends the Public Health Law to repeal the following requirements that were enacted in the 2001 and 2002 legislative sessions:

These are all new programs that were enacted in either the 2001 or the 2002 legislative session.

Although these are laudable public health initiatives, none are essential to health and safety and the limited resources available to DOH at this time must be dedicated to higher priority programs.

Part D – Increase fees for retrieval of various vital records that are administered by the Department of Health

This bill increases fees for copies of birth, death and marriage certificates and other records to support staff and administrative functions associated with the vital records program.

This bill amends the Public Health (PHL), State Finance and Domestic Relations (DRL) laws to:

Section 4139, 4174 and 4178 of the PHL and Section 20-a of the DRL govern DOH’s vital records program, which charges various fees for copies of certificates of birth, death, marriage and dissolution of marriage. Currently, copies can cost between $5 and $15 (the fees have not been increased since 1989) and take up to eight weeks to be processed.

This bill, by increasing fees for various vital records, will generate needed revenues to support the costs of managing the vital records program.

Part E – Authorize Health Information and Quality Improvement Act activities to be funded by the Professional Medical Conduct Account

This bill removes a statutory provision that prohibits using the Department of Health’s (DOH) Office of Professional Medical Conduct (OPMC) Account to finance activities required by the Patient Health Information and Quality Improvement Act of 2000 (known as the Physician Profiling Act).

Effective April 1, 2003, this bill amends Section 2995 of the Public Health Law to allow funds appropriated to the OPMC Account to be used to implement the requirements of the Physician Profiling Act. This will allow the use of the OPMC Account to finance the $3.5 million cost of such requirements. Currently, the OPMC Account, which is capitalized with physician fees, finances the monitoring and oversight of the conduct of New York’s physicians.

Section 2995 of Article 29-D, Title 1 of the Public Health Law established the Patient Health Information and Quality Improvement Act of 2000 (Chapter 542 of the Laws of 2000) which:

It is necessary to maximize the use of non-General Fund revenues at a time when the State is facing significant fiscal challenges. The use of OPMC funds to finance Physician Profiling activities is appropriate because it is consistent with the purpose of the OPMC Account – which is to ensure quality health care for New Yorkers.

The OPMC Account has sufficient revenues available to finance costs associated with the Physician Profiling Act.

Part F – Close the Institute for Basic Research and consolidate the Nathan Kline Institute into the New York Psychiatric Institute

This bill authorizes the closure of the Institute for Basic Research in Developmental Disabilities (IBR), located in Staten Island, and the closure and consolidation of the Nathan S. Kline Institute for Psychiatric Research (NKI), located in Orangeburg. This bill also authorizes the Commissioner of Mental Health to designate and transfer any remaining functions, obligations, and duties of NKI to the New York State Psychiatric Institute (NYPI), located in Manhattan.

Sections 1 and 2 of this bill amend section 7.17 subdivisions (b) and (e) of the Mental Hygiene Law (MHL) to provide for the closure of NKI by removing it from the list of facilities operated by the Office of Mental Health (OMH) and to provide that the one-year prior notice provisions of the law be deemed satisfied.

Sections 3 and 4 amend sections 13.01 and 13.17 of the MHL to provide for the closure of IBR by striking language requiring the Office of Mental Retardation and Developmental Disabilities (OMRDD) to “conduct research” as part of its primary function and removing IBR from the list of facilities operated by the agency.

Section 5 notwithstands any other law to the contrary and authorizes the Commissioner of OMH to close and consolidate NKI and designate and transfer any remaining functions, obligations, and duties of NKI to NYPI.

Section 6 notwithstands any other law to the contrary and authorizes the Commissioner of OMRDD to close IBR.

Section 7 establishes an April 1, 2003 effective date.

Section 7.17 (e) of the MHL outlines specific requirements for notification prior to initiating a “significant service reduction” for State psychiatric hospitals, including a one year notification for labor organizations, consumer advocacy groups, and others, and the development of a strategic plan for minimizing the impact on the State workforce.

The functional and programmatic reasons for recommending the closure of these facilities are as follows:

  1. In consideration of the State’s fiscal difficulties, OMRDD can no longer maintain the priority of funding its own scientific research facility since IBR’s primary mission is in an area not directly involved with hands-on care of consumers. Annually, IBR expends more than $17 million in State funds for its operations and would require at least an additional $12 million in capital expenditures. In making this difficult decision, the State will continue to fully support the direct delivery of services to individuals with developmental disabilities, as exemplified by the NYS-CARES program and the NYS-CARES II expansion.
  2. The closure and consolidation of NKI will enable OMH to streamline the research function into a single, more cost-effective entity to achieve administrative and operational efficiencies, including the elimination of duplicative and non-essential research. In addition, OMH will continue its commitment to conduct research at the two campuses and the consolidation allows for the transfer of remaining NKI research activities and extramural grant funding to the auspices of NYPI.

