Joint Legislative Public Hearing on 2017-2018 Executive Budget Proposal: Topic "Health" - Testimonies

13 Senator Catharine M. Young
Chair, Senate Finance Committee
14
Assemblyman Herman D. Farrell, Jr.
15 Chair, Assembly Ways & Means Committee

16 PRESENT:

17 Senator Liz Krueger
Senate Finance Committee (RM)
18
Assemblyman Robert Oaks
19 Assembly Ways & Means Committee (RM)

20 Senator Kemp Hannon
Chair, Senate Committee on Health
21
Assemblyman Richard N. Gottfried
22 Chair, Assembly Health Committee

23 Senator David J. Valesky
Cochair, Senate Committee on Health
24

1 2017-2018 Executive Budget
Health and Medicaid
2 2-16-17

3 PRESENT: (Continued)

4 Senator James L. Seward
Chair, Senate Committee on Insurance
5
Assemblyman Kevin A. Cahill
6 Chair, Assembly Committee on Insurance

7 Senator Diane Savino
Vice Chair, Senate Finance Committee
8
Senator Gustavo Rivera
9
Assemblyman Andrew P. Raia
10
Assemblyman Phil Steck
11
Senator Neil Breslin
12
Assemblyman Andrew Garbarino
13
Assemblyman John McDonald
14
Senator Martin J. Golden
15
Assemblyman Edward P. Ra
16
Assemblywoman Ellen C. Jaffee
17
Assemblyman Kevin M. Byrne
18
Assemblywoman Shelley Mayer
19
Senator Leroy Comrie
20
Assemblywoman Patricia Fahy
21
Assemblywoman Yuh-Line Niou
22

23

24

1 2017-2018 Executive Budget
Health and Medicaid
2 2-16-17

3 LIST OF SPEAKERS

4 STATEMENT QUESTIONS

5 Howard Zucker, M.D., J.D.
Commissioner
6 NYS Department of Health
-and-
7 Jason Helgerson
NYS Medicaid Director 12 21
8
Maria T. Vullo
9 Superintendent
NYS Department of Financial
10 Services 207 226

11 Dennis Rosen
Medicaid Inspector General
12 NYS Office of the Medicaid
Inspector General 307 315
13
Bea Grause
14 President
Healthcare Association of NYS
15 of NYS (HANYS) 333

16 Stephen Hanse
President and CEO
17 New York State Health Facilities
Association (NYSHFA)
18 New York State Center for
Assisted Living
19 -and-
Mark Olsen
20 Administrator
Kingsway Arms Nursing Center 338 346
21
Claudia Hammar
22 President
Laura Haight
23 Vice President, Public Policy
NYS Association of Health
24 Care Providers 349

1 2017-2018 Executive Budget
Health and Medicaid
2 2-16-17

3 LIST OF SPEAKERS, Continued

4 STATEMENT QUESTIONS

5 Al Cardillo
Executive Vice President
6 Home Care Association of
New York State 360 372
7
Ami J. Schnauber
8 VP, Advocacy & Public Policy
LeadingAge New York 375 382
9
Kathy A. McMahon
10 Consultant
Hospice and Palliative Care
11 Association of NYS 384

12 Paul Macielak
President and CEO
13 NY Health Plan Association 388

14 James Lytle
Counsel
15 NYS Coalition of Public
Health Plans and
16 NYS Coalition of Managed Long
Term Care and PACE Plans 398 406
17
Lacey Clarke
18 Assistant Director of Policy
Community Health Care
19 Association of NYS (CHCANYS) 408

20 Moe Auster
Senior VP/Chief Leg. Counsel
21 Medical Society of the
State of New York 416 425
22

1 2017-2018 Executive Budget
Health and Medicaid
2 2-16-17

3 LIST OF SPEAKERS, Continued

4 STATEMENT QUESTIONS

5 Nora Margaret Higgins, RN
Region 12 Coordinator
6 Kenneth Ferro
Associate Healthcare
7 Fiscal Analyst
NYS Public Employees
8 Federation (PEF) 426

9 Jill Furillo, RN
Executive Director
10 NYS Nurses Association 440

11 Frank Kruppa
President
12 NYS Association of County
Health Officials (NYSACHO) 446
13
Neal Kalish
14 Codirector
United Ambulette Coalition 453
15
John Tomassi
16 President
Upstate Transportation
17 Association 463 472

18 Kathy Febraio
Executive Director
19 Russell Gellis
President
20 Pharmacists Society of
the State of New York 473 481
21
Michael Duteau
22 President
Chain Pharmacy Association
23 of New York State 481 487

24

1 2017-2018 Executive Budget
Health and Medicaid
2 2-16-17

3 LIST OF SPEAKERS, Continued

4 STATEMENT QUESTIONS

5 Bill Hammond
Director of Public Policy
6 Empire Center for Public Policy 488 495

7 Jo Wiederhorn
President and CEO
8 Associated Medical Schools
of New York
9 -and-
Richard Pacheco
10 First-Year Medical Student 500

11 Nathan Tinker
Executive Director
12 NY Biotechnology Association 511

13 Thomas Faith
President
14 NYS Association of Ambulatory
Surgery Centers 515
15
Dr. Bryan Ludwig
16 Albany District Representative
New York Chiropractic Council 519
17
Shelley J. Wagar
18 Executive Director
NYS Center for Assisted Living 526 532
19
Jim Kane
20 Treasurer
Empire State Association of
21 Assisted Living 534 541

22 Louise Cohen
CEO
23 Primary Care Development Corp. 543 549

24

1 2017-2018 Executive Budget
Health and Medicaid
2 2-16-17

3 LIST OF SPEAKERS, Continued

4 STATEMENT QUESTIONS

5 Bryan O'Malley
Executive Director
6 Consumer Directed Personal
Assistance Association of NYS 554
7
Julie Hart
8 Director, Government Relations
American Cancer Society
9 Cancer Action Network 563

10 Jane Ginsburg
Executive Director
11 Coalition of NYS Alzheimer's
Association Chapters 570 577
12
Andrea Smyth
13 Executive Director
NYS Coalition for Children's
14 Behavioral Health 579

15 Timothy Hathaway
Executive Director
16 Prevent Child Abuse New York 582

17 Steven Sanders
Executive Director
18 Agencies for Children's
Therapy Services 587
19
Lisa Foehner
20 Director of State Advocacy
Parents as Teachers
21 National Center 592

22 Kim Atkins
Board Chair
23 Planned Parenthood Empire
State Acts 599
24

1 2017-2018 Executive Budget
Health and Medicaid
2 2-16-17

3 LIST OF SPEAKERS, Continued

4 STATEMENT QUESTIONS

5 Rebecca A. Novick
Director, Health Law Unit
6 The Legal Aid Society 607

7 Maria Alvarez
Executive Director
8 Statewide Senior Action Council
-for-
9 Campaign for New York Health 615 619

10 Bailey Acevedo
Health Counselor & Attorney
11 Community Service Society of
New York
12 -for-
Health Care for All New York 620
13
Claudia Calhoon
14 Director, Health advocacy
New York Immigration Coalition
15 -for-
Coverage 4 All Campaign 624
16

17

1 CHAIRWOMAN YOUNG: Good morning. I'm

2 Senator Catharine Young, chair of the Senate

3 Standing Committee on Finance, and I'm joined

4 by my colleague from the Assembly, Assembly

5 Ways and Means Chairman Denny Farrell.

6 And also we have several colleagues

7 who I will introduce, and then let the

8 Assembly introduce their members, and from

9 there we will proceed.

10 So joining us today, just coming in,

11 is Senator Liz Krueger, who is ranking member

12 on the Finance Committee. We also have our

13 chair of the Health Committee, Senator Kemp

14 Hannon; we have Senator David Valesky, who is

15 vice chair; we have Senator Jim Seward,

16 Senator Marty Golden, Senator Gustavo Rivera,

17 and just joining us is Senator Neil Breslin.

18 Good morning. Chairman?

19 CHAIRMAN FARRELL: Good morning.

20 Thank you.

21 Assemblyman Dick Gottfried, chair.

22 Assemblyman Kevin Cahill, chair also.

23 Assemblyman Phil Steck, Assemblywoman Ellen

24 Jaffee, Assemblyman John McDonald,

1 Assemblywoman Shelley Mayer, and Assemblyman

2 Oaks, who will tell us his folks.

3 ASSEMBLYMAN OAKS: Yes, we are joined

4 by Assemblyman Raia, Assemblyman Ra, and

5 Assemblyman Garbarino.

6 CHAIRWOMAN YOUNG: Thank you.

7 If you look at the schedule today, we

8 have more than 50 witnesses. Health is a hot

9 topic this year -- it always is a hot topic,

10 but this year especially so. I am going to

11 ask all of the witnesses to stick to the time

12 period. I know for the commissioners we will

13 have extra time allotted for you, just

14 because there's so many questions.

15 But for the following witnesses, I

16 would ask that you give a summary of your

17 testimony -- that we will have written

18 testimony that you will submit so we will

19 have that, we will look at it. But in the

20 interests of time, we don't want to be here

21 until tomorrow, because we have to have the

22 Housing Committee meeting tomorrow. We don't

23 want to run into that. So I'm going to ask

24 all of the witnesses to be on message and

1 sticking within time limits. Of course we

2 may have to ask you questions.

3 But also the members, I'm asking the

4 members to watch the clock. Watch the clock.

5 We have clocks all over the place, watch the

6 clock. And I am going to be strict today

7 about members. There will be leeway given to

8 the chairs of the fiscal committees and

9 chairs of the health committees, but other

10 than that I'm asking the members to stick to

11 the time period. Thank you.

12 Pursuant to the State Constitution and

13 Legislative Law, the fiscal committees of the

14 State Legislature are authorized to hold

15 hearings on the Executive Budget. Today's

16 hearing will be limited to a discussion of

17 the Governor's proposed budget for the

18 Department of Health and the Office of

19 Medicaid Inspector General.

20 Following each presentation, there

21 will be some time allowed for questions from

22 the chairs of the fiscal committees and other

23 legislators.

24 I would like first to welcome

1 Dr. Howard Zucker, commissioner of health.

2 Following the presentation by Dr. Zucker will

3 be Dennis Rosen, Medicaid inspector general.

4 And also we have Jason Helgerson joining

5 Dr. Zucker here today.

6 All testimony will be followed by a

7 question-and-answer period by members of the

8 Legislature. And after the final

9 question-and-answer period, an opportunity

10 will be provided for members of the public to

11 briefly express their views on the budgets

12 under discussion.

13 So Dr. Zucker, good morning. Welcome.

14 We are delighted to have you here, and we

15 look forward to your testimony.

16 COMMISSIONER ZUCKER: Thank you. And

17 good morning, Chairpersons Young and Farrell,

18 Hannon and Gottfried, and members of the

19 New York State Senate and Assembly. I'm here

20 today to discuss Governor Andrew Cuomo's

21 2017-2018 Executive Budget as it relates to

22 health. And I am joined by Jason Helgerson,

23 the state's Medicaid director.

