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Medicaid panel recommends $2.5B in health care spending reductions

Mar 19, 2020

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A state panel tasked with reducing the state’s Medicaid budget voted on a plan to cut $2.5 billion out of the state’s health care system.

But the commission’s work likely falls far short of closing a widening budget deficit that the coronavirus pandemic is expected to create.

The panel, chaired by two longtime allies of Gov. Andrew Cuomo, voted on a package that includes tightening rules on home health care programs, including one that allows sick or disabled New Yorkers to employ relatives to help with their care.  

The changes would also make it harder for people with assets to qualify for Medicaid for home care or nursing home care, requiring a new five-year lookback window where any wealth a patient had during that time will be counted against their eligibility for the program.

It would also eliminate what’s known as spousal refusal, where a husband or wife can refuse to pay for their partner’s care, allowing them to go on a state-funded health care program. 

The state would also try to get better control of rising drug prices, by getting rid of managed care pharmacy programs and replacing them with fee-for-service programs instead. The shift would eliminate insurance company middlemen known as pharmacy benefit managers, who critics say help to inflate drug prices.

The plan would also cut the reimbursement rate to health care providers by just under 1%, or around $400 million, for the state’s hospitals, and would save a total of $1.6 billion. It also takes into account $900 million in savings to Medicaid already implemented in the current fiscal year.  

The reductions cannot take place, though, as long as a federal emergency order is in effect that prohibits health care cuts, said a spokeswoman for the panel, Erin Dennis.   

The governor’s budget director, Robert Mujica, who is advising the panel, said the cuts likely won’t be enough, given the state’s rapidly ballooning deficit. 

“As we move forward, we’re going to have to make some tough budget choices,” Mujica said. “And every state is going to have to be doing that.” 

But Mujica said some of the cuts to hospitals could be delayed as money comes in from a federal aid package approved by Congress, which would add several billion more dollars to the state’s health care program. 

The funding is complicated by a rule, though, that prevents the state from passing on any new Medicaid costs to local governments. Cuomo had hoped to have counties and New York City pay for a larger share of the program.