New York State will continue to be a national leader in psychiatric research. The integration of key basic, clinical and services research under one auspice will not only maintain the State’s mental health investigative capacity but expand the current long-term investment in diverse areas of research for people with serious mental illness through better coordination of research efforts.

Part G – Close five psychiatric centers and reauthorize the Reinvestment Act to redirect State savings into the community-based mental health system

This bill creates the Community Mental Health Support and Workforce Reinvestment Program to reinvest the savings associated with State inpatient bed and facility closures to develop and strengthen New York’s community-based mental health system of care. In addition, this bill authorizes the closure of four adult psychiatric centers and one children’s psychiatric center and grants the Commissioner of the Office of Mental Health (OMH) authority to ensure efficient administration of State psychiatric facilities.

Sections 1 and 2 of this bill amend the Mental Hygiene Law (MHL) to provide for the closure of the Elmira, Middletown and Richard H. Hutchings Psychiatric Centers on July 1, 2003 and the Bronx Psychiatric Center and Bronx Children’s Psychiatric Center on October 1, 2005, and that the one-year prior notice and reporting provisions in §7.17 (e) of the MHL shall be deemed satisfied for the five facility closures.

Section 3 of this bill amends the MHL to include consumers and family members in the membership of community service boards and to clarify the local planning process.

Section 4 of this bill adds a new section 41.56 to the MHL to establish the Community Mental Health Support and Workforce Reinvestment Program (“Reinvestment”) and to define how such Reinvestment funds will be available for the community mental health system, including workforce related activities or the development of new services.

Section 5 of this bill determines the amount available to fund Reinvestment for State Fiscal Years 2004-05 through 2006-07, based on the annual State Operations appropriation reductions for the savings directly attributed to adult non-geriatric inpatient bed closures and facility closures. This section also requires that Reinvestment funds be subject to appropriation and made available in the same amount by which OMH’s State Operations General Fund appropriations are reduced.

Section 6 of this bill provides that the amount by which OMH State Operations General Fund appropriations are reduced for children’s inpatient bed closures attributed to the closure of State psychiatric centers will be made available to expand community-based programs for children, including but not limited to crisis intervention beds, home-based crisis intervention teams, and home and community-based waiver slots.

Section 7 of this bill amends the MHL to establish the Commissioner of Mental Health, or his or her designee, as the sole appointing or removing authority (“central appointing authority”) for all OMH employees.

Section 8 of this bill provides for an immediate effective date with certain exceptions including specific effective dates for the closure of five psychiatric centers and the reinvestment of State savings starting in the 2004-05 fiscal year. In addition, this section provides for the sunset of certain provisions relating to the Reinvestment Program on March 31, 2007.

The Community Mental Health Reinvestment Act (Chapter 723 of the Laws of 1993) established a mechanism whereby State appropriation reductions for savings associated with the closure of adult non-geriatric inpatient beds and psychiatric centers were directed to local governments for the expansion of community mental health services. This Act was subsequently extended (Chapter 358 of the Laws of 1998) without amendment until the funding mechanism expired on September 30, 2001.

Section 7.17 (e) of the MHL outlines specific requirements for notification in the event of “significant service reductions” for State psychiatric hospitals, including a one year notification for labor organizations, consumer advocacy groups, and others.

Section 7.21 of the MHL authorizes the directors of OMH facilities to appoint and remove staff of psychiatric hospitals or institutes who are not designated managerial or confidential.

There have been various other proposals to extend Reinvestment. In 2002, the Governor vetoed — on constitutional grounds — a bill (S.7560) that would have created a new Reinvestment program.

New York State has an extensive system of State supported community mental health services. In the past few years alone, there have been several initiatives to reorganize and expand the capacity of community mental health services including the Assisted Outpatient Treatment Program, the Enhanced Community Services Program, the NY/NY II housing agreement, and other housing initiatives. Significant actions include: the development of new single point of entry and accountability systems in counties throughout the State to better manage service access and utilization; Assisted Outpatient Treatment supports for mentally ill persons who are unable to manage safely in the community without supervision; the expansion of assertive community treatment (ACT) and doubling of case management capacity for adults and children; and the expansion of children’s mental health services including tripling the number of children served under the home and community-based waiver and the expansion of school-based services, family support services and community residential and family based treatment beds. In addition, the 2003-04 Executive Budget recommends development of 2,000 new community residential beds. In total, this commitment to expand residential capacity will bring the number of community beds to over 31,000 — an increase of more than 60 percent in the number of beds operating since 1995.

