healthsignals new york

Feds want special ed money back

So the Feds want some more of their Medicaid money back. They're moving to recover hundreds of millions of dollars in Medicaid payments claimed by New York school districts to cover the cost of educating children with speech disabilities, most of whom are enrolled in special education programs.

Mostly, this sounds like the same old stuff (polite word). As we've said elsewhere, Medicaid is a verb as well as a noun. To Medicaid is to re-classify services (such as educational services) as health services so that reimbursement can be claimed from the federal government. In New York, this is an art form. I know several people whose careers have been made by their creative interpretation of federal law and regulation in order to Medicaid services and pull in federal revenues. That's what New York has been doing here.

But there's something else as well. I've listened to people in the education community (and not just in New York, by the way) about how record keeping for special education is a paper factory. It's a mechanically complex process, it's tedious paperwork, (teachers, like nurses filling out paperwork rather than teaching or nursing) it's messy (and therefore subjuct to legal challenge), it's terribly inefficient and it's probably not generating the additional Medicaid claims that it could if it were strategically automated. Given today's story, isn't that a twist!

More confusion on the Medicare drug cards

Just talked with Andy Koski of the Brookdale Center on Aging of Hunter College. Andy trains a lot of people around New York about law and policy that affects clients of health and welfare programs. He's been doing a lot of training recently on the new Medicare drug card program and has had two consistent experiences:

First, the professionals that he's training, generally lawyers, social workers and health professionals, are saying, "this is confusing for us, how on earth is the public going to understand it?"

Second, there are a lot of Medicare beneficiaries who have no idea that the discount card program is different from the new drug benefit that starts in 2006. They think there's one program.

This is consistent with what we're hearing elsewhere. Some confusion with any major change like this is inevitable. We'll see how quickly it settles down. Who knows, maybe some of the beneficiaries, those who think all they're getting is a discount, may be pleasantly surprised in 2006. But if there are a significant number of folks out there who think they're getting the new benefit right now, they may be a bit cranky when they figure out they have to wait more than a year.

State funded work & economic effects

David Shaffer of the Business Council's affiliated Public Policy Institute had an op-ed in yesterday's New York Post on Dennis Rivera's ability to latch onto New York State funds. Rivera, the head of SEIU's District 1199 has been the linchpin in the efforts of New York City hospitals to effectively lobby for more and more funds and has been able to pull a substantial portion of those funds into 1199's coffers as well.

The op-ed is based on a report New York State's Economy in 2004, Which Way Out? (PDF). The press release is here. Here's the essence of Shaffer's argument:

For now, Rivera is king of the hill, at least in Albany. Every year, he successfully uses his political war chest and his campaign foot soldiers to extract more and more dollars out of the taxpayers, paying for more and more health-care jobs.

But there's a cloud in Rivera's silver lining, and it's this: You can't expect to keep taking unlimited amounts of money away from the taxpayers, once you start running the taxpayers out of town ...

... I recently undertook a detailed analysis of the state's job performance since 1990. Almost any way you slice the years since then, you find both state and city lagging well behind the nation's job growth. Maybe that's no surprise. But here's something that is: From 1990 through 2003, New York state has added few, if any, net new jobs - except jobs paid for by the taxpayers.

We've created many new jobs, and lost many others, for a net gain of about 190,000 statewide. But take out the new jobs financed by government, and it may well be that we haven't created a single net new job in 13 years ...

New York can't go on indefinitely like this, basing its "economic growth" on jobs paid for by a declining number of tax-paying jobs.

Every time taxes are raised, we make it that much harder for businesses to provide real, tax-paying jobs in New York. That means fewer of those jobs - each one paying a bigger share of the cost of growing the number of tax-financed jobs.

That leads to further economic decline. Which, ultimately, will force drastic cuts in the tax-spending jobs, too - just as happened in the fiscal crisis of the 1970s.

Unlike the op-ed, the report doesn't mention Rivera. It does say this:

But it isn't just that these interest groups are powerful; it's almost as though many in Albany have given up hope that anything else can be done about the state's economy ... The catch is that ultimately, as an economic growth polity this will prove self-defeating.

A couple of other observations:

First, Rivera has become the lightning rod. Shaffer's op-ed talks about Rivera by name. Though his report also talks about public sector jobs, Shaffer doesn't single out public sector union leaders in the op-ed. Politically, school aid is at least as contentious and expensive as health care and the teacher's unions have more than a passing interest in those fights. For many around New York, even in the hospital sector and certainly upstate, Rivera has become the bogeyman, probably because he keeps beating them. Are there other reasons?