24 In the last six years, New York has

1 made remarkable progress improving the health

2 of New Yorkers and, at the same time,

3 controlling costs. We are transforming the

4 healthcare delivery system; improving the

5 quality of care provided; expanding access to

6 health insurance through the success of the

7 New York State of Health; promoting the

8 state's Prevention Agenda; and all the while,

9 responding to emerging priorities such as

10 infectious diseases, weather emergencies,

11 water quality, and the devastating effects of

12 opioid abuse and heroin and synthetic

13 cannabinoid use.

14 In a healthcare environment that is

15 ever challenged to maintain spending within

16 sustainable limits, the Governor is proposing

17 to confront one of the biggest drivers of

18 premium rate increases for New York's

19 commercial health insurance market -- soaring

20 prescription drug prices. Not only do these

21 rising prices drive up commercial health

22 insurance premiums, but there are

23 implications for New York taxpayers who have

24 subsidized a $1.7 billion drug-related cost

1 increase in the Medicaid program over the

2 last three years.

3 The Governor's budget proposes a

4 three-point plan to protect consumers and

5 taxpayers from the consequences of the

6 rapidly rising cost of prescription drugs.

7 The plan insulates taxpayers by preventing

8 prescription drug price-gouging in the

9 Medicaid program; imposes a surcharge on drug

10 manufacturers that charge exorbitant prices

11 and reallocates that money to insurers and

12 businesses to lower premiums for the

13 following year; and protects ratepayers from

14 abusive business practices by intermediaries

15 that drive up drug prices.

16 The Governor's Budget also proposes

17 significant actions to promote and improve

18 public health. The Executive Budget proposes

19 a comprehensive tobacco control and

20 prevention strategy by incorporating the use

21 of electronic cigarettes into the definition

22 of "smoking," thereby including electronic

23 cigarettes within the Clean Indoor Air Act

24 and the Adolescent Tobacco Use Prevention

1 Act. This will prevent the use of electronic

2 cigarettes in most public places and allow

3 the Department of Health to regulate

4 electronic cigarettes in the same way as

5 other tobacco products.

6 Also, vapor products used in

7 electronic cigarettes, or e-cigarettes, will

8 be taxed along with other tobacco products.

9 This proposal is significant because tobacco

10 use remains the number-one cause of

11 preventable disease and death in New York

12 State.

13 A report released by the Office of the

14 Surgeon General at the end of 2016 states

15 that "E-cigarette use among U.S. youth and

16 young adults is now a major public health

17 concern." E-cigarette use among youth and

18 young adults is associated with the use of

19 other tobacco products. In New York State,

20 the rate of high-school-age youth e-cigarette

21 use has doubled in just the years between

22 2014 and 2016, increasing from 10.5 percent

23 to 20.6 percent.

24 Because most tobacco use is

1 established during adolescence, actions to

2 prevent our young people -- who are sensitive

3 to price increases -- from the potential of a

4 lifetime of smoking and addiction are

5 critical.

6 In order to support ongoing public

7 health programs or achieve flexibility to

8 support new investments to meet emerging

9 public health priorities, the Executive

10 Budget proposes to consolidate some of the

11 many public health appropriations into pools,

12 and to reduce the overall funding for each of

13 the pools. This action achieves savings, but

14 will also allow the Department of Health to

15 coordinate, streamline, and prioritize our

16 public health spending.

17 Governor Cuomo's Executive Budget

18 seeks to establish New York's Capital Region

19 as a hub for life sciences innovation. This

20 economic development proposal will complement

21 the Governor's $650 million Life Sciences

22 Initiative announced in December of 2016.

23 The $150 million appropriation and authority

24 to build, using more efficient approaches,

1 represents the first step in the development

2 of a new modern public health laboratory

3 facility in the Capital Region that is

4 designed to enhance partnerships and

5 encourage growth in the life sciences and

6 health data sectors.

7 The Wadsworth Center Laboratory is a

8 tremendous asset with an international

9 reputation and a robust history of

10 collaboration with private business, academic

11 institutions, healthcare providers, and

12 research facilities. Through the efforts of

13 the department, the Empire State Development

14 Corporation and the Dormitory Authority of

15 the State of New York, we will improve our

16 readiness to respond to public health

17 priorities and to position the lab as a core

18 element in the development of a life sciences

19 cluster in the Capital Region.

20 New York, along with states across the

21 country, is working to confront emerging

22 contaminants in our drinking water. Governor

23 Cuomo is taking an aggressive approach to

24 this issue by proposing the Clean Water

1 Infrastructure Act of 2017, an investment of

2 $2 billion in critical water infrastructure

3 across New York State. These funds will

4 support drinking water infrastructure,

5 wastewater infrastructure, and source water

6 protection actions.

7 There are an estimated 1.1 million

8 private wells in New York State, providing

9 drinking water to as many as 4 million

10 residents, yet there is no requirement to

11 test that water. The Executive Budget

12 proposes to require the testing of

13 private-well drinking water upon the sale of

14 a residential property and the construction

15 of a new well. In addition, the Governor

16 proposes to require landlords to conduct

17 periodic testing of private well water and

18 notify tenants of the results. We will work

19 with our partner agencies to ensure the

20 testing includes contaminants of local or

21 regional concern, and we will make hardship

22 funding available for low-income homeowners

23 and seniors.

24 The Governor has taken decisive action

1 towards ensuring New Yorkers have access to

2 clean drinking water, and addressing

3 unregulated contaminants is one of our top

4 priorities. The Water Quality Rapid Response

5 Team has been working to identify and address

6 drinking water quality issues across the

7 state. To enhance the effort, the Executive

8 Budget proposes to require the testing of

9 additional public water supplies for

10 unregulated contaminants. Fewer than 200 of

11 the over 9,000 public water supplies in

12 New York are required to test for unregulated

13 contaminants.

14 The state will use the model of the

15 emerging contaminant testing required by the

16 federal EPA for large public water supplies

17 to require testing for smaller public water

18 supplies, but consideration will be given to

19 specific issues affecting localities when

20 establishing the requirements. As with the

21 private-well testing proposal, the Governor

22 will make funding available for small

23 community water systems with financial

24 hardship.

1 From clean water to healthcare

2 providers, the Governor proposes investments

3 to support essential activities. The

4 Executive Budget provides $500 million in

5 additional capital support for essential

6 healthcare providers, including a minimum of

7 $30 million directed to community-based

8 providers. These funds will be used for

9 capital projects, debt retirement, working

10 capital, and other non-capital projects that

11 facilitate healthcare transformation. The

12 total amount of capital support provided to

13 healthcare providers for transformation

14 efforts, between the current and the last two

15 state budgets, will now be $3.3 billion.

16 It is not enough, however, to provide

17 investment. We must continue to reimagine

18 the structure in which care is delivered.

19 New York has made great progress with

20 Medicaid redesign and with the State Health

21 Innovation Plan, or the SHIP, and now it is

22 time to take a comprehensive approach to

23 modernize the regulations that serve the core

24 purposes of ensuring access and protecting

1 safety. The department will undertake a

2 stakeholder engagement process to review

3 existing healthcare regulatory structures and

4 recommend appropriate changes.

5 With the uncertainty that now exists

6 in federal healthcare policy, Governor Cuomo

7 is taking decisive action in New York to

8 ensure access to high-quality, cost-effective

9 healthcare for all New Yorkers.

10 Thank you, and I'm glad to answer any

11 of your questions.

12 CHAIRWOMAN YOUNG: Thank you very

13 much.

14 Our first speaker will be Senator Kemp

15 Hannon, who is chair of the Health Committee.

16 Senator?

17 SENATOR HANNON: Commissioner, you

18 raise a number of interesting questions,

19 which at some point during the course of this

20 morning I'm going to have a dialogue with

21 you.

22 But the first topic that I want to

23 discuss is the provision that's in the health

24 proposal in regard to the powers of your

1 department and the Executive in the event

2 there is a revenue shortfall from that which

3 is projected in the adopted budget. I'm just

4 thinking that this is an extraordinary

5 request for powers that have hitherto not

6 been seen in the Executive, even with the

7 strong executive Division of Budget that we

8 have in the state. And I'm wondering in what

9 events that you envision that you're going to

10 do this, and do you have alternatives?

11 Because I frankly don't see that that's a

12 proposal that's something I agree with.

13 COMMISSIONER ZUCKER: So the budget

14 provides for an opportunity, in the event of

15 emergencies, to make sure that there's a way

16 for us to address that, not at the -- not by

17 increasing the budget, but to redirect

18 resources as necessary. And I think that

19 that's the -- it gives us a little latitude

20 in case that were to occur. And we've seen

21 situations where there have been emergencies

22 that surface.

23 SENATOR HANNON: Well, I think this

24 goes beyond a latitude that's ever been seen

1 for allocating and suballocating and moving

2 funds in a budget. So I would just suggest

3 that there be some -- you may want to

4 consider some alternative.

5 Obviously there are dramatic proposals

6 in Washington, there are budgeting -- they're

7 talking about doing two or three budgets by

8 reconciliation during the course of the

9 calendar year. Their fiscal year doesn't

10 begin until October 1, so there's a lot of

11 mismatch in regard to calendar years. But I

12 think there needs to be a practical proposal,

13 not a pie-in-the-sky proposal in regard to

14 dealing with that situation.

15 COMMISSIONER ZUCKER: Thank you.

16 SENATOR HANNON: You mentioned the

17 Wadsworth Lab, and I know this is something

18 that you as commissioner are especially

19 passionate about. My difficulty with that is

20 I would look through the budget and I don't

21 see any location proposed for a new Wadsworth

22 Lab to the tune of $150 million. Has the

23 Executive and yourselves come up with a finer

24 tuning to where it might be located?

1 COMMISSIONER ZUCKER: So thank you for

2 that question. So we are looking at -- the

3 $150 million will work towards looking at,

4 number one, engaging stakeholders, looking at

5 site evaluations, trying to design the lab.

6 And we are trying to identify the right place

7 for this to make sure there's an opportunity

8 for both a public/private partnership but

9 also to engage those in academic communities

10 and others to be able to utilize the

11 unbelievable services that the lab has.

12 And this is all the first stage of

13 what we're planning to do.

14 SENATOR HANNON: So it may be

15 appropriate for us, in response, to say this

16 is something to look at and to evaluate and

17 to see where the request for proposals should

18 be made and where the site selection should

19 be. Because I know the lab is nationally,

20 internationally renowned, yet could still be

21 improved, but still this is a major

22 undertaking for a fairly tight-knit region of

23 the state.

24 COMMISSIONER ZUCKER: Right. And I

1 think, as you mentioned, it's a gem in our

2 department, and what the Wadsworth Lab has

3 achieved over the course of the past three

4 years that I've been in the department,

5 including the issues of Legionnaires' disease

6 and Ebola and Zika and water testing.

7 So we want to be sure when we move

8 forward with a new lab, the location, the

9 site, the design, the partnerships are

10 addressed, and that's where the first step of

11 that $150 million -- or the $150 million will

12 go.

13 SENATOR HANNON: The -- you mentioned

14 water, which we have spent a considerable

15 amount of time on, for good reason. And I

16 noticed that yesterday the department mailed

17 out to residents of the Newburgh area, the

18 Hudson Valley, the results of their own blood

19 tests.

20 One of the things I went looking for

21 is whether or not your department has

22 progressed in regard to levels of standards

23 of safety for the contaminant that was tested

24 in Newburgh, also in Hoosick Falls, the PFOA.