There is no longer a need to operate 17 adult civil psychiatric centers and six children’s psychiatric centers across the State to provide access to intermediate and long-term inpatient psychiatric care. Closing the five psychiatric centers and transferring inpatient bed capacity to vacant space at nearby facilities will allow the State to achieve administrative and operating efficiencies, thereby saving more than $27 million on a full annual basis. In addition, the closure of the facilities will also avoid extensive capital improvements which would otherwise be needed should these facilities remain in their current physical space.

The bill provides a mechanism to further develop and strengthen the community mental health system by allowing State savings from the closure of unneeded inpatient beds and facilities to be used to fund the development or support of community mental health services, including workforce-related activities to improve recruitment and retention of staffing in community-based programs.

This proposal reinvests resources attributed to inpatient bed closures at the Bronx Children’s Psychiatric Center to expand community-based services for children. OMH will transfer a portion of the inpatient capacity to nearby downstate facilities and redirect resources associated with the closure of 50 children’s inpatient beds for the expansion of community-based services for children in this geographical region of the State. With these new supports, the number of children served will increase fourfold contrasted to the institutional setting, and they will be more appropriately served at home and in their schools.

Currently, OMH is prohibited by MHL from reassigning staff to another facility, even though staffing levels at nearby facilities may require additional staffing to meet the needs of patients who are transferred. As a result, the amendment designating the Commissioner as the central appointing authority will help to ensure that OMH can operate hospitals at appropriate staffing levels without hiring new staff or imposing mandatory overtime requirements on staff, by allowing the Commissioner of Mental Health to reassign employees and balance staffing levels consistent with the number of operating beds or wards, to provide quality patient care. In addition, most other State agencies have central appointing authority, including the Department of Correctional Services, the Department of Transportation, and the Department of Health.

Part H – Extend Federal Disproportionate Share (DSH) payments to replace certain Mental Hygiene State aid funds to Article 28 hospitals

This bill extends Chapter 119 of the Laws of 1997, as amended by Chapter 57 of the Laws of 2000, through March 31, 2006 to allow voluntary Article 28 hospitals to continue replacing, through Federal disproportionate share payments, reductions in State Aid grant funds provided by the Office of Mental Health (OMH) and the Office of Alcoholism and Substance Abuse Services (OASAS).

This bill extends the authorization of annual Federal Disproportionate Share (DSH) payments to support the provision of mental health and substance abuse services by Article 28 hospitals, by amending sections 1 and 3 of Chapter 119 of the Laws of 1997. These additional DSH payments are based on the value of State Aid grants and/or DSH payments received by these hospitals, provided by OMH and OASAS, in the prior State fiscal year.

The annual DSH payment amounts are related to each hospital’s willingness to provide similar services that were previously funded by the State aid grant and/or DSH payments, with all DSH amounts subject to the approval of the Division of Budget. In addition, this bill limits the local share of Medicaid to the same proportion local governmental units provided as a match for State aid prior to the implementation of the DSH initiative.

The expiration date of the above provisions is extended from the current sunset date of June 30, 2003 to March 31, 2006.

This legislation is a 3-year extension of Chapter 57 of the Laws of 2000, which will expire on June 30, 2003.

In the absence of DSH funding, Article 28 hospitals would have to significantly curtail services they provide to persons with mental illness and/or substance abuse. Alternatively, to maintain current service levels, the State would need to replace DSH revenues with additional General Fund support, an action precluded by current fiscal exigencies. Therefore, extending the current DSH statute, as provided for in the legislation, is crucial to the maintenance of service delivery, the financial well being of the hospitals and to the State’s current Financial Plan.

The amount of DSH funding is determined by the Commissioners of OMH and OASAS based on the value of State Aid grants and/or DSH payments each hospital received in the prior State fiscal year. This bill thus preserves total funding of a hospital with the expectation that it will be spent for the same program purpose as the State Aid grants. The increase in Federal aid allows the State to save a commensurate amount totaling approximately $20.6 million annually. In addition, local government units save approximately $2.1million annually.

Part I – Revamp the General Public Health Works Program

This bill modifies the reimbursement formula for the General Public Health Works (GPHW) program through which the State provides financial assistance to localities for community-based public health services to ensure that State resources are directed to the most critical priorities.

