BILL NUMBER: S257A

SPONSOR: ORTT
 
TITLE OF BILL:  An act directing the office for people with develop-
mental disabilities to study and develop suitable measures to prevent
financial hardship and/or failure of providers serving individuals with
developmental disabilities funded by Medicaid to support the uninter-
rupted continuation of necessary services

 
PURPOSE OR IDEA OF BILL:

This legislation requires the Office of People with Developmental Disa-
bilities to prepare a report including recommendations as they relate to
rate rationalization.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 requires the Commissioner of OPWDD to prepare a report that
includes recommendations for holding harmless from future rate
reductions providers that operate beneath a regional average ration, a
methodology for adjusting rates so that total reimbursement is equal to
              

the total costs of that program, establishment of a rate appeal process
designed to increase rates during a non-rebasing year, consider length-
ening the period between base year updates, and identify parts of the
plan to be approved by CMS.

Section 2 requires DOH to submit a report detailing the recommendations
set forth by this act by February 1, 2019.

Section 3 is the effective date.

 
JUSTIFICATION:

Services for individuals with developmental disabilities funded by Medi-
caid are subject to extraordinary financial stress under rate setting
policies and methodologies known as "rate rationalization."  Rate ratio-
nalization poses a systemic threat to the entire system of OPWDD funded
services. Specifically, it penalizes agencies efficient enough to real-
ize savings by taking those savings away when program rates are rebased
every other year. This ignores the fact that the system of OPWDD funded
services is based in large measure on an agency's ability to operate
efficiently enough to realize savings in various cost categories or
programs in order to subsidize cost categories or programs which are
chronically underfunded. Without this flexibility providers have been
placed in a position of closing or curtailing services or allowing
services to weaken because of insufficient funds to improve wages for
underpaid employees, provide intensified services to meet challenging
needs of people served, meet increases in health insurance costs and
other costs necessary to successfully provide services for people with
developmental disabilities.

Rate rationalization makes it unlikely the financially struggling
providers can recover since reducing costs in order to operate more
efficiently results in reimbursement rate cuts by the Department of
Health which simply exacerbate the provider's weak financial condition.
In one of many instances a financially struggling agency cut costs to
produce savings. However it soon found those savings lost to rate cuts
thus punishing it for being efficient further weakening it almost to the
point of bankruptcy.
Additionally, programs which must increase their costs in order to
manage a more difficult population with severe needs must wait for two
and a half to nearly three and a half years before rates are increased
by DOH. If the agency is financially marginal the potential exists to
fatally weaken the agency. In one of many examples a provider in a
struggling agency accepted four behaviorally challenging individuals for
placement from State facilities. The extraordinary costs associated with
these placements created a financial hole in excess of almost $1 million
and nearly bankrupted the entire agency placing the services for
hundreds of individuals and families at risk.

Rate rationalization also means that the cost to the State for funding
the entire services system must be budget neutral. However that doesn't
recognize essential costs increases due, for example, to an aging popu-
lation or meeting new mandates. Budget neutrality therefore contributes
to fiscal instability and jeopardizes sustainability.

 
PRIOR LEGISLATIVE HISTORY:

S. 7668A Passed Senate in 2016.

 
FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect immediately.