1 Now, since we began all the hearings, I know

2 the federal government has come up with a

3 standard that's 70 parts. But I was

4 wondering, has the department adopted that?

5 Has the department looked at the fact that

6 that's -- you call the EPA standard an

7 advisory, as opposed to a rigorous standard?

8 And so if we don't have this adopted in this

9 state as a standard, I'm wondering what's the

10 use of mailing out the blood tests to people.

11 Will they say it's safe, it's not safe. Do

12 we --

13 COMMISSIONER ZUCKER: So thank you for

14 that question. We've spent a lot of time on

15 water.

16 The advisory put forth by the federal

17 government was 70, as we know. However, we

18 recognize that we've been working with --

19 trying to work with the EPA in the last

20 administration. However, as of today, or

21 maybe perhaps it's tomorrow, that there will

22 be a new EPA administrator that will be

23 confirmed, or it goes up for confirmation.

24 And the department wants to work with the

1 federal government on identifying the steps

2 for MCLs for these unregulated contaminants.

3 We need to give them a little bit of

4 an opportunity to move forward in identifying

5 an MCL. If they do not identify one -- or

6 set one, I should say, then we as the state

7 will do that.

8 SENATOR HANNON: Well, you could do

9 that now, is that not the case?

10 COMMISSIONER ZUCKER: Right, we could

11 do that. However, because the issue of water

12 is such a national issue, it's in the best

13 interests of everyone, whether New York or

14 neighboring states or other states across the

15 nation, to have a national standard. When

16 the issues of PFOA were addressed upstate

17 here in this area and I had an opportunity to

18 speak with my colleagues in neighboring

19 states, we all recognized that the best thing

20 is for the federal government to set that.

21 And so again, we will ask the federal

22 government. We hope that they do the right

23 thing and set a standard. But if they don't,

24 this state, New York and the Governor and the

1 department, will set one.

2 SENATOR HANNON: I've proposed

3 legislation in regard to setting up in the

4 state a Water Institute that would do

5 testing, that would have standards, that

6 would issue those. And I think in light of

7 the fact that we don't have one for PFOA, the

8 fact that the other day you and the Governor

9 signed a letter to the EPA asking for testing

10 of another contaminant, dioxin -- at the end

11 of your statement you said, If the EPA won't

12 do it, we will convey a group of experts and

13 try to come up with our own standard -- I

14 think that it's really incumbent upon this

15 state to act.

16 If in eight years of an Obama

17 administration, arguably an environmentally

18 friendly administration, they could not come

19 up with standards -- they don't even have the

20 standard for chromium, which is Erin

21 Brockovich's thing. So if they couldn't come

22 up with a standard, the expectations are not

23 high, and I think we should move forward

24 having our own standard-making system

1 automatically, continually -- not ad hoc --

2 in this state.

3 COMMISSIONER ZUCKER: I appreciate

4 that. And I had an opportunity to read the

5 report that you provided to us regarding --

6 and the recommendations. I think that we --

7 yes, and I have it here too, thank you. And

8 I appreciate the recommendations.

9 The -- and so the question that I

10 raise is, okay, what are some of the things

11 that putting together a committee would do

12 that we are already looking at? So the

13 Department of Environmental Conservation, my

14 department, the Department of Transportation,

15 all of us are working together and using our

16 experts -- and we just mentioned Wadsworth,

17 the experts there -- to come up with how do

18 we move forward on these issues of water

19 quality. And so I am with you on this and

20 would love to work with you further on

21 getting this done.

22 SENATOR HANNON: Well, thank you. I

23 know there's a lot of good work that's been

24 done, but I think there's a lot more that

1 needs to be done.

2 Madam Chair, I'll cede my time. At

3 the end of my colleagues' time, I'd like to

4 come back for questions, but I know people

5 are anxious.

6 CHAIRWOMAN YOUNG: Certainly.

7 Certainly.

8 SENATOR HANNON: And I didn't even ask

9 anything of the Medicaid director.

10 (Laughter.)

11 CHAIRWOMAN YOUNG: That's coming.

12 (Laughter.)

13 CHAIRWOMAN YOUNG: We've been joined

14 by Senator Diane Savino.

15 And also I want to point out -- I

16 didn't announce it at the beginning, but we

17 also will be hearing from Maria T. Vullo,

18 superintendent of the New York State

19 Department of Financial Services. She's up

20 next after the two esteemed witnesses that we

21 have now.

22 Chairman?

23 CHAIRMAN FARRELL: Assemblyman

24 Gottfried, chairman of the Health Committee.

1 ASSEMBLYMAN GOTTFRIED: Thank you. I

2 don't know whether this question is better

3 directed to Dr. Zucker or Jason Helgerson,

4 but you can divide it up. And I'm going to

5 read through it, because it's kind of long.

6 So my first question is about

7 prescription drug pricing. The proposals for

8 dealing with high-priced prescription drugs

9 suggest that DOH believes it can do a better

10 job of bringing down those prices than

11 individual insurance companies can. If that

12 is correct, why limit it to those drugs? Why

13 not provide the same benefit for antibiotics

14 and all other drugs?

15 In the past, DOH has objected to

16 restoring the role of the Preferred Drug

17 Program to negotiate price or rebates for

18 drugs for the whole Medicaid program. DOH

19 has said individually Medicaid managed care

20 plans get better prices than the PDP could,

21 because they work through giant PBMs. But

22 now DOH says it can do a better job bringing

23 down prices than the managed care plans can.

24 And the proposal to regulate PBMs suggests

1 that the Executive thinks PBMs are actually

2 ripping off their health plan clients.

3 Please explain.

4 COMMISSIONER ZUCKER: So I think

5 there's two parts there. One is the issue of

6 the prescription drug prices. And as we all

7 know, we've seen this, the price of

8 prescriptions on some medications are just

9 astronomical. And this is not -- not

10 acceptable in -- it's just not acceptable for

11 the high-quality care we're trying to

12 provide. The commitment of Governor Cuomo is

13 to not allow that to continue.

14 The -- we all have gone to pharmacies

15 and have looked at filled prescriptions,

16 we've all heard from -- you've heard from

17 your constituents, and I've heard from them

18 as well about the price of medicines. I

19 personally have heard of patients when I was

20 practicing medicine who cut --

21 ASSEMBLYMAN GOTTFRIED: Excuse me.

22 Dr. Zucker?

23 COMMISSIONER ZUCKER: Yup.

24 ASSEMBLYMAN GOTTFRIED: Could you

1 focus on my question?

2 COMMISSIONER ZUCKER: On the

3 prescription benefit?

4 ASSEMBLYMAN GOTTFRIED: On why the

5 state can do a better job negotiating prices

6 than drug companies, which I believe -- than

7 insurance companies, which I believe it can,

8 but which was -- which is the opposite of

9 what the department has said in the past.

10 COMMISSIONER ZUCKER: So -- well, one

11 part is that with regards to these prices,

12 it's a -- as the Governor has put forth, it's

13 not all medications, it's a small pool of

14 medications.

15 There are three areas. One are new

16 medicines that come onto the market that are

17 markedly elevated in price. Another are

18 medicines that are -- and for example, some

19 of the hep C, hepatitis C medicines that were

20 put out there. A second one are medicines

21 that come into the marketplace that were

22 there and then they have a dramatic increase

23 in the price. So that's like the EpiPen,

24 where it went from $100 and up by

1 500 percent. And others are medicines that

2 are brought into the marketplace that have a

3 very narrow area of diseases or a specific

4 area of disease that has a markedly elevated

5 price.

6 So the -- what you're saying is that

7 the state addressing all medicines -- that's

8 not the plan of what the Governor has put

9 forth.

10 Regarding the Medicaid component,

11 which is set, some of the prices -- Jason,

12 did you want to add anything about the

13 Medicaid?

14 MEDICAID DIR. HELGERSON: Sure. So,

15 Assemblyman, I think that generally speaking

16 both the state through the Preferred Drug

17 List, as well as managed care plans through

18 their contracts with PBMs, have an ability in

19 the case of most drugs and most drug classes

20 to create competition and, with that, to help

21 bring down prices.

22 But what we have seen in the last few

23 years is a relatively new phenomenon, which

24 is manufacturers in a select set -- actually,

1 a relatively small set -- of specific drugs

2 and specific classes, in which there is no

3 competition, in which there really is just

4 one drug available for a period of time, and

5 during that period of time, during that

6 period of patent protection, a manufacturer

7 is using in essence their monopoly power to

8 charge an outrageous price, a price that

9 simply is not affordable.

10 And so in response to that, the

11 Governor has proposed very aggressive action

12 designed to target only those drugs where

13 that's an issue. His proposal is not unique

14 to Medicaid, it is an all-payer approach to

15 basically provide a strong financial penalty

16 to any manufacturer who brings such a drug to

17 market or attempts to increase a drug's

18 price, you know, during that period in which

19 there is really no competition. Whether it's

20 PBMs nationally or locally or whether it's

21 state Medicaid programs, whether they

22 negotiate as a whole or through their managed

23 care partners, if there is no competition,

24 there is no competition.

1 And what the Governor is acknowledging

2 in his proposal is in those extraordinary

3 circumstances -- and it's a limited number of

4 drugs -- that if a manufacturer abuses the

5 rights that they have under their patent

6 protection and attempts to charge outrageous

7 prices that no one can afford, that could in

8 fact cost taxpayers in New York State

9 billions of dollars, that in those rare

10 circumstances the extraordinary all-payer

11 initiative is necessary. And that's where

12 his surcharge proposal comes in.

13 That's why, in our view, it's really

14 two separate issues. And we think at the end

15 of the day an all-payer surcharge penalty

16 upon those limited number of drugs -- which

17 we hope actually we don't have to use, but if

18 we have to, is a very strong stick to

19 discourage the kind of behavior that we've

20 seen in the past few years.

21 ASSEMBLYMAN GOTTFRIED: Well, before I

22 ask my second question, which may focus this

23 point a little more, I'll just note that in

24 the past you've said that PBMs with

1 90 million covered lives have more bargaining

2 clout than the Medicaid program, even if

3 under the PDP it was bargaining for

4 6.5 million lives, and therefore going

5 through a PBM has more clout, presumably, to

6 deal even with these big bad super-drugs.

7 But let me read my second question.

8 On January 13th, I wrote to you

9 saying: "The Health Department has asserted

10 that the current system saves Medicaid money

11 because the managed care plans, by using the

12 services of national pharmacy benefit

13 managers, negotiate lower prices than the

14 PDP, Preferred Drug Program, could.

15 "I assume that with hundreds of

16 millions if not billions of dollars at stake,

17 the department has evidence to support this

18 assertion. For example, there ought to be

19 evidence comparing the rebates negotiated by

20 the PDP when it was at full strength,

21 comparing that to the rebates by or for the

22 various Medicaid managed care plans after the

23 carve-in.

24 "I would appreciate it if you would

1 provide me this evidence before the budget

2 hearing."

3 Now, I had asked this same question at

4 previous budget hearings, got no evidence in

5 response. In the intervening weeks since my

6 letter, the department assured me that I

7 would get that information prior to today's

8 hearing. At 11:27 p.m. on Tuesday, DOH

9 emailed my office saying: "Staff have been

10 working on this issue, but the analysis is

11 complicated and requires a bit more of a

12 deeper dive to ensure that they have a full

13 understanding."