This bill lowers from 36 percent to 30 percent the amount of State aid a locality will receive pursuant to Section 616 of Article 6 of the Public Health Law for the cost of providing basic health services and eliminates State aid for optional health services (currently at 30 percent).

State assistance will continue as currently provided in the base grant to each county, and for 30 percent of the cost of a county’s medical examiner and 50 percent for emergency vector control (West Nile virus preventive activities).

Article 6 of the Public Health Law established the GPHW program, which pays each county a base grant of $.45 per capita, or $450,000, whichever is greater, for localities that provide five core public health services: family health, disease control, health education, community health assessment and environmental health. Additionally, cities and counties are reimbursed 36 percent of their costs for core program expenditures that exceed the base grant; 30 percent of their costs for other public health service programs (e.g. housing hygiene, home health services, long-term care and individual sewerage systems) and 50 percent of their costs for public health emergency response and vector control activities included in their approved municipal health services plan.

Chapter 474 of the Laws of 1996 reduced the State share for the GPHW program from 40 percent for all services to 36 percent for core services and 30 percent for optional services.

The General Public Health Works (GPHW) program reimburses counties for a wide range of public health activities, including communicable disease control, public water supply protection, and health education. In recent years, this relatively open-ended program, driven by county activities, has grown significantly and will exceed $200 million in the current year. The increase is partially due to changing county claiming trends designed to maximize State reimbursement.

In the current fiscal environment, the increasing cost of this program must be addressed. This bill will lower reimbursement to counties from 36 percent to 30 percent of local costs for activities identified as “core” services, and eliminate State aid for other optional services. While local governments will likely object to the elimination of State aid for optional services, current statute permits localities — and many do — to charge fees for such services that could generate revenue exceeding the lost State assistance and sufficient to cover the total costs of such activities.

Part J – Reduce pharmacy reimbursement for the EPIC prescription program, increase drug manufacturers’ rebates and increase participants’ fees and deductibles

This bill renders the Elderly Pharmaceutical Insurance Coverage (EPIC) program more cost effective by reducing pharmacy reimbursement, increasing participant cost-sharing and promoting the use of more cost effective drugs by EPIC participants.

This bill:

Chapter 913 of the Laws of 1986 established the EPIC program which provides assistance to income qualified non-Medicaid eligible seniors in their purchase of prescribed medications, and sets forth provisions regarding dispensing limits, and a fair hearing process for individuals and participating provider pharmacies.

Section 547 of the Executive Law delineates:

Amendments to the Health Care Reform Act (HCRA) enacted in 2002 reduced EPIC’s pharmacy reimbursement from 95 percent of the Average Wholesale Price (AWP) to 90 percent of the AWP; required EPIC to use the same manufacturers’ rebate methodology as Medicaid and required private health insurers to match membership files with EPIC to facilitate coordination of benefits.

The EPIC Program is among the most generous state pharmaceutical benefit programs for the elderly in the country both in scope and the value of benefits provided. With pharmaceutical prices continuing to increase at alarming rates, it has become necessary to control the growth in program expenditures to ensure that the EPIC program can continue to provide affordable pharmaceuticals to New York’s senior population.

The measures proposed in this bill are similar to those applied in other states, and reflect the general practices of the health insurance industry with respect to pharmaceuticals.

The bill reduces program costs through an equitable and balanced approach that will reduce pharmacy reimbursement for covered drugs, increase manufacturer’s rebates and require program participants to assume a higher share of the cost of their prescriptions without diminishing the level of benefits available through this program.

Part K – Restructure the Medicaid program, contain Medicaid costs, and make Medicaid Managed Care permanent

This bill continues restructuring the State’s Medicaid program through initiatives which will reduce costs, enhance revenue and maintain access to health care services.

The major provisions of this bill are as follows:

Section 368-a of the Social Services Law allocates responsibility for payment of the non-Federal share Medicaid costs for specific services and certain individuals between the State and localities.

Section 367-a of the Social Services Law establishes the lower level of reimbursement for pharmacies at the average wholesale price less 10 percent or the customary price as charged by pharmacies to the general public. Subdivision 6 of this section establishes co-payments at $.50 on generic or $2.00 on brand name drugs and establishes a limit that annual co-pays cannot exceed $100 per recipient.

Section 2807-c of the Public Health Law determines the rates of payments made to providers for inpatient and outpatient services. Chapter 1 of the Laws of 1999 limited inflationary adjustments to the Consumer Price Index (CPI).

Sections 211 through 222-a of Chapter 474 of the Laws of 1996 established additional disproportionate share payments for hospitals operated by New York City’s Health and Hospital Corporation (HHC) and certain other public hospitals.