Second, it's not just business that's paying more; because of how hospital finances are structured in New York, other unions with health benefit funds are also paying a lot more. Their officials may be more quiet about 1199 than business is, but many in the know resent having their funds and members being forced to pay more because of the political clout of the hospital workers' union.

And a question: how many 1199 members read the Post?

Why is the hospital capital bill such a precedent?

So why is the bill that's floating around such a precedent setter? Simple.

New York has been bailing out hospitals for over 25 years and New York has been supporting the debt of hospitals for at least that long.

But near as I can tell, New York has never before borrowed money to give it to hospitals and other medical facilities. And it has never done anything like this to bail out hospitals. And it has never done anything like this on this scale.

If New York State borrows a billion (the current proposed number) and then gives it to hospitals in New York as grants, then it will not only be on the financial hook to pay off the debt, but it will be on the political hook to ensure that the recipients of its largesse survive. It would be really embarrasing to have a hospital close after the State borrowed money to give to that hospital.

The bill states that the funds would go for information technology, consolidation, re-configuration and other functions. The other functions potentially include filling the gaps in the union benefit funds that hospitals have failed to pay. Funds could also be used to close facilities which would be a good idea, but it shouldn't be necessary to borrow to do that and there may be legal questions about the notion as well.

There may be other precedents in this proposal and I'm checking on those. More analyses and commentary to come. This is groundbreaking.

(This post continues our commentary about a proposal for a New York State public authority to borrow substantial funds and to use those funds to provide grants to hospitals and other medical facilities. The earlier posts on this topic are here and here.)

Medicare drug discount cards

Despite significant PR expenditures, we're not off to a good start with the Medicare drug discount card program. Sign-ups begin Monday May 3, just a few days away and discounts begin June 1.

But indications are that even the professionals who will be helping the public deal with the program are confused. If so, how is the public going to deal with this? CMS has FAQs on its website. It's a great thing to do, but isn't it reminiscent of what software companies do when their program interfaces are confusing? In both cases, the user will get blamed but really it's all in the design.

There are no indications yet regarding whether or how New York might tie-in its own pharmaceutical assistance program, EPIC. New York might save some money by auto-enrolling EPIC beneficiaries in a Medicare program (by having the Medicare discount kick in first), but advocates don't want those using EPIC to also need to carry a second card. It's more confusion and would lose the benefit of catching some potential drug interactions. We're cutting it a bit close here ...

The discount card programs will be allowed to revise the list of prescription drug prices each week, but generally Medicare beneficiaries can switch cards only during an open-enrollment period at the end of the year. What a set-up for a bait and switch.

Then of course, there are questions about just how much the program will save beneficiaries. CMS itself estimates savings between "10-25% on many drugs." Check also here and here. Some folks have suggested that since the discounts are off of "average wholesale price," (AWP) the average discounts will amount to nil. There are also questions about how many will participate.

Medicare members who decide to join the program can choose only one card, which can carry a maximum annual fee of $30. Card holders may qualify for a $600 subsidy toward the cost of their drugs if their annual incomes are below $12,569 for individuals or $16,862 for couples.

No doubt Congress wanted something in place before the election and that's why they went with this "relatively" simple initiative, saving the more complex and controversial pharmaceutical program for later. They may rue the day.

If it works for cops, can it work for docs?

New York City's Compstat program has been in use for a decade now and is spreading throughout the country. The essence is "statistics driven" resource deployment. Crime rates went down. When we do the same, we'll see changes in healthcare too.

Suozzi & political backlash

Well, it was bound to happen. We said earlier that it was going to get ugly and it has.

(For you non-New Yorkers, this is may be a bit too inside. But for those of you who are political voyeurs, jump right in. This brawl centers around New York's requirement that its counties contribute a big part of the non-federal financial share of the country's most expensive Medicaid program. It's also about which elected officials get to raise taxes.)

Dean Skelos (R-Rockville Centre) who is deputy majority leader of the State Senate and Owen Johnson (R-Babylon) who chairs the Senate Finance Committee have an opinion piece in today's Newsday, County execs' proposal would add to tax burden. This responds to Tom Suozzi's (the Nassau County Executive) FixAlbany political action committee and to his flogging of the Medicaid issue.

