1) Federal Spending Package and 2) State Budget Talks

March 10, 2022

Modern Healthcare, 3/9

Congress’ $1.5 trillion spending deal includes 340B, telehealth coverage


Congress reached a deal early Wednesday morning on a $1.5 trillion package to fund the government, but additional money to respond to the COVID-19 pandemic was stripped out at the last minute.

The long-awaited package comes after months of negotiation between Democrats and Republicans and disagreements over additional COVID-19 funding. The House plans to pass the package Wednesday with a vote in the Senate potentially by the end of the week.

About $15.6 billion in supplemental funding was removed from the bill Wednesday afternoon after some Democratic members objected to the offsets: cuts in planning relief funding to state and local governments.The $15.6 billion was already $7 billion less than the Biden administration had asked for, and now it’s not clear when or if Congress will pass additional COVID-19 response funding.

“It is heartbreaking to remove the COVID funding, and we must continue to fight for urgently needed COVID assistance, but unfortunately that will not be included in this bill,” House Speaker Nancy Pelosi (D-Calif.) wrote in a letter Wednesday to Democratic members.

More than $10.5 billion of the funding would have gone to the Health and Human Services Department for research, manufacturing, production and distribution of vaccines, treatments, diagnostics and medical supplies.

The remainder of the funding would have gone toward the global COVID-19 response.

The supplemental funding doesn’t include money for an HHS program that reimburses providers for treating uninsured COVID-19 patients. The Biden administration had initially asked Congress for $3 billion to replenish this fund, which is expected to run out of money by spring or early summer.

Congressional Republicans had raised concerns about how the money has been spent so far.

The Biden administration says all of the funding that was appropriated by Congress in the past to respond to COVID-19 has been spent or obligated.

The overall package also does not include several other provider group requests, including another delay of Medicare payment cuts, which are set to partially resume in April.

The package also does not include more money for the Provider Relief Fund, which helps providers offset financial losses due to COVID-19, nor does it include a suspension of Medicare loan repayments.

Providers did score some wins. Some hospitals that fell out of the 340B Drug Discount Program during the pandemic due to a change in patient mix and volume will be allowed to stay in the program through Dec. 31. More than 50 hospitals have already been kicked out of the program during the pandemic, according to the American Hospital Association. However, the language is not retroactive, meaning that hospitals that already lost eligibility may not benefit.

“The AHA appreciates Congress’ effort to restore some access to the 340B program for hospitals that lost eligibility to the program due to COVID-19-related changes to their payer mix,” said Aimee Kuhlman, vice president of federal relations for the AHA. “We are pleased that these affected 340B hospitals and their patients will be able to benefit from the program as they continue to weather the financial and operational challenges of the pandemic.”

The package will also extend Medicare coverage of telehealth services for 151 days after the end of the public health emergency, allowing beneficiaries to continue accessing care from their homes, at least temporarily.

Under the public health emergency, Medicare has temporarily waived several restrictions on coverage, including a requirement that beneficiaries be at a rural healthcare facility to receive telehealth services. Many of those waivers expire at the end of the public health emergency, which could end as soon as July 15.

The temporary extension will allow Congress more time to study the impacts of expanding telehealth access under Medicare and to decide whether lawmakers want to make those changes permanent. The extension also applies to coverage of audio-only telehealth.

HHS will receive a 12% funding increase under the proposal, including more money for the National Institutes of Health, the Centers for Disease Control and Prevention and various priorities for lawmakers, including maternal health and the substance use crisis.

Some of the department’s funds will be earmarked for a new agency that will focus on accelerating the pace of scientific breakthroughs for cancer and diseases like Alzheimer’s, fulfilling a key Biden administration priority. Additional money will go toward modernizing public health data surveillance and public health workforce initiatives.

The Substance Abuse and Mental Health Services Administration would receive $6.5 billion — a $350 million increase. That funding would go toward supporting mental health services and substance use treatment. The Health Resources and Services Administration would receive $9 billion, or a 20% increase in funding. Some of that would go toward workforce programs, including a new loan repayment program for physicians who specialize in pediatrics, and a funding increase for the Children’s Hospitals Graduate Medical Education program.