Article 28 and section 2808 of the Public Health Law contain various components of the Medicaid nursing home reimbursement formula.

Section 364-j authorizes the Medicaid managed care program in accordance with Federal regulations. In addition, this section establishes program eligibility and local social service district responsibilities.

Chapter 551 of the Laws of 2002, the Most Integrated Setting Bill, establishes a new State Council charged with developing a statewide plan to ensure that persons with disabilities can reside and function in the most integrated setting possible.

Chapter 412 of the Laws of 1999 as amended by Chapter 1 of the Laws of 1999 (HCRA 2000) included a series of cost containment measures to reduce hospital, nursing home and home care expenditures.

Section 2807-d of the Public Health Law established hospital provider assessments, which began in 1991 and were gradually phased out by December 1999.

Sections 3614 of the Public Health Law and 367-i of the Social Services Law established home care provider assessments, which began in 1992 and were eventually phased out by 1999.

New York State taxpayers support the most expensive Medicaid program in the nation, a program that provides a generous array of services to approximately 3.3 million recipients. This bill continues $307 million in State savings in prior year cost containment measures which were initially enacted in 1995-96 and 1996-97 and introduces a series of new measures to make New York’s Medicaid program more affordable while maintaining New York’s position as a national leader in providing high quality health care services to the State’s neediest populations. Absent these measures, total Medicaid program spending — Federal, State and local government combined — would reach $41.7 billion in 2003-04.

These new measures will save the State $1.2 billion in 2003-04 and $1.3 billion in 2004-05 by:

This bill proposes to extend $307 million in prior year cost containment – savings measures which have been absorbed by hospitals, nursing homes and home care providers.

Additionally, this bill reauthorizes the Managed Care Program to secure Federal funding as a result of the waiver and proposes other actions to maximize efficiencies.

Part L – Reauthorize HCRA and Child Health Plus through June 30, 2005

This bill extends provisions of the Health Care Reform Act (HCRA) governing the financing of health care services and the Child Health Plus (CHP) program for an additional two years through June 30, 2005. Currently, both HCRA and the CHP program are scheduled to sunset on June 30, 2003.

This bill amends and extends existing HCRA and CHP provisions through June 30, 2005, as follows:

Various provisions within Article 28 of the Public Health Law establish the program and financing structure for HCRA, including payments to hospitals and other health care providers. Sections 2807-c, 2807-j, 2807-s and 2807-t establish the hospital inpatient reimbursement system through June 30, 2003 for Medicaid and other governmental payors, and provide for surcharges and assessments, indigent care reimbursement and graduate medical education payments. Section 2807-v establishes the Tobacco Control and Insurance Initiatives Pool and identifies funding for various health care and insurance initiatives.

Title 1-A of Article 25 of the Public Health Law authorizes the CHP Program, a child health insurance plan, to provide subsidized health insurance coverage for children in low-income families who are not eligible for Medicaid and lack other health insurance coverage.

Section 4301 of the Insurance Law authorizes the conversion of Empire Blue Cross and other non-profit health insurers to for profit entities and directs most of the State proceeds from such conversions to HCRA.

In 1996, New York enacted landmark health care reform legislation – the Health Care Reform Act of 1996 (HCRA) – that replaced the hospital reimbursement system established in 1983 with a deregulated system for most non-Medicare payors. This Act was designed to improve the fiscal health of hospitals and to ensure that affordable and quality health care coverage was available to all New Yorkers.

In 1999, HCRA 2000 built upon the framework established in 1996, implementing the Family Health Plus (FHP) and Healthy New York programs as national models for expanding health care coverage to the uninsured; expanding funding for CHP; supporting anti-smoking efforts; strengthening hospital and clinic care for the indigent; and addressing rural health care and graduate medical education needs.

Most recently HCRA 2002 made additional investments to enhance the ability of health care providers to attract, train and maintain a high caliber health care workforce; expanded access to health care coverage for the working disabled and for low-income women diagnosed with breast and cervical cancer; secured a permanent funding stream for the Excess Medical Malpractice Insurance program and authorized the conversion of Empire Blue Cross to for-profit status, dedicating the majority of the proceeds from the conversion to finance on-going HCRA programs.

This legislation again builds upon the State’s longstanding commitment to the health and well being of New Yorkers by extending HCRA programs and financing through June 30, 2005. HCRA 2003 will invest a total of $8.7 billion – over two years – to finance critical health and insurance initiatives, including the CHP, FHP, Elderly Pharmaceutical Insurance Coverage, Healthy New York programs and health care workforce recruitment and retention payments.