14 So considering DOH's lack of

15 understanding, wouldn't it be prudent and

16 helpful to the department, to delete the drug

17 pricing and PBM provisions from the

18 Article VII bill until DOH can develop a full

19 understanding and explain it all to the

20 Legislature? We could then consider that in

21 a departmental program bill after the budget.

22 MEDICAID DIR. HELGERSON: So in terms

23 of the -- we are completing the analysis per

24 your request. The issue is just -- what

1 we're trying to do is go back and basically

2 try to replicate what the world would have

3 looked like back to 2010. We're now in 2017,

4 so the drug carve-ins now have been in place

5 for five, six years. So it is a bit of a

6 challenge to go back and try to replicate

7 what the world would have looked like,

8 considering how much has changed.

9 I think the bottom line is that the

10 supplemental rebates that the managed care

11 organizations are able to generate compared

12 to what we were able to generate as a percent

13 of total spend before the drug carve-in is

14 basically comparable. It's about 5 percent

15 of total drug spend comes from supplemental

16 rebate revenue. That is about what it was

17 back in 2010. That's about what the plans

18 are able to generate. In fact, the plans

19 generate slightly more than what we were able

20 to do in 2010.

21 Now, obviously 2010 was 2010. We're

22 now in 2017. So we're trying to see and

23 update that to 2017, which is what is the

24 complexity and a bit of a challenge working

1 with our actuaries as well as the state's

2 contracted pharmacy benefit manager.

3 So that's what's taking a little bit

4 of time. Apologize for it. But I do think

5 that one fact which is known is that one of

6 the things that carving the drug benefit into

7 the managed care contracts did, and did very

8 clearly -- and it is very clearly something

9 that we can demonstrate -- is that they were

10 very successful increasing the generic

11 dispensing rate. And the vast majority of

12 what is hundreds of millions of dollars in

13 savings that was generated as a result of the

14 drug carve-in had nothing to do with

15 negotiations with manufacturers on brand-name

16 medications. It rather was the fact that we

17 have significantly increased the number of

18 patients who are utilizing generics when the

19 generic equivalent is available. In fact,

20 prior to the carve-in we had a generic fill

21 rate of 73 percent. We now have a generic

22 fill rate of 86 percent. And that has

23 generated significant savings, hundreds of

24 millions of dollars in savings to taxpayers

1 as a result. And that's -- that is a key

2 part of why we believe at the end of the day

3 the drug carve-in has been a successful

4 policy for the State of New York.

5 ASSEMBLYMAN GOTTFRIED: Well, I have

6 two problems with that answer. One is that

7 the reason the generic fill rate went up is

8 not because of any magical powers of PBMs or

9 Medicaid managed care plans. Isn't it

10 because we enacted a statute that mandates

11 generic substitution in Medicaid, whether the

12 prescriber wrote "dispense as written" or

13 not? Isn't that what bumped up the generic

14 fill rate?

15 And secondly, you have said at these

16 hearings and elsewhere, several times, that

17 you know that the managed care plans have

18 been more effective than the PDP was or could

19 be. You've put specific dollar amounts on

20 that increased effectiveness, both at this

21 hearing and in budget negotiations. Now

22 you're telling me that you really do not have

23 a factual basis for those statements because

24 you don't know what the rebates were in 2007.

1 And I find it hard to believe that the

2 department wipes out those records. But

3 you're saying you don't know what the rebates

4 were in 2011 and are therefore having a hard

5 time comparing it to the rebates, let's say,

6 in 2013, when the carve-in was fully

7 effective.

8 So how can you be so adamant that all

9 along when I've been asking this question, I

10 was wrong and you had a specific price tag to

11 put on that answer?

12 MEDICAID DIR. HELGERSON: No, we do

13 know exactly how much rebate revenue we

14 collected in 2010 prior to the carve-in. We

15 know how much rebate revenue is collected by

16 the managed care organizations. They report

17 that to us each and every year.

18 The issue is that what you had asked

19 us to do was to try to replicate -- and we do

20 this each year, but we wanted to do a deeper

21 dive, per your request, because a lot has

22 changed since 2010. That's part of the

23 reason why we're here. Part of the reason

24 why the Governor has proposed such aggressive

1 action in his budget is that in 2010, we did

2 not have the kinds of treatments that we now

3 have for the treatment of hepatitis C. In my

4 time --

5 ASSEMBLYMAN GOTTFRIED: Well, no, wait

6 a minute. First of all --

7 MEDICAID DIR. HELGERSON: -- as a

8 Medicaid director, I've never seen anything

9 that was more disruptive to the Medicaid

10 program nationally than the new drug agents

11 that came in for the treatment. Very

12 exciting in so many ways, but so high cost

13 that -- it's such a significant game changer

14 that it made sense for us to sort of take a

15 little bit more time because we knew at the

16 end of the day whatever number we put on your

17 proposal would be one that we would want to

18 have the maximum ability to defend.

19 And we thought it made sense, with our

20 actuaries and with the pharmacy benefit

21 manager, to take that time to do that

22 analysis. And that's what we're doing. And

23 we will get your analysis shortly.

24 ASSEMBLYMAN GOTTFRIED: Well, first of

1 all, I never asked you to create a

2 hypothetical scenario for 2016. I asked to

3 know what the rebates were for 2011, the last

4 year when the carve-out was in full effect,

5 with what I guess would be 2012 or 2013, the

6 first year when the carve-in was fully

7 effective.

8 I can't believe that you couldn't get

9 that number by dinnertime tonight, if you

10 wanted it, from a member of your staff. And

11 when I first started asking you this

12 question, it was long before Sovaldi or any

13 of these other things were on the market, it

14 was long before the sevenfold increase in the

15 price of an EpiPen. And I think I've been

16 asking a pretty simple question and not

17 getting an answer. And I believe at this

18 point that the reason that evidence has not

19 been presented is that that evidence, like

20 the dog that didn't bark, does not prove your

21 point. I believe it will prove my point.

22 And the fact that you think for these

23 high-priced drugs you are more powerful than

24 a 90-million-covered-lives PBM -- I agree

1 with you that I think you are more powerful

2 for negotiating about Sovaldi, but I think

3 you are also more powerful when negotiating

4 about Crestor or amoxicillin.

5 MEDICAID DIR. HELGERSON: So I guess,

6 in a sense -- I mean, we will get you the

7 information. I think what we were -- maybe

8 we were reading more into this in terms of

9 your questions. But we were anticipating, as

10 has been the case last year and in past

11 years, that you would be needing this

12 information for the preparation for a budget

13 proposal, and that what you'd want us to do

14 is to say if we changed our policy, what

15 would be the fiscal implications of that and

16 provide you with sufficient evidence to

17 support our conclusion.

18 So that's the core of what we were

19 doing. And obviously in order to do that,

20 you have to take into account the current

21 state of pharmaceutical prices and the

22 current state of utilization. So that's --

23 so I apologize, but that was what we were

24 anticipating, so that's a key reason for why

1 we are taking a bit more time to do that.

2 But we definitely will get you what it is

3 that you need.

4 I would say, however, the Governor's

5 proposal really isn't about negotiation. The

6 Governor's proposal is about situations in

7 which negotiation doesn't work. It's about

8 situations like we had with Sovaldi, where

9 you had a drug come to market when there was

10 no alternative -- and this was a drug that

11 cured a horrific disease, a cure that many,

12 many people have been waiting for for a long

13 time. And it came in at a price tag that

14 when you look at the potential cost to

15 taxpayers, was in the billions, with a B.

16 And it shook the healthcare industry

17 and shook the payer community and shook the

18 Medicaid and Medicare programs like nothing

19 I'm seen in my 10 years as a Medicaid

20 director. And it has scared a lot of people

21 about the future of healthcare costs in this

22 state. And we have seen in the last couple

23 of years a growth in our costs on drugs that

24 we have not seen in the past.

1 And this isn't a general trend. This

2 is a trend that is occurring with a select

3 number of specialty medications and a select

4 number of manufacturers who are using this

5 small window in which they have patent

6 protection and no other competitor -- you

7 can't have a competition if there's only one

8 player on the field. And that's the

9 challenge, that's where the Governor's

10 proposal is, is the only drugs that will go

11 into, under his proposal, into the penalty

12 box that is this surcharge are those in which

13 the practice -- in which there is no

14 opportunity for competition, where they use

15 that unique window to drive inappropriate

16 prices. That's the only time we plan to use

17 it.

18 In fact, in a lot of ways we hope not

19 to use it because we hope this will have a

20 chilling effect on bad practice, on bad

21 behavior, and as a result we'll see a more

22 affordable drug benefit moving forward.

23 CHAIRMAN FARRELL: Thank you.

24 CHAIRWOMAN YOUNG: Thank you.

1 ASSEMBLYMAN GOTTFRIED: I'll come back

2 with a couple of other questions later.

3 CHAIRWOMAN YOUNG: Thank you.

4 I have a few questions, and I would

5 like to start with the Governor's proposal.

6 In his Executive proposal he has a provision

7 about avoidable emergency room visits and

8 that people could basically be turned away if

9 it's deemed somehow that they are not rising

10 to the level of an emergency situation.

11 I'd like to point your attention to a

12 law that was enacted in 1986. It's a federal

13 law. It's the Emergency Medical Treatment

14 and Active Labor Act that requires anyone

15 coming to an emergency department to be

16 stabilized and treated regardless of their

17 ability to pay or their insurance status.

18 And it applies when an individual comes to an

19 emergency department.

20 So how does what the Governor is

21 proposing interface with this federal law?

22 COMMISSIONER ZUCKER: So EMTALA

23 obviously serves a very critical purpose for

24 anyone to show up in an emergency room and

1 get the necessary care, at least for

2 stabilization or, obviously, for labor.

3 And the commitment is to continue to

4 provide that kind of care. The issues that

5 we have in transformation of care is to make

6 sure it's a seamless process of care. But

7 I'm not clear as to where you're saying that

8 we would be not following the EMTALA law.

9 CHAIRWOMAN YOUNG: Well, if somebody

10 shows up to an emergency department and

11 they're deemed somehow -- I guess it's up to

12 the hospital? How would that even work?

13 Who's responsible for deeming whether

14 somebody is having an actual medical

15 emergency or not?

16 COMMISSIONER ZUCKER: Right, so if

17 someone shows up in the ER -- and having

18 worked in these emergency rooms, if someone

19 walks in that door, they are stabilized and

20 the necessary care would be provided.

21 At some point after they are

22 stabilized -- and this is the case for those

23 who may be transported to another facility

24 for one of many reasons, including care that

1 may not be provided at the hospital where

2 they walked into the emergency room -- but

3 that is the decision made at that point,

4 after the patient has been -- their condition

5 has been basically stabilized.

6 CHAIRWOMAN YOUNG: So -- but what if

7 somebody is having a heart attack? Sometimes

8 the -- I mean, you know better than anyone

9 else, if somebody is having a heart attack

10 sometimes the symptoms aren't as obvious in

11 some people as others. So what if somebody

12 is basically told, "You're stable, go home,"

13 and then they die? I mean, that could

14 happen; right?

15 COMMISSIONER ZUCKER: Well, we do

16 have -- number one, I mean, I hope that

17 doesn't happen.