The package also includes several new grant programs to address maternal health, including $9 million in annual grants intended to spur innovative approaches to improving maternal health outcomes. The HHS funding also creates a $5 million-a-year grant program for medical and nursing schools to train students to care for racial and ethnic minorities. Other grant programs would focus on care integration, vaccine awareness, data collection and care in rural areas. More than $4.7 billion would go toward addressing the nursing shortage.


For Budget Wonks:

NYS Council notes:  With the Assembly and Senate one-house budget proposals expected any day now, advocates are making their last-minute requests to Gov. Kathy Hochul and state lawmakers.   The Governor signaled yesterday that her plan to increase the state’s reserves fund is not open to negotiation; however, advocates continue to make requests for additional assistance (beyond what was included in her executive budget proposal) including MH and SUD advocates who have requested $500M that would make a sizeable down payment on funds denied to our sector during the many years where the Cuomo Administration failed to honor the Human Services COLA statute.  

One subject seems to be on everyone’s mind: What’s next for New York’s Medicaid global cap?

Medicaid cap is ripe for overhaul during Albany budget talks

Albany is eying a major overhaul of the cap, which currently limits most state Medicaid spending growth at about 3 percent, or $580 million each fiscal year.

BY: SHANNON YOUNG | 03/10/2022 05:01 AM EST

For more than a decade, the global Medicaid cap has loomed over Albany budget negotiations, factoring into nearly all decisions on how dollars are spent — or not spent — in the program, which accounts for roughly half the state budget and provides health coverage to more than 7 million New Yorkers.

But with a new occupant in the governor’s office — and state coffers now flush with federal dollars — Albany is eying a major overhaul of the cap, which currently limits most state Medicaid spending growth at about 3 percent, or$580 million each fiscal year. And some lawmakers are hoping to take those talks one step further by eliminating the cap altogether.

I think it helps that Gov. [Kathy] Hochul did not spend a decade with the Medicaid cap being an article of religious faith — and she certainly doesn’t regard it as one of her signature accomplishments as governor, the way Gov. [Andrew] Cuomo did so that certainly helps,” Assembly Health Chair Richard Gottfried said in an interview. “I think we’re in a much more open conversation.”

Cuomo repeatedly rebuffed efforts to eliminate the Medicaid cap, despite attempts by some in the Legislature and growing calls from a diverse set of health industry leaders to do so in past budget negotiations. And it’s become something for the governor’s office, and even legislative leaders, to point to when justifying the need for unpopular Medicaid policies and cuts.

Hochul’s first executive budget proposes updating the metric used to set the cap from a 10-year rolling average of the Medicaid component of the Consumer Price Index to a five-year rolling average of Medicaid spending projections within the National Health Expenditure Accounts produced by the Centers for Medicare & Medicaid Services’ actuary.

The shift would “account for enrollment and population changes, which are significant drivers of costs, and support additional Medicaid spending increases of $366 million in FY 2023, growing to $3.1 billion in FY 2027,” according to budget documents. Total global cap spending growth is estimated at $966 million in FY 2023 under the proposedmetric.

State Budget Director Robert Mujica told reporters in January that the proposal would increase the global cap to 4.7 percent. He attributed the change to two things: the cap not tracking with medical Consumer Price Index as originally designed, and the pandemic.

The proposed raising of the cap — and spending that goes along with it — has drawn praise from many New York health care observers, including long-time critics who’ve argued that the limit, as enacted by Cuomo in 2011, does not acknowledge the current reality in the state’s Medicaid program.

The cap has come under major scrutiny in recent years, after the Cuomo administration in 2019 pushed $1.7 billion in scheduled Medicaid payments to the next year’s budget to avoid breaking the spending threshold, triggering a Medicaid budget shortfall. Critics have also taken issue with what Medicaid spending is subject to the cap. (For example, it does not apply to “state costs for the takeover of Medicaid growth from local governments and reimbursement to providers for increased minimum wage costs,” according to the executive budget’s Financial Plan.)

Additional criticism came in early 2020 amid Department of Health delays in releasing Medicaid global cap reports. The Medicaid Redesign Team II, meanwhile, recommended that the Cuomo administration “negotiate a redefinition of the Medicaid global cap as part of the FY21 budget in a manner that takes into account developments since the state Medicaid global cap was first enacted in 2011.”