Financed by HCRA and Federal funds, New York’s CHP program continues to set a national standard for providing comprehensive health care coverage for children up to age 19. In conjunction with HCRA 2003, the CHP program is reauthorized for two years – through June 30, 2005. The legislation also proposes to rollback Medicaid eligibility for children up to 100 percent of the Federal Poverty Level and gradually shift 234,000 children moved into Medicaid under previous legislation to the CHP program, which is generally preferred to their coverage under Medicaid. In SFY 2003-04, the program will serve an estimated 550,000 low-income children.

In addition, HCRA 2003 includes $4 million in new funding in 2003-04 to be matched in the Budget (for a total of $8 million) to support State efforts to improve the safety and quality of care of residents in adult homes. HCRA funding for this initiative will grow to $6 million in 2004-05 as these initiatives continue to ramp up.

HCRA 2003 also proposes a series of cost containment actions – which when combined with the additional revenues proposed – will ensure adequate funding for HCRA programs and provide needed State General Fund relief at a time when the State is facing unprecedented fiscal challenges. The savings actions include: reductions in the FHP program associated with rolling-back income eligibility from 150 percent to 133 percent; implementation of controls on pharmaceutical spending within the EPIC program, similar to those proposed under the Medicaid program; and reductions in certain programs, including phasing-out the Catastrophic Health Insurance program that is no longer necessary given the availability of other public insurance products.

HCRA 2003 also proposes to generate new resources to secure the future financial outlook for HCRA and the programs it supports. These new resources stem from increases in current HCRA surcharges and assessments; collections of overdue revenues associated with the implementation of an amnesty program and the maximization of available Federal resources, including the dedication of anticipated Federal funds for World Trade Center relief and recovery costs – primarily Disaster Relief Medicaid.

In addition, this legislation builds upon the successful experience with the Empire Blue Cross conversion to a for-profit company and directs most of the proceeds from future non-profit insurance company conversions to HCRA.

The HCRA plan also fully accommodates the re-direction of Tobacco Settlement payments beginning in April 2004.

Part M – Establish a Forge-Proof Prescription Program

This bill establishes a “Forge-Proof” prescription program to reduce the illegal marketing of prescription drugs.

The bill amends the Public Health Law (PHL) to:

Article 33 of the Public Health Law provides for the regulation of controlled substances, requires physicians to use official triplicate forms for prescribing those substances and requires pharmacists to file information about such prescriptions with the Department by filing an actual copy of the prescription or, optionally, transmitting it electronically. Section 3332 of the Public Health Law mandates requirements for prescriptions for such substances. Section 170.10 of the Penal Law makes forgery of a prescription a class D felony in New York State, and Article 178 of the Penal Law outlines penalties for the illegal diversion of non-controlled prescription drugs.

Requiring statewide non-reproducible prescription blanks will combat drug diversion (i.e., the stealing or copying of prescriptions) in both the Medicaid Program and private health insurance programs in New York State which creates a public health hazard through the distribution, adulteration and resale of potentially dangerous drugs.

DOH, law enforcement and administrative agencies have undertaken cooperative efforts to combat drug diversion and to prosecute individuals, providers, prescribers and recipients involved. This bill continues efforts to prevent the illegal duplication of prescriptions and enables law enforcement agencies to prosecute individuals engaged in illegal drug diversion activities.

Importantly, the bill will generate significant financial savings to private insurers as incidents of fraudulent activity decline, offsetting by far the cost of the program. The illicit buying and selling of prescription drugs costs private health insurers approximately $75 million per year.

Part N – Reform the Early Intervention Program

This bill establishes a series of measures to reform the financing of the Early Intervention (EI) program to control the escalating growth in State and local costs for EI.

Effective immediately this bill:

Chapter 1 of the Laws of 2002 included provisions to strengthen requirements that insurance companies cover appropriate medical and therapeutic services such as physical therapy, occupational therapy, assistive technology, speech language pathology and audiology for insured children. However, those provisions did not mandate private health insurance coverage.

The EI program provides developmental interventions that benefit thousands of children across the State each year without regard to their family’s ability to pay. However, the number of children participating in this program increased significantly, from 22,611 participants in 1994 to an estimated 64,269 children in 2002-03. Likewise, the program cost, from all sources, is projected to reach over $604 million in 2002-03, nearly double the $350 million spent in 1999-2000. This bill is required to curtail the unfettered growth in the Early Intervention Program and to ensure that taxpayer monies are used wisely and efficiently.