18 Number two, I think that the

19 department is responsible for a lot of the

20 obviously regulations that -- we monitor very

21 closely hospital emergency rooms, and if

22 there's ever a problem brought to our

23 attention, we will investigate it.

24 The judgment call, it should not be

1 based on anything more than potentially a

2 physician's or other healthcare provider's

3 judgment call at that point. We hope that

4 the judgment call is correct and that the

5 decision to send somebody home was not based

6 on anything more than their belief that the

7 patient was doing better.

8 CHAIRWOMAN YOUNG: Doesn't the

9 proposal penalize hospitals if they treat

10 somebody and the condition is found to be not

11 that serious?

12 COMMISSIONER ZUCKER: I would check on

13 that, but I don't think that we would

14 penalize a facility. I mean, do you --

15 MEDICAID DIR. HELGERSON: Right. So

16 what the proposal is is to basically reduce

17 the payment through Medicaid to hospitals for

18 non-emergent ER visits. It's a specific set,

19 we worked with clinicians to identify

20 specific instances where there -- really this

21 was a service that should not have been

22 provided in the emergency room but rather

23 should have been provided in an outpatient or

24 primary care setting.

1 We subsequently increase

2 reimbursements to outpatient services, to

3 hospitals, to basically incentivize them to

4 work with patients, work with others to

5 redirect.

6 And I do think it's important to point

7 out that the emergency room is not the

8 appropriate place for someone with the flu.

9 It is not the appropriate place for someone

10 who does not have an emergent condition.

11 Last year roughly a half a million visits to

12 emergency rooms occurred in New York State

13 that were for things that were not truly

14 emergencies. A core function of the Delivery

15 System Reform Incentive Program is to

16 actually begin to help reconnect patients

17 back to primary care, which is the most

18 appropriate place for those services to be

19 provided, not in the emergency room.

20 And I would also say one of the

21 challenges are --

22 CHAIRWOMAN YOUNG: But what you're

23 saying is somebody shows up at the emergency

24 room and they are required to be seen and

1 stabilized, under federal law. And if the

2 hospital does that, and then they have the

3 flu, which you don't think is that serious,

4 then the hospital will be penalized

5 financially if they treat that person. I

6 don't understand how this could even work.

7 And on top of that, in rural areas you

8 know there is a dire shortage of primary care

9 providers. In many cases, doctors have

10 caseloads of 10,000, 15,000 patients, and

11 there's not access. So if they have to go to

12 the emergency room, that might be the only

13 option that a person has.

14 So I don't understand how the

15 hospitals could be penalized for this.

16 They're required under federal law to provide

17 the service, and then you would determine,

18 no, you shouldn't have provided the service.

19 And I think the hospitals are at risk of

20 being sued if they don't treat someone and

21 they go home and they die. I just think this

22 is a really bad, bad proposal.

23 I understand the overutilization of

24 emergency rooms. I understand the costs.

1 But I don't think this is the right direction

2 to take.

3 Just switching gears, I want to talk

4 about the Medicaid global cap. And there are

5 a few questions regarding that, because the

6 current fiscal year estimates emerging

7 pressures on the global cap due to

8 higher-than-expected enrollment with the

9 managed long term care. Is the global cap on

10 track to remain balanced through the

11 conclusion of this year after accounting for

12 higher projected deficits?

13 MEDICAID DIR. HELGERSON: So the

14 answer is yes, we are on track this year to

15 finish the year with the global cap in

16 balance. As has been the case in past years,

17 it is not without its challenges, but we

18 anticipate finishing the year in balance.

19 CHAIRWOMAN YOUNG: What's the total

20 amount of accrued Medicaid liabilities moving

21 forward from the current year into fiscal

22 year 2018?

23 MEDICAID DIR. HELGERSON: So we're in

24 the midst of closeouts. So at that point, as

1 we come to the end of any fiscal year, we are

2 looking at potential liabilities that may

3 drag into the next year. And we always

4 strive to make sure we have sufficient

5 credits that we too can move into the next

6 year so we do not create a structural

7 deficit.

8 We've never created a structural

9 deficit in the Medicaid program from one year

10 to the next in terms of our management of the

11 global cap. At this point we do not

12 anticipate having that occur this year.

13 CHAIRWOMAN YOUNG: Is the growth in

14 the global cap -- or I guess I'll reframe

15 that. Does the growth in the cap increase

16 the minimum wage? Is that included in it?

17 MEDICAID DIR. HELGERSON: So there is

18 actually a fund that's been set aside, I

19 believe it's $255 million, that's actually

20 outside of the global spending cap that is

21 administered jointly by the Division of

22 Budget and the Department of Health. That is

23 monies that are set aside, that's state share

24 funding that is available to basically

1 support costs of implementing the minimum

2 wage. The Governor made the commitment, and

3 the Legislature in the last budget agreed,

4 that the global cap would not bear the cost

5 to the Medicaid program of the minimum wage.

6 And the Governor's budget fulfills that

7 commitment.

8 CHAIRWOMAN YOUNG: But isn't that

9 fund, isn't that still Medicaid? Aren't

10 those still Medicaid dollars?

11 MEDICAID DIR. HELGERSON: It is a --

12 in addition to the global cap itself, which

13 grows at its historic rate of the 10-year

14 rolling average of the medical portion of

15 CPI, there is this separate fund, which in

16 essence will be allocated on an as-needed

17 basis to the global cap to cover those costs.

18 CHAIRWOMAN YOUNG: But the separate

19 fund is still Medicaid.

20 MEDICAID DIR. HELGERSON: I mean, it

21 only becomes Medicaid when it's transferred

22 into that global cap for that purpose.

23 CHAIRWOMAN YOUNG: Okay, so it's still

24 Medicaid.

1 (Laughter.)

2 CHAIRWOMAN YOUNG: What percentage of

3 DOH State Medicaid global cap funds are used

4 for funding purposes outside the Medicaid

5 global cap?

6 MEDICAID DIR. HELGERSON: So off the

7 top of my head, I don't know the percentage.

8 There are a couple of transfers that occur.

9 One of those transfers is associated with --

10 if people remember from a few years ago, we

11 had to fundamentally change how we reimbursed

12 or provided federal reimbursement to services

13 within the OPWDD system. It was a loss of

14 federal money, a very substantial loss of

15 federal money, about a billion dollars per

16 year loss of federal money.

17 The global cap helped contribute to

18 that, and to the tune of about $700 million

19 in the initial loss. And phasing out that

20 contribution, that -- the last increment to

21 that contribution is continuing, in the sense

22 that it goes into the General Fund. Off the

23 top of my head, I think it's about

24 $260 million that is transferred out.

1 There's an additional transfer out of

2 the global spending cap this year of

3 $115 million that is also going to the

4 General Fund. Obviously those dollars are

5 supporting overall healthcare expenditures,

6 including other expenditures in Medicaid.

7 Medicaid doesn't cover the entire -- or the

8 global cap doesn't cover all of Medicaid,

9 there are other parts of the program that are

10 outside. As well as obviously the rest of

11 the Department of Health budget is outside.

12 CHAIRWOMAN YOUNG: So does the

13 Executive proposal reduce funding for the

14 supportive housing program?

15 MEDICAID DIR. HELGERSON: It does in

16 this year. Although the good news is next

17 year there will be a return of some capital

18 funds that have been temporarily, in last

19 year's budget, reduced. And so while we have

20 a slowdown in the program this year, we

21 anticipate ramping back up in terms of our

22 supportive housing program beginning in the

23 next fiscal year.

24 CHAIRWOMAN YOUNG: Okay, thank you.

1 My time is up, so I'll come back.

2 CHAIRMAN FARRELL: Thank you.

3 Assemblyman Cahill, chair of the

4 Insurance Committee.

5 ASSEMBLYMAN CAHILL: Thank you,

6 Mr. Chairman.

7 Dr. Zucker, good to see you. Thank

8 you for the many times that I've called your

9 office and you've been very responsive. I

10 really do appreciate it.

11 I want to focus on two areas, as much

12 as we can fit into the time we have allotted,

13 and that would be early childhood

14 intervention programs and the Essential

15 Health Benefit Plan increases that are

16 proposed in the budget.

17 So with regard to Early Intervention

18 programs, the state several years ago took an

19 initiative to remove the responsibility of

20 the counties to seek reimbursement from

21 insurance companies and place that

22 responsibility directly with the providers,

23 and put in place a fiscal agent. The fiscal

24 agent, it was proposed at the time and

1 several times since, was to increase

2 participation by insurance companies from

3 their slightly under 2 percent to some

4 significantly higher number. And over the

5 course of the several years since this

6 program has been initiated, we've spent about

7 three-quarters of the $45 million that we

8 promised to give the fiscal agent.

9 So can you give us a thumbnail report

10 on the progress that the fiscal agent has

11 made in increasing insurer participation?

12 COMMISSIONER ZUCKER: Sure. So Early

13 Intervention, we have 68,000 newborns and

14 toddlers, or infants and toddlers in it.

15 We've got 16,000 or more Early Intervention

16 providers. The state fiscal agent was put in

17 place to help recover some of the

18 insurance -- the reimbursement for these

19 services.

20 However, of the 68,000 infants and

21 toddlers, about 40 percent of them are

22 covered by commercial insurance. And the

23 reimbursement for that, it's only been about

24 2 percent that's come back. And the budget

1 is proposing to modify that work to create a

2 system so that they can get more

3 reimbursement. Because otherwise it ends up

4 falling on -- obviously, on the state.

5 So the goal here is to increase the

6 third-party reimbursement. It's also to

7 expand the access to the commercial insurance

8 as well. So we would like to see this be

9 better reimbursement than what we see right

10 now, and the goal here in the Executive

11 Budget is to get that more in line.

12 ASSEMBLYMAN CAHILL: So this is the

13 fourth year of the program, right?

14 COMMISSIONER ZUCKER: This is the

15 fourth year, I think, yes.

16 ASSEMBLYMAN CAHILL: What has been the

17 success for the first years of the program

18 from the fiscal agent? Have they actually

19 improved it over the course of the last

20 several years?

21 COMMISSIONER ZUCKER: I'd have to

22 check about how much of the changes, but I do

23 know that we are not where we want to be at

24 this point.

1 ASSEMBLYMAN CAHILL: I can tell you

2 I've checked, and there's been no progress.

3 COMMISSIONER ZUCKER: So this is why

4 the modifications, yeah.

5 ASSEMBLYMAN CAHILL: We spent several

6 tens of millions of dollars for a fiscal

7 agent, we've placed a lot more administrative

8 burdens on providers, so that providers have

9 been leaving the system. These are folks who

10 are making, you know, sometimes $20 an hour

11 and then are required to take one-third of

12 their time to go out and secure billing,

13 where in the past they got reimbursed

14 directly from the counties.

15 Has there been any thought of

16 abandoning this modification that has proven

17 to be a failure over the past three years and

18 returning to the old system where the

19 counties sought out the reimbursement and the

20 providers were directly reimbursed?

21 COMMISSIONER ZUCKER: So we think that

22 with the proposal we have now, that may help

23 facilitate the role of the state fiscal

24 agent. So let's see how that works at this

1 point.