Some, however, are questioning the decision to now tie New York’s cap to enrollment — which is expected to soon start falling back to pre-pandemic levels — and national Medicaid trends.

“It’s a strange choice of benchmarks,” said Bill Hammond, senior fellow for health policy at the Empire Center for Public Policy, a nonpartisan Albany think tank.

And others have voiced concerns that despite the initial boost, the changes could set the state up for a tighter cap in the long-term.

Gottfried, a Manhattan Democrat who has called for the Medicaid cap’s repeal, said while he likes “having growth in enrollment and growth in the acuity of enrollment as a factor” as proposed in the executive budget, “people are right to be concerned.”

For example, he argued that “the new language could have the effect of lowering the cap” if the state sees a major drop in Medicaid enrollment — which surged from 6 million people in February 2020 to nearly 7.4 million enrollees as of January 2022 — as more New Yorkers, who lost their jobs during the pandemic, rejoin the workforce.

“It might have a short-term benefit, but could do long-term damage,” he said. “And so I believe getting rid of the Medicaid cap is the only sensible thing to do.”

Senate Health Chair Gustavo Rivera, a Bronx Democrat and vocal critic of New York’s Medicaid cap, told POLITICO that he’s “thankful” that the Hochul administration is more open than Cuomo when it comes to making changes. But he said he has “very deep misgivings” when it comes to the budget director — who he cast as “the architect of all of the shenanigans over the last decade” — and how the new metric would be calculated.

“You can claim it corresponds to some calculations — whether its utilization or enrollment or CPI — or what have you. It’s all a Three-card Monte,” Rivera said. “So we should just get rid of it completely and just actually look closely at who was being served by the program and how we can best stabilize the program for those folks who are using it.”

Department of Health spokesperson Jeffrey Hammond said the administration “does not believe that year-to-year changes from [other] states — or New York — will have a material impact on the [CMS Office of the Actuary] projections, as DOH is proposing to use the five-year rolling average … which will mitigate against any short-term, unforeseen or unexpected changes.”

“The five-year lookback period embedded in this calculation will be able to capture more quickly any increases in spending patterns and costs, which is being experienced in the current inflationary environment,” he said in an email. “Accordingly, the [Office of the Actuary’s] five-year rolling projections reflects a more accurate predictor of the types of spending growth pressures, as compared to the current growth metric that examines only the health care cost component of the consumer price index.”

Bill Hammond, who has generally supported the cap as a budgeting tool but has taken issue with its enforcement, questioned why the state would “pick a projected rate rather than something based in reality.”

New York should preserve the parts of the cap that give the health commissioner authority to manage finances in the middle of a fiscal year and mandate reporting on Medicaid spending, he said. And instead of “picking an arbitrary limit,” the governor and legislature should have to decide each year on the appropriate level of program spending.

“They shouldn’t need some kind of benchmark to tell them what the right level is,” he said, adding that “it’s kind of hard to talk about whether the cap should continue or not because it’s been so eviscerated: The percentage limit only applies to a fraction of state spending, the reporting kind of dried up and the health commissioners never actually [used their] authority.”

Elisabeth Benjamin, the vice president of health initiatives at the Community Service Society of New York, a New York City-based organization that promotes economic opportunity, agreed that the state needs “a systematic, thoughtful mechanism to control costs”.

“It would move us to have a more thoughtful cost containment conversation than an arbitrary cap. I just think we, as a state, need to pull up our big boy or big girl pants and have a really thoughtful, comprehensive cost containment conversation,” she said. “Other states are moving forward on this. New York is way behind.”

Benjamin pointed to Maryland, which uses a Global Budget Revenue methodology that focuses on population-based health management, as a model that New York could replicate.

Both Gottfried and Rivera hinted that such changes to the Medicaid cap could come as part of the Senate and Assembly’s one-house budget proposals, which are expected to be released in the coming days.

Unlike in previous budget cycles, however, they said they’re optimistic that conversations about repealing the global cap may actually gain some traction this year, given the change in state leadership under Hochul.

“I do think there’s certainly an openness to having a conversation with the legislature that was just not there before,” Rivera said. “Am I and the other folks who are advocating for this particular thing [going to] be able to get over the finish line with the governor? Maybe. Maybe not.”