While the 2002 revisions to the law did require insurance industry reimbursement for covered EI services, the provisions did not address issues of medical necessity and network providers and thus fell short of ensuring offsetting revenue from medical coverage. Consistent with the original program design that assumed that private health insurance companies would pay a portion of the costs for their clients, this proposal expands upon the 2002 amendments by mandating that medical insurance companies cover EI treatments as covered benefits and pay a part of the cost of providing these services to insured children. It also clarifies that EI services are, by definition, medically necessary and requires reimbursement without regard to the insurer’s network of providers.

The Early Intervention program is currently free of charge to all eligible children regardless of family income. This proposal addresses this situation by setting in law the requirement that families making at least 160 percent of the Federal Poverty Level contribute up to 20 percent — similar to the Medicare cost sharing model — towards the cost of their children’s EI services, excluding service coordination and evaluations. Parental sharing of costs is appropriate and has precedents in other states’ EI programs, as well as in most medical insurance plans. The bill provides a waiver process for parents who, due to financial hardship and the high cost of their child’s medical treatments, are unable to make such a contribution.

The proposal to discontinue services at the age of three to children who will not be transitioning to the pre-school program is consistent with the intent of Federal law. Such provisions should not disadvantage children, as ineligibility for the pre-school program indicates that the child has reached an age-appropriate developmental stage.

BUDGET IMPLICATIONS:

Part A – Discontinue the Youth Opportunity Program

Enactment of this bill is necessary to implement the 2003-04 Executive Budget which includes recurring full annual savings of $1.3 million associated with the repeal of the YOP.

Part B – Consolidate various State Office for the Aging programs into a new Community Services Program

Enactment of this bill is necessary to implement the 2003-04 Executive Budget and the multi-year State Financial Plan to achieve savings of $6.4 million annually without reducing services to the elderly in New York State. Counties, which currently pay 25 percent of program cost support 30 percent of the service costs.

Part C – Abolish several-low priority programs administered by the Health Department

Enactment of this bill is necessary to implement the 2003-04 Executive Budget which reflects $1 million in annual savings from the elimination of these statutory requirements.

Part D – Increase fees for retrieval of various vital records that are administered by the Department of Health

Enactment of this bill is necessary to implement the 2003-04 Executive Budget, which includes $1.2 million in fee increase revenue to support 28 positions currently financed on the General Fund.

Part E – Authorize Health Information and Quality Improvement Act activities to be funded by the Professional Medical Conduct Account

Enactment of this bill is necessary to implement the 2003-04 Executive Budget, which transfers the financing of the $3.5 million in Patient Safety Center costs from the General Fund to the OPMC Account.

Part F – Close the Institute for Basic Research and consolidate the Nathan Kline Institute into the New York Psychiatric Institute

The elimination and consolidation of these research facilities will result in General Fund savings of $20.1 million in 2003-04, $27.1 in million 2004-05 and $28.1 million on a full annual basis.

Part G – Close five psychiatric centers and reauthorize the Reinvestment Act to redirect State savings into the community-based mental health system

The 2003-04 Executive Budget projects State savings of $12.1 million in 2003-04 and $22.4 million on a full annual basis for the closure of three adult State psychiatric centers and 60 adult non-geriatric inpatient beds. The severe fiscal restraints facing New York preclude new reinvestment funds from the savings actions initiated in 2003-04. Instead, these savings will allow the State to fund the annualization of the 2002-03 cost-of-living adjustment and Medicaid fee increases to improve recruitment and retention in community-based programs.

Starting in 2004-05, the legislation will redirect State savings for bed closures and facility closures into community-based services. Future savings will be used to develop 600 new supported housing beds and expand children’s community-based services, and could also be available for mental health workforce-related activities.

Part H – Extend Federal Disproportionate Share (DSH) payments to replace certain Mental Hygiene State aid funds to Article 28 hospitals

Enactment of this bill is necessary to implement the 2003-04 Executive Budget as it provides for a three-year extension of a 1997 initiative expiring March 31, 2003, which provides an annual net State savings totaling approximately $20.6 million. The two State agencies impacted are the Office of Mental Health (saving $9.4 million) and the Office of Substance Abuse Services (saving $11.2 million). Local governments also save a total of approximately $2.1 million annually.

Part I – Revamp the General Public Health Works Program

This proposal is necessary to implement the 2003-04 Executive Budget, which includes an associated Financial Plan savings of $32.3 million in 2003-04 and $63.8 million in 2004-05.