2 ASSEMBLYMAN CAHILL: Well, if I

3 understand the proposal, it is to expand the

4 range that insurers would be required to

5 cover to add essentially new benefits, but

6 also to deny those plans some of their

7 administrative tools that they currently use.

8 In other words, right now a plan can say

9 that's not a covered benefit and therefore

10 we're not going to cover it, and under the

11 rule that's being proposed in the budget, the

12 plan would no longer have that authority if

13 there's been a doctor's diagnosis or

14 something of that sort.

15 That seems to be just increasing the

16 rates. Couldn't that also be done without a

17 fiscal agent, couldn't the money that we're

18 spending on the fiscal agent be better spent

19 on reimbursing providers at a more

20 responsible level?

21 COMMISSIONER ZUCKER: Well, we think

22 that the role of the fiscal agent -- and it

23 may not be as efficient as we want it to be

24 right now, but we think that it serves a

1 role, and that's why these modifications, to

2 help facilitate that role.

3 I hear what your concerns are.

4 Let's -- so I would ask that we see where we

5 are a year from now on this.

6 ASSEMBLYMAN CAHILL: Dr. Zucker,

7 several years ago some of our colleagues,

8 some of whom are on this panel -- Senator

9 Hannon, Senator Seward and myself,

10 Assemblyman Barclay, Senator Breslin --

11 visited the premises of the fiscal agent, and

12 they were basically a start-up at the time.

13 And great promises were made of success.

14 When do we decide that it was a

15 failure? Do we wait till we've spent the

16 entire $45 million to decide that it's a

17 failure? Because we've spent a significant

18 amount of that money already.

19 COMMISSIONER ZUCKER: So we've

20 examined this -- and I hear your concerns.

21 We've examined it, this is why we think these

22 modifications that we've put in would help

23 expedite the process of getting more

24 reimbursement for this.

1 So I recognize that, you know, there's

2 a period of time, several years have gone by,

3 but this is sort of a complex process and

4 we'd like to see if this works.

5 ASSEMBLYMAN CAHILL: I would suggest

6 to you that there is no value added from the

7 fiscal agent. I didn't reach that conclusion

8 when I walked out of their offices -- that

9 had xeroxed signs on the door, no artwork on

10 the walls, no kids' pictures on the desks,

11 that looked like something from The Sting

12 that was set up just for our visit. I didn't

13 make that conclusion at the time, but I said

14 let's see what they produce and let's judge

15 them on their product. And now it's time to

16 judge them on their product, and they have no

17 product.

18 All the changes you're proposing could

19 go directly to the benefit of the providers

20 themselves. If we were to continue with

21 those changes without the need for the

22 intervention, it would provide another maybe

23 $10 million -- I don't know, have they been

24 paid any bonuses over this time? I know

1 their contract called for bonuses. Have they

2 been paid any?

3 COMMISSIONER ZUCKER: I couldn't hear

4 the last part.

5 ASSEMBLYMAN CAHILL: I said, has the

6 fiscal agent been paid any bonuses over the

7 course of these four years?

8 COMMISSIONER ZUCKER: I don't know

9 that answer. I'd have to find out.

10 ASSEMBLYMAN CAHILL: If you could

11 provide that answer, I would really

12 appreciate it.

13 The other question that I have is

14 about the Essential Health Benefits Plan and

15 the proposal on the part of the Governor to

16 impose a $20 premium on people whose income

17 ranges from 138 to 150 percent of the poverty

18 level. This is probably for you,

19 Mr. Helgerson. What is 138 percent of the

20 poverty level? What's that family income in

21 New York?

22 MEDICAID DIR. HELGERSON: It varies

23 based on family size. So off the top of my

24 head, a family of two -- I can get that for

1 you before the end of the hearing.

2 ASSEMBLYMAN CAHILL: It's not much,

3 right?

4 MEDICAID DIR. HELGERSON: What's that?

5 ASSEMBLYMAN CAHILL: It's not much.

6 MEDICAID DIR. HELGERSON: It's not

7 much. It is -- it is incomes above,

8 obviously, the Medicaid level. We already

9 have a premium for individuals whose

10 incomes are between 150 and 200 percent of

11 federal poverty. And so this program -- or

12 this proposal extends that.

13 Now, it does cap total out-of-pocket

14 expenses. But I hear your concern. I think,

15 though, that we feel at the end of the day

16 this is still a very affordable form of

17 insurance. If these individuals -- if we

18 didn't offer the Essential Plan, these

19 individuals would be in qualified health

20 plans through the exchange, and they'd be

21 paying considerably more.

22 And so in a sense, because at the end

23 of the day this is a program that is

24 subsidized by state taxpayers, in addition to

1 the federal government, we still are offering

2 a very, very affordable insurance that is

3 actually better than anything you'd find

4 anywhere in the country, with the possible

5 exception of Minnesota.

6 ASSEMBLYMAN CAHILL: So there's a

7 savings represented in the budget of

8 approximately $15 million as a result of this

9 $20 copay. Is that just the income from the

10 $240 a year you're going to receive from

11 these families between 138 and 150 percent of

12 the poverty level? Or is there a component

13 in there where there's anticipating that

14 people will be leaving the system?

15 MEDICAID DIR. HELGERSON: So we work

16 with our actuaries, so we basically estimate

17 what our reductions will be in the premiums.

18 I don't know if we have any estimates for

19 reductions in actual enrollment as a result.

20 I mean --

21 ASSEMBLYMAN CAHILL: So that

22 $15 million just reflects the actual premium

23 cost?

24 MEDICAID DIR. HELGERSON: Honestly,

1 off the top of my head, I'd have to go back

2 and check to see whether there's any premium.

3 But what I can say is this program has

4 been amazingly successful and popular. There

5 are almost 700,000 people enrolled in it, far

6 in excess of what the earlier estimates were.

7 I don't think at the end of the day this is

8 going to deter too many people, because

9 compared to what they might find in other

10 means, this is still exceptionally affordable

11 insurance.

12 ASSEMBLYMAN CAHILL: So you said

13 you'll have to go back and get that

14 information. I'd appreciate it if you could

15 get it for us before we have to actually

16 decide on the Governor's budget proposal. I

17 think it's information we need.

18 Are there any other changes for those

19 people in 138 to 150 percent of the poverty

20 level to the plan that they would get under

21 the Essential Health Benefits Plan?

22 MEDICAID DIR. HELGERSON: Yes. So

23 there are changes to the other forms of

24 out-of-pocket expense that individuals will

1 be facing, not only in that 138 to 150 range

2 but also the 150 to 200 range. So they are

3 the institution of what I would consider

4 fairly modest copays that -- but as I say,

5 they're capped.

6 ASSEMBLYMAN CAHILL: What is the

7 change in the copay? Because what you might

8 consider fairly modest at a state employee's

9 salary might be something different than what

10 somebody at 138 percent of the poverty level

11 might think is modest.

12 MEDICAID DIR. HELGERSON: So they

13 range from say $5 for a copay for a visit to

14 your primary care provider to an outpatient

15 surgery procedure where the copay would be

16 about $20. So that just gives you the range.

17 ASSEMBLYMAN CAHILL: So I would

18 appreciate if you could provide us with any

19 information that your actuaries have

20 determined would result in people leaving the

21 plan and, if so, what we expect those folks

22 to do for their healthcare and what you

23 expect us to do for their healthcare.

24 MEDICAID DIR. HELGERSON: Understood.

1 ASSEMBLYMAN CAHILL: Thank you.

2 CHAIRWOMAN YOUNG: Thank you.

3 CHAIRMAN FARRELL: Thank you.

4 CHAIRWOMAN YOUNG: Senator Marty

5 Golden.

6 SENATOR GOLDEN: Good morning,

7 gentlemen. Commissioner, I'm going to change

8 the tone a little bit, going over to

9 ambulances and ambulance service.

10 The good Governor has authorized you

11 to take over the responsibility of the

12 managed long term care transportation.

13 You're going to select the contractors for

14 this transportation system. Do localities

15 have any input into that?

16 COMMISSIONER ZUCKER: The localities

17 what?

18 SENATOR GOLDEN: That they're going to

19 have these transportation systems in.

20 COMMISSIONER ZUCKER: Have we

21 identified them? We're working on that.

22 We're working on it.

23 SENATOR GOLDEN: Will the localities

24 have some input into that?

1 COMMISSIONER ZUCKER: Yes. Yes.

2 SENATOR GOLDEN: The Governor has

3 suggested -- not suggested, he's proposed

4 repealing the standards. So since there's no

5 standards in the bill, aren't we sort of like

6 jeopardizing the transportation system for

7 our --

8 COMMISSIONER ZUCKER: I don't follow

9 why you're saying that, that we're

10 jeopardizing it.

11 SENATOR GOLDEN: Because there are no

12 standards, they're not in statute once we

13 repeal them. So therefore when you have a

14 service now, a transportation system taking

15 people back and forth for the medically

16 necessary appointments, what assurances do we

17 have for safety?

18 MEDICAID DIR. HELGERSON: So I think

19 you're referring to our proposals to carve

20 certain -- in the case of certain managed

21 care products, to carve those services, those

22 transportation services out of those managed

23 care contracts and manage it through our

24 transportation manager.

1 So for the vast majority of

2 individuals on the Medicaid program, they

3 receive their services -- their

4 transportation services are managed by a

5 state vendor who manages the benefit with a

6 1-800 number that allows them access to the

7 transportation services they need. Very

8 successful initiative, saved tens of millions

9 of dollars over the last several years.

10 As we proposed last year, we're

11 proposing some additional moves to basically

12 leverage that transportation manager. And we

13 think at the end of the day it will lead to

14 greater access, which is what we saw in the

15 case of the transportation manager with the

16 populations that already are affected, as

17 well as some additional cost savings.

18 SENATOR GOLDEN: What are the safety

19 standards, sir?

20 MEDICAID DIR. HELGERSON: I'm sorry,

21 the safety standards? So the safety

22 standards that apply in transportation are

23 not being changed by this. All that's being

24 changed is that the managed long term care

1 plans will no longer be paying for those

2 services and the state will be paying for it

3 and managing it with its vendor.

4 SENATOR GOLDEN: The supplemental

5 ambulance payments that are now -- should be

6 going to the ambulance providers, will that

7 money go to the ambulance providers while you

8 are choosing these contractors?

9 MEDICAID DIR. HELGERSON: So I think

10 there's sort of two issues here.

11 There is a proposal in the budget

12 relative to ambulance services, which is

13 there's an existing appropriation for

14 $6 million that the Governor's proposal is to

15 basically continue to use those payments, use

16 those dollars, but use them more efficiently

17 to fund ambulance services. And that, in

18 essence, will begin a process of adopting

19 some rate reforms that will be recommended by

20 a report which will be coming out very

21 shortly on ambulance services in Medicaid.

22 And so that proposal is a little bit

23 different than the carve-out services for

24 managed long term care, which is --

1 SENATOR GOLDEN: With the money that's

2 going to be used, are the ambulances going to

3 get that supplemental payment while you are

4 waiting to design and get this off the

5 ground?

6 MEDICAID DIR. HELGERSON: Yes, they

7 will receive those funds.

8 SENATOR GOLDEN: Thank you.

9 You know, you pointed out to us

10 several million dollars in savings over the

11 past couple of years by lowering the generic

12 drug CPI penalty threshold by 225 percent,

13 estimated to save the state about $17

14 million. Since the CPI penalty was enacted

15 last year, the state has saved less than

16 $2 million. The estimate was much higher.