This is interesting for a couple of reasons:

First, when Suozzi (who's a Democrat) started this ruckus, he said that he would target both a Republican and a Democratic member of the County's Legislative delegation if the State failed to provide some financial relief. So he's being bi-partisan in ticking (that's the polite word) people off. Even the Speaker of the Assembly, a Democrat has taken a shot at him.

So it's interesting that it was two Republicans who wrote this piece. What was the political calculus? Did they try to get any Dems to join them? Weakening Suozzi might have been easier if the counterattack was also perceived as bi-partisan. On the other hand, there may have been partisan purpose in taking local political advantage of the substance of the issue.

The substance of the counterattack is that the tax revenues that support Medicaid at the local level come from different sources (primarily property and sales taxes) than those that come from the state level (income taxes) and that the geographic distribution of tax revenues differ by type of tax. The geographic distribution of tax burden is different for different types of taxes and differs also from the geographic distribution of Medicaid costs. So the Senators argue that relieving the property tax (county share) burden of Long Island resident will be more than offset by increasing their income tax (state share) burden and their net taxes will increase.

Of course, none of this has anything to do with the total cost of the program which is staggering. While county officials have a very legitimate gripe, if the debate turns into one that is only about the local share, then we'll get into the same kind of geographic equity debate as we have in education, we'll keep on spending more and both sides will lose.

Mathew Holt on United & Oxford

Matthew Holt adds a couple of observations about United's acquisition of Oxford, the first having to do with the new importance of national rather than regional strategies and the second showing graphically that somebody appears to have been tipped off early about the deal.

So what's the deal on healthcare capital in NYS?

So why would New York hospitals ask for and why would New York State officials even consider having the public authority that does healthcare bonding borrow money and then give it away? Old habits.

Let's start with some context. New York and its healthcare hospitals have gotten themselves into a very tight corner. For starters, here are some key points:

1. For years, most hospitals in New York, and these days a lot of nursing homes, have been financially strained.

2. But New York's policymakers (both Legislative and Executive) have been loathe to let institutions fail. Going back to at least 1977, we have bailed numerous facilities out numerous times. The process is now built into both the law and the politics. Rather than letting some fail so the survivors could prosper, all of them hang on the brink.

3. New York does not allow publically traded stock companies to own and operate hospitals and nursing homes. So the only substantial source of capital is borrowed money. Since most of the facilities are bad risks, the debts have to be guaranteed.

4. The debt is overwhelmingly in the form of bonds issued by New York State public authorities. While strictly speaking, these are not obligations of the State, to think otherwise in reality is foolish. Any default will affect New York State's credit rating and rightly so. As a result, hospitals and some nursing homes have deliberately taken on debt to keep the State on the hook. It's like a third world nation that's taken on too much debt. It's not the debtor that's in trouble; it's the lender.

New York hospitals have been especially reliant on FHA guaranteed debt. In fact as of March of 2004, New York hospitals are responsible for 84 percent of FHA's active porfolio. Out of $4,857,300,468 in FHA guaranteed hospital mortgages, $4,079,016,568 were in New York State. Moreover, many of the outstanding mortgages are for financially shaky institutions.

But while New York hospitals still use a disproportionate share, FHA is no longer the source it was. (It's a wonder it took this long for the Feds to slow the flow. Their risk was enormous.) For the most recently completed federal fiscal years 2000-03, HUD insured $614,436,200 in total mortgage value, but only $130,118,900 or 21.2 percent were in New York.

So if we continue current policy and if we wish to upgrade facilities while avoiding the prospect of closing or cutting back existing hospital resources, then the only source of capital is New York's taxpayers. We've caught ourselves in a vicious cycle.

We proposed alternatives in 1994. We'll come back to them shortly.

Oxford goes not to Empire, but United

The Wall Street Journal reported this afternoon that Oxford has agreed to be acquired by United. This comes just a few days after the announcement that Wellchoice (the parent of Empire Blue Cross/Blue Shield) had terminated discussions about acquiring Oxford.

Total acquisition cost estimated to be $4.9 billion, including $1.4 billion in cash.

Having opened the bidding but not closed the deal itself, Wellchoice has put more pressure on itself in the Greater New York market ... not that they had any choice.

Assuming this deal goes through the question now is who does Wellchoice go after next and who goes after them.