Part J – Reduce pharmacy reimbursement for the EPIC prescription program, increase drug manufacturers’ rebates and increase participants’ fees and deductibles

This bill is necessary to implement the 2003-04 Executive Budget, which reflects EPIC savings of $36.5 million and additional fee revenues of $1.5 million.

Part K – Restructure the Medicaid program, contain Medicaid costs, and make Medicaid Managed Care permanent

Enactment of this bill is necessary to implement the 2003-04 Executive Budget and the multi-year State Financial Plan which reflect new Medicaid savings totaling $1.2 billion in 2003-04 and $1.3 billion in 2004-05. In addition, annual savings of $307 million will continue as a result of permanently extending prior year cost containment.

Part L – Reauthorize HCRA and Child Health Plus through June 30, 2005

Enactment of this bill is necessary to implement the 2003-04 Executive Budget and the State’s multi-year Financial Plan that reflects continuation of HCRA funding for a number of important health programs and a series of revenue and cost containment actions to stabilize HCRA and secure a Financial Plan benefit. In total, this legislation will dedicate $8.7 billion for health care programs over its two-year extension and generate State General Fund savings of $214 million in 2003-04 and $351 million in 2004-05.

Part M – Establish a Forge-Proof Prescription Program

Enactment of this bill is necessary to implement the 2003-04 Executive Budget, which includes revenue received by insurers to cover the costs associated with the forge-proof prescription program. It is also anticipated this proposal will save the State approximately $25 million on its share of Medicaid prescription drug costs by 2004-05 and private insurers an estimated $75 million a year.

Part N – Reform the Early Intervention Program

Enactment of this bill is necessary to implement the 2003-04 Executive Budget and the multi-year State Financial Plan. Counties — who pay the full State and local share for EI services in the first instance — will save over $41 million in SFY 2003-04 and $55 million in SFY 2004-05. The State, which reimburses the counties on a lag basis, will save comparable amounts commencing in SFY 2004-05.

EFFECTIVE DATE:

Part A – Discontinue the Youth Opportunity Program

This bill will take effect April 1, 2003.

Part B – Consolidate various State Office for the Aging programs into a new Community Services Program

This bill will take effect immediately and be deemed to have been in full force and effect on and after April 1, 2003.

Part C –Abolish several-low priority programs administered by the Health Department

This bill will take effect immediately.

Part D – Increase fees for retrieval of various vital records that are administered by the Department of Health

This bill will take effect immediately.

Part E – Authorize Health Information and Quality Improvement Act activities to be funded by the Professional Medical Conduct Account

This bill will take effect April 1, 2003.

Part F – Close the Institute for Basic Research and consolidate the Nathan Kline Institute into the New York Psychiatric Institute

This bill will take effect April 1, 2003.

Part G – Close five psychiatric centers and reauthorize the Reinvestment Act to redirect State savings into the community-based mental health system

This bill will take effect immediately with certain exceptions, including specific effective dates for the closure of five psychiatric centers, and provides for the reinvestment of State savings starting in 2004-05. In addition, the provisions relating to Community Mental Health Support and Workforce Reinvestment will sunset on March 31, 2007.

Part H – Extend Federal Disproportionate Share (DSH) payments to replace certain Mental Hygiene State aid funds to Article 28 hospitals

This bill will take effect immediately and extends the sunset date of Chapter 119 of the Laws of 1997 from June 30, 2003 to March 31, 2006.

Part I – Revamp the General Public Health Works Program

This bill will take effect immediately and be deemed to have been in full force and effect on and after December 31, 2002.

Part J – Reduce pharmacy reimbursement for the EPIC prescription program, increase drug manufacturers’ rebates and increase participants’ fees and deductibles

This bill will take effect immediately except that section 2 will take effect within 60 days of enactment.

Part K – Restructure the Medicaid program, contain Medicaid costs, and make Medicaid Managed Care permanent

This bill will take effect April 1, 2003.

Part L – Reauthorize HCRA and Child Health Plus through June 30, 2005

This bill will take effect July 1, 2003.

Part M – Establish a Forge-Proof Prescription Program

The forge-proof prescription provisions of this proposal will take 60 days after enactment, although the Commissioner is authorized to permit practitioners to continue to use existing forms for up to twelve months after the effective date. The electronic filing of prescription information with the Department will be implemented only after the Commissioner has promulgated regulations and the amendments to the penal code will be effective on the first day of November next succeeding the date on which the bill becomes law.

Part N – Reform the Early Intervention Program

This bill will take effect immediately except that sections 12 and 14 regarding parental fees and section 13 regarding reimbursement for services will take effect 60 days after enactment.

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