17 How can we be sure that the savings achieved

18 will be even close to the estimate?

19 MEDICAID DIR. HELGERSON: So in terms

20 of the -- and actually I take that the

21 project or the proposal that was enacted,

22 which put basically a cap on the rate of

23 increase for generics -- and so we've spent

24 earlier talking about brand-name medications.

1 But a recent trend, recent in the last few

2 years, that's been very disturbing is generic

3 manufacturers using windows of opportunity to

4 greatly increase prices for generics.

5 So last year we enacted a policy

6 specific to the Medicaid program where we

7 would in essence require a mandatory rebate

8 for any generic where the price grew by more

9 than, I believe, 300 percent. And in fact,

10 after a couple of years in which we saw

11 increases of that level, in the last year

12 since this proposal went into effect we have

13 seen no generic manufacturer attempt to raise

14 prices above that 300 percent threshold. And

15 we think that is a direct result of the

16 state's policy.

17 And as a result, we are proposing this

18 year --

19 SENATOR GOLDEN: Thank you, sir, but I

20 do not see the savings. And maybe we'll sit

21 down at a later date and you'll show me these

22 savings.

23 MEDICAID DIR. HELGERSON: Sure.

24 SENATOR GOLDEN: Brooklyn I. That's

1 obviously a corporation that we're setting up

2 in Brooklyn, New York. It's similar to

3 HHC -- which is losing about a billion-eight

4 today -- but we're going to try something

5 that we've already tried before.

6 We want to -- I appreciate that the

7 legislators are at the table, and hopefully

8 we continue to be at the table as we move

9 forward on this. I don't see any money,

10 though, going toward the implementation of

11 this Brooklyn I, and I don't see -- I guess

12 there's a proposal going out shortly, if it

13 hasn't gone out already. And I don't see

14 the -- this is going to cost a couple of

15 billion dollars over a five-year period,

16 probably, and I don't see that money in the

17 budget for that to take place.

18 COMMISSIONER ZUCKER: So the

19 $700 million is going -- will be going to

20 Brooklyn. This is a major transformational

21 approach to healthcare. The issues in

22 Brooklyn, as you know and we all know --

23 SENATOR GOLDEN: Ground zero.

24 COMMISSIONER ZUCKER: -- have been

1 quite concerning, and we need to move this

2 forward.

3 I believe, as I've said -- and I've

4 been out to Brooklyn over a dozen times on

5 this issue -- is that we will set the model

6 in Brooklyn for how urban healthcare is

7 delivered, not just in New York State but

8 across the nation.

9 The RFA will go out soon on this. The

10 Governor is committed to all the issues of

11 not just the health component of this, but

12 all of the social determinants of health,

13 which we have all learned is as important as

14 just the hospitals and other areas of

15 delivery of care.

16 So please realize that we are

17 committed to this, and I am confident that

18 you'll see the changes that --

19 SENATOR GOLDEN: I know you're

20 committed and you have $700 million going in

21 for capital. But there's no money to

22 implement the program that you are now going

23 to implement in the next couple of months.

24 That's my concern.

1 COMMISSIONER ZUCKER: Well, I

2 understand but part of the -- the problem

3 that we have -- with healthcare is that it

4 has been divided up into different areas, and

5 we need to see this more as a seamless

6 process. So -- and I understand that you're

7 saying it's capital and there's also the

8 issues of program. But part of it is you

9 have to fix some of the infrastructure right

10 there to start with. And we will also

11 address some of the issues of the program

12 development as we move forward.

13 SENATOR GOLDEN: If the chair of

14 Health here in the Senate could please get a

15 copy of what your plans are to implement this

16 program. When the dollars are needed, how

17 it's going to be done, who's going to lead

18 this process. We would like to see that

19 happen and have a hearing, probably in the

20 future, on how this is going to be

21 implemented in Brooklyn. Because so goes

22 Brooklyn, so goes the State of New York, and

23 we want to make sure we do it correctly.

24 COMMISSIONER ZUCKER: Absolutely.

1 We'll get that information to you. And as I

2 said, there are a lot of programs that we are

3 looking at that address all the social

4 determinants that will move this forward.

5 CHAIRWOMAN YOUNG: Thank you.

6 SENATOR GOLDEN: Since they reduced

7 our time, we don't have the ability to go on.

8 So if you can note generic drug pricing right

9 now and pharmaceutical medical redesign,

10 we'll get back to them later. Thank you very

11 much.

12 CHAIRWOMAN YOUNG: Thank you, Senator.

13 Chairman.

14 CHAIRMAN FARRELL: Thank you.

15 We've been joined by Assemblywoman

16 Fahy.

17 Mr. Oaks.

18 ASSEMBLYMAN OAKS: Yes, we've also

19 been joined by Assemblyman Byrne.

20 CHAIRMAN FARRELL: Next to question,

21 Mr. Raia.

22 ASSEMBLYMAN RAIA: Thank you,

23 Mr. Chairman. As the ranking member on the

24 Health Committee, I've got a bunch of

1 questions. I'll try to move them along as

2 quickly as possible, so we'll call this the

3 lightning round.

4 Licensed home care service agencies,

5 licensing issues. A couple of years ago we

6 talked about the backlog, about getting

7 assisted living facilities licensed and

8 opened. And that was about three years. We

9 seem to have been moving pretty well on that

10 now. But the LTCSAs are complaining that

11 it's anywhere from three to three and a half

12 years to move along.

13 We all know it costs less to take care

14 of somebody in their home than moving them to

15 a nursing home. So how big is the backlog,

16 and what are we doing to address it?

17 COMMISSIONER ZUCKER: So we'd have to

18 look at the backlog on that, but we are

19 trying to move this quick. And I agree with

20 you that it is better to have someone cared

21 for at home and we're trying to make sure

22 that we provide the services that --

23 ASSEMBLYMAN RAIA: And we get that tax

24 revenue too.

1 COMMISSIONER ZUCKER: I get it.

2 ASSEMBLYMAN RAIA: Thank you.

3 With respect to hospitals, ER was

4 mentioned. The $195 million from last year's

5 capital money, a lot of it hasn't been

6 released yet. When can the hospitals expect

7 to get that?

8 COMMISSIONER ZUCKER: We should be

9 seeing it shortly. Within the quarter.

10 ASSEMBLYMAN RAIA: Okay. Elimination

11 of the nursing home beds obviously is raising

12 some concern, the hold.

13 COMMISSIONER ZUCKER: Right.

14 ASSEMBLYMAN RAIA: Do you foresee any

15 problems with that, or do we think we just

16 have a lot of open beds that somebody could

17 be slid into?

18 COMMISSIONER ZUCKER: So I'll start

19 and then I'm going to turn this to Jason.

20 The issue with the nursing bed hold is

21 that clearly -- you know, we recognize that

22 when someone goes into the hospital, they may

23 need to go back to a facility. But there's

24 been a lot of money that that person is going

1 into the hospital and that bed is sitting

2 there, and they get reimbursed that money for

3 that bed, and the amount that they need to

4 cover that bed is not that much. And so

5 we're trying to streamline this a little bit

6 more.

7 But do you want to add there?

8 MEDICAID DIR. HELGERSON: Yeah. So we

9 reduced the payment a few years ago because

10 it creates a perverse incentive, which is

11 that a nursing home can reduce its staffing

12 as a result of having a regular churn of

13 patients being churned out of the nursing

14 home into other settings, because they only

15 have to staff for the actual census of the

16 day.

17 And that kind of incentive we are

18 strongly trying to avoid, and that's why you

19 see this proposal, which is at the end of the

20 day we want to reduce the number of

21 individuals who have to go into hospitals.

22 And we think there's opportunities and

23 projects, including those funded through

24 DSRIP, that are available to help get better

1 connections between nursing homes and other

2 providers to reduce the need for that kind of

3 churn.

4 ASSEMBLYMAN RAIA: Okay. Thanks.

5 Moving on to pharmacy, developing the

6 new pharmacy dispensing professional fees to

7 offset the new benchmark, which I think

8 you're saying is about $55 million that we're

9 going to save. What surveys are we relying

10 on? Are we still relying on that 2012 -- I

11 call it the Superstorm Sandy survey -- to

12 come up with those prices?

13 MEDICAID DIR. HELGERSON: The answer

14 is I'm aware of the -- we don't internally

15 refer to it as that, Assemblyman. But I

16 would say that that is not the survey.

17 Actually with the benchmarks that are going

18 to be set, as I said earlier, the focus here

19 is on a very small subset of drugs that have

20 extremely high costs. And the idea there is

21 to say, across all payers, what really is the

22 appropriate cost? And that looks at a

23 variety of different sorts of information,

24 including information from the nonprofit,

1 very respected Institute for Clinical and

2 Economic Review, which does specific analysis

3 looking at the relative effectiveness of

4 drugs and basically helps states and other

5 purchasers to really understand what's the

6 economic value of a new drug and what should

7 be an appropriate price for that.

8 We have been using those sources --

9 lots of payers have -- but the Governor's

10 proposal allows us in essence to utilize that

11 information with even more strength.

12 I would point out that nothing about

13 this policy is going to impact pharmacists.

14 This is really about ensuring that -- it's

15 really about the state and manufacturers.

16 ASSEMBLYMAN RAIA: Okay. Now, but

17 there's a pharmacy professional fee in there?

18 MEDICAID DIR. HELGERSON: So there's a

19 separate proposal, which is a requirement

20 that we're just complying with, which is to

21 in essence comply with federal rules relative

22 to pharmacy payments at the point of sale.

23 And it's requirements around us moving to

24 really a cost-based system, and there's some

1 new sources of information that states and

2 other payers can use for reimbursing

3 pharmacies both on the ingredient side as

4 well as on the dispensing side.

5 And what you see in the proposal is a

6 change in both of those. I believe there's

7 actually a net increase in the amount --

8 maybe it's a small net decrease, but it's an

9 increase in the dispensing rate as well as

10 some savings that somewhat offset that on the

11 ingredient side, thanks to the use of a

12 different measure of prices, not AWP.

13 CHAIRWOMAN YOUNG: Thank you.

14 ASSEMBLYMAN RAIA: But it seems, from

15 what I've seen with respect to southern and

16 midwestern states that are $11, $12, $13 --

17 our price is less than that, but yet quite

18 clearly it costs more to do business in

19 New York State.

20 MEDICAID DIR. HELGERSON: We looked at

21 a number of comparable states. I believe our

22 proposal is $10 on the dispensing, which

23 obviously is considerably higher than it is

24 today. But I'd be happy to work with you and

1 provide you more information on the sources

2 and information we used.

3 CHAIRWOMAN YOUNG: Thank you.

4 Our next speaker is Senator David

5 Valesky, who's vice chair of the Senate

6 Health Committee.

7 SENATOR VALESKY: Thank you, Senator.

8 Commissioner, Director Helgerson, I

9 just want to touch on two general areas. But

10 before I do that, the way the calendar works,

11 my understanding is that today happens to be

12 the day that the Governor will submit 30-day

13 amendments to his budget. I'm curious as to

14 whether either of you can speak to, at this

15 point in time, any potential changes that may

16 be coming to the Legislature at some point

17 today in regard to the health budget.

