Governor Cuomo’s Proposed Budget 2013-2014: Major Proposals Addressing Cost-Cutting and Reorganization

On January 22, 2013, Governor Andrew Cuomo issued the Executive Budget for 2013-2014.[1]  The plan proposed, without the addition of federal aid, a $136.4 billion state budget, which is a 1.9% increase over the prior year. The major proposals, discussed below, focused on reduced spending and increased efficiency. 

Cost Cutting

The plan extended the 2% across-the-board Medicaid payment reduction and the Medicaid spending cap enacted in 2011-2012 and it eliminated trend factor adjustments permanently beginning April 1, 2013.  The Executive Budget also extended through March 31, 2015, the Commissioner of Health’s “super powers” should the global Medicaid spending cap be pierced.  The global cap does not expire and is currently estimated at 3.9%.  The Governor recommended amending the provision to include state administration under the global gap. 

The proposed budget delayed the 1.4% human services cost of living adjustment for 2013-14.   This adjustment is currently administered automatically with no relation to actual cost of growth or performance outcomes.  

Furthermore, the plan reduced secondary medical malpractice coverage for qualified physicians and dentists.  This coverage would only support doctors in the most high-risk specialties that practice at community hospitals in the highest risk areas.  The Governor authorized the commissioners of the Department of Financial Services (“DFS”) and the Department of Health (“DOH”) to create regulations executing this program.

Likewise, the budget restricted reimbursement for the costs of executive compensation and administration for state funded social service providers.  The plan would force state agencies to create limits on New York State’s reimbursement of executive compensation and administration expenses. 

Reorganization

Governor Cuomo’s Executive Budget also called for a financial restructuring of many state programs to increase efficiency.  The proposed budget continued the implementation of the Medicaid Redesign Team initiatives by supporting enactment of Health Homes for complex high-cost recipients, investment in affordable housing, and continuing the transition to care management for all Medicaid recipients.  Additionally, the proposed budget supported health home progression and developed care coordination for mentally ill recipients discharged from state psychiatric centers and individuals receiving court ordered assistance through Assisted Outpatient Treatment. 

Moreover, Governor Cuomo’s budget modified the indigent care funding formulas to safeguard hospitals from potential federal funding cutbacks and to meet the Affordable Care Act (“ACA”) requirements.  It included increased expenditures to vital community providers, strengthened tobacco cessation efforts, and streamlined delivery of service in common locations for physical health, mental health, and substance abuse.   

The Executive Budget reformed the state’s General Public Health Work (“GPHW”) and Early Intervention (“EI”) programs.  For the GPHW, the plan limited reimbursement to local clinics for services delivered to children under age 21 who have access to health insurance.  It permitted counties to bill third parties for sexually transmitted disease prevention and treatment services, which are currently provided without charge.  The plan reduced administrative costs by eliminating unnecessary local reporting and statutory program requirements, such as the obligation that counties submit a municipal public health services plan and a separate report on fees and revenues. 

For the EI program, the Executive Budget increased coverage by insurers, including Medicaid Managed Care and Child Health Plus plans, by including EI service providers in their networks, and obligating insured individuals to use providers within their networks.  The plan also recommended integrating eligibility determinations under redrafted Federal regulations.  The Governor recommended utilizing supplemental evaluations for children, who were previously referred to the EI program, requiring screenings for children referred without a diagnosis, and using records to establish eligibility where suitable in order to increase the efficiency of patient care. 

For the Health Care Program, the Governor endorsed the re-evaluation of current contracts in order to align contract periods and consolidate separate programs into six competitive pools.  This would allow all providers to annually compete for funding based upon their capability of achieving health outcomes. 

The Executive Budget also requested the consolidation of all state Medicaid administrative functions (e.g., rate setting, negotiation of managed care contracts, claims processing) into the DOH in 2013-2014.  This would streamline the administrative process and permit agencies to focus on the needs of their communities.  In addition, it recommended that the DOH, rather than the DFS, have authority to establish rate setting for Child Health Plus.  This would permit oversight alignment that is uniform with Medicaid Managed Care and FHP.   

The Governor similarly modified the planning process for emergency medical services by consolidating it into a single state Emergency Medical Services Advisory Board, which assists in reviewing quality guidelines and review standards.  The current 18 Regional Emergency Medical Services Councils would be combined into ten units. 

Moreover, the Executive Budget requested the establishment of regional centers of excellence for state-operated inpatient psychiatric facilities, enhanced community mental health services, and cost controls in agency operations.  The plan proposed the incorporation of the Office of Welfare Inspector General into the Office of the Inspector General to reorganize the state’s administration of Medicaid programs through the DOH. 

In addition, Governor Cuomo requested common standards for the negotiation and purchase of health insurance by the DOH and the Department of Civil Service.  The Governor hopes that this standardization will increase industry efficiencies by aligning hospital cost reimbursement policies, expanding patient centered medical home models, and advancing evidence based strategies that decrease costs and the quality of care. 

The Executive Budget recognized the New York State Health Insurance Exchange Program.  The Exchange creates a centralized marketplace for the purchase and sale of health insurance, in accordance with the ACA.  The Governor’s plan created a Small Business Health Options Program that would be obtainable by employers with less than 50 employees through January 1, 2016.  

Further, proposed changes include allowing private capital demonstrations for health care facilities, modifications to the Certificate of Need review for primary care providers, and the authorization for appointment of temporary operators at hospitals or diagnostic and treatment centers by the DOH.  

Governor Cuomo and legislative leaders will meet shortly to negotiate a final plan by the April 1 start of the fiscal year.