18 COMMISSIONER ZUCKER: I can't speak to

19 that at this point. No, I don't know.

20 SENATOR VALESKY: We will actually

21 anxiously await that document, then.

22 I want to first talk about safety net

23 hospitals, and particularly DSH payment

24 reductions. And I know there's a global

1 issue here that has to do with the Affordable

2 Care Act, obviously. There's also a specific

3 issue in regards to specific payments -- and

4 I'm referring especially to the academic

5 medical centers -- Upstate, particularly in

6 my part of the state, but all three academic

7 medical centers.

8 My understanding is that there was a

9 midyear -- I'm not sure it was a reduction,

10 but a withholding of a payment that the

11 centers expected to receive in October, I

12 believe. Could you speak specifically to

13 where we are with those DSH payments to the

14 academic medical centers?

15 MEDICAID DIR. HELGERSON: Certainly.

16 So the issue, Senator, is that of all

17 the public hospitals -- and we have a

18 separate DSH pool specifically for public

19 hospitals in the state, of which there's the

20 three SUNY hospitals, you could include in

21 that Westchester Medical Center, also Erie

22 County Medical Center, and obviously the

23 Health and Hospital Corp. of New York City,

24 and lastly NUMC, Nassau University Medical

1 Center. And so that's a fixed pot of money

2 that in essence is available to those

3 facilities, and we historically have and

4 continue to utilize that entire pool.

5 What happened a couple of years ago is

6 that we saw an increase in losses within the

7 SUNY campuses, driven mostly by losses

8 associated with the LICH facility that

9 affected the SUNY Downstate facility.

10 Obviously those losses have now been

11 mitigated because of the disposition of the

12 LICH facility.

13 That said, it takes a couple of years

14 before those losses materialize into

15 increased DSH payments. As the SUNY DSH

16 payments went up, the Health and Hospital

17 Corp. DSH payments went down. That created a

18 global cap issue, because historically the

19 global cap paid the state share for DSH

20 payments to the SUNY campuses, whereas all

21 the other publics were responsible for

22 putting up intergovernmental transfer revenue

23 to draw down the federal funds in DSH for

24 their own facilities.

1 We agreed to cover, in the first year

2 that that increase occurred, to -- for the

3 global cap to come up with those funds. But

4 what we told the SUNY campuses, from that

5 point forward they would have to do -- for

6 that increment, for that increase, that they

7 would be responsible for putting up

8 intergovernmental transfer revenues just like

9 any of the other facilities, to pull down

10 that additional increment. We would retain

11 our historic level of investment, but for the

12 increase they'd be responsible for that

13 state/local salary.

14 We've said also, however, that we will

15 continue to monitor the financial situation

16 of the SUNY campuses, and if it's deemed that

17 they are unable to afford to put up those

18 dollars, that we would look to take steps to

19 remediate. So we'll continue to monitor the

20 situation, and if something happens relative

21 to their financial state, we'd be prepared to

22 adjust course.

23 SENATOR VALESKY: I appreciate that,

24 particularly your last point.

1 The second issue I just want to touch

2 on has to do with capital. So my

3 understanding is the Governor's proposing

4 another $500 million in capital.

5 COMMISSIONER ZUCKER: Correct.

6 SENATOR VALESKY: If you could

7 summarize for us the status of last year's

8 capital. Has that gone out the door? I

9 believe it was $195 million. Has that gone

10 out the door? With this -- assuming

11 legislative appropriation, would this new

12 round of capital fund projects that were

13 proposed last year but we didn't have enough

14 money to pay for those? If you could just

15 talk us through that, please.

16 COMMISSIONER ZUCKER: So we have the

17 $1.2 billion in capital, the capital

18 restructuring, which we're getting those

19 dollars out. We have -- just to give you an

20 overview, we have the $700 million for

21 Brooklyn, we have $300 million for Oneida.

22 And then we have the $500 million, which is

23 around, too, the statewide healthcare

24 transportation dollars, and the $300 million

1 is for construction projects, the

2 $200 million is for noncapital projects.

3 And as we move forward, clearly we

4 will -- if someone puts a proposal together

5 and then they're not accepting that, they can

6 reapply and we will look at that proposal

7 again. The goal is probably not to have to

8 have them put the -- you know, work on the

9 whole proposal and submit -- they can submit

10 the same proposal and we can evaluate at that

11 point in time.

12 So I recognize that your concern is

13 that that's a lot of money that -- a lot of

14 places that are looking for a pool of money,

15 and that there's a lot of need out there.

16 SENATOR VALESKY: There is a lot of

17 need, yes. Thank you.

18 CHAIRWOMAN YOUNG: Thank you.

19 CHAIRMAN FARRELL: Thank you.

20 Mr. McDonald.

21 ASSEMBLYMAN McDONALD: Good morning,

22 Doc. Good morning, Jason.

23 A comment first. In the budget

24 there's actually comprehensive medication

1 management, which is an outcome of your

2 workgroups. I think it's a good thing. I'm

3 not saying it because I'm a pharmacist, I'm

4 saying it because it gets to the larger goal,

5 which is -- putting aside the cost of this

6 medication -- if the right patient actually

7 takes the right medication, we might get the

8 right outcome. And that's what it should be

9 all about, particularly in regards to

10 preventing these very costly and unnecessary

11 hospital readmissions.

12 In regards to the prescription drug

13 proposal -- and I get it. As I tell people

14 quite often, I pay for the drug before most

15 people do. I see some great drugs coming on

16 the market that are making significant

17 impacts on the market. And in the absence of

18 federal action, the state is in a very

19 difficult position.

20 I guess my question -- and this is the

21 one I had last year, so I need to have an

22 updated answer -- is what you're proposing,

23 particularly with the high cost of

24 medications, is it legal? Is it going to

1 actually hold challenges in court? Because

2 there's a heavy price tag of $55 million tied

3 to this. Are we going to see that savings?

4 COMMISSIONER ZUCKER: So we will -- I

5 think that, you know, with the proposal we

6 put forth two things. We will see the

7 savings. That's the first part.

8 And the second part is these prices

9 that are so high, we believe that the

10 Governor's proposal, as Jason mentioned

11 before, may work as a -- create an

12 environment where it will be -- prevent them

13 from having the motivation to actually raise

14 their prices. And I think that's what's

15 going to happen, and we've seen some stories

16 about that even in the news as recently as

17 the other day.

18 MEDICAID DIR. HELGERSON: Right. I

19 would also add on that, on the legal

20 question, we considered and worked on this

21 project, on this proposal, for a good long

22 time, because we are well aware that other

23 states have had proposals challenged in

24 courts. And we are confident that the

1 Governor's proposal will stand up to any

2 legal scrutiny because -- and we took that

3 into account, that concern into account in

4 the development of it and worked very hard

5 cross-agency, with our colleagues in the

6 Department of Financial Services as well as

7 our colleagues in the Department of Tax and

8 Finance, to develop this proposal in a way

9 that we believe can in fact hold up in court.

10 ASSEMBLYMAN McDONALD: I agree with

11 you, particularly -- the interesting part is

12 we've spent a lot of time on the Sovaldis of

13 this world, but I can tell you firsthand the

14 generic drug marketplace has gone haywire.

15 Now, the good news is yes, 86 percent of all

16 meds are now -- because patents have

17 basically expired -- they've gone off-patent.

18 But we've seen some aggregation of companies,

19 and basically they've taken full opportunity

20 to really gouge the taxpayer, for lack of a

21 better term. So I don't disagree with that

22 at all.

23 I guess one question, though, is in

24 this day and society, is it possible legally

1 to actually have outcomes-based reimbursement

2 with the manufacturer? Is that really -- I

3 mean, Sovaldi is a good example. If we can

4 avoid the $175,000 liver transplant, maybe

5 it's worth paying $60,000 or $70,000 for the

6 drug, if it's taken properly and we get the

7 98 percent success rate.

8 COMMISSIONER ZUCKER: This is an

9 interesting question. I've actually spoken

10 to colleagues about this, because they raised

11 this question with me about, well, if $80,000

12 could save you from $180,000. And I think

13 that -- those prices are just exorbitant to

14 start with. And I think that not -- I'm all

15 in favor of medicine that can cure you of an

16 illness, but I think, you know, when you look

17 at -- let's pick $180,000. There's a whole

18 system. That money doesn't go to just one

19 person, it goes to many -- you know, a

20 healthcare system. It involves a lot more --

21 those $180,000 go to a lot of providers and

22 people and part of the system.

23 And I think that a $80,000 price tag

24 or whatever for one drug to cure something is

1 sort of exorbitant. And I think that it's

2 our responsibility -- and I've raised this

3 before, in the sense that I think when you

4 have a company that is making a product that

5 is a lifesaving product or is making

6 something that can affect someone's health, I

7 believe that they stand on a higher rung on

8 the ladder of corporate social

9 responsibility. And I think that we need

10 to -- and the Governor's plan will -- hold

11 them to that step, to make sure that they do

12 the right thing.

13 ASSEMBLYMAN McDONALD: On the PBM

14 regulation, I get it. I understand it,

15 actually. Because quite honestly,

16 pharmacies, wholesalers, they're required to

17 provide all their cost of goods. It only

18 makes sense.

19 What I don't understand with the PBM

20 regulation is that I believe in the managed

21 care Medicaid program, the PBMs are not

22 required -- they're not covered under the

23 Governor's proposal. Is that correct? And

24 is there a reason why?

1 MEDICAID DIR. HELGERSON: Right. So

2 we're going to look at and ensure

3 transparency, and we want to begin to better

4 understand how PBMs operate. And the PBMs

5 that the managed care plans in Medicaid

6 contract with are the same ones that you see

7 in the commercial space. It's a highly

8 consolidated market.

9 So at the end of the day I think the

10 benefits -- the question is is that if we

11 actually begin to go beyond transparency, the

12 one concern we had was not to have some sort

13 of knock-on effect that led to an increase in

14 the spend within the global spending cap. So

15 I think we are just trying to be a little

16 careful as we begin. We've never regulated

17 PBMs before. You know, there's a debate

18 between whether or not PBMs are a force for

19 the good or a part of the problem.

20 ASSEMBLYMAN McDONALD: Serve a

21 purpose.

22 MEDICAID DIR. HELGERSON: Which is

23 that -- and so, you know, in the case of a

24 force for the good, we don't want to weaken

1 in any way, shape or form our ability of our

2 managed care partners to control expenses

3 while we attempt to begin to shine some light

4 on the practices, to make sure that we have

5 confidence moving forward that overall,

6 pharmacy benefit managers are doing what we

7 would hope they would do.

8 ASSEMBLYMAN McDONALD: Thank you.

9 CHAIRMAN FARRELL: Thank you.

10 Senator?

11 CHAIRWOMAN YOUNG: Thank you.

12 Senator Gustavo Rivera.

13 SENATOR RIVERA: Thank you, Madam

14 Chairwoman.

15 Good morning, folks. Since --

16 considering I probably will have a couple of

17 parts, so let's start at the top and work our

18 way down.

19 Considering what the federal

20 situation -- which I call the Orange

21 Madness -- might cause us in the next couple

22 of months or years, I wanted you to talk

23 briefly about some of the preparations that

24 we're making as a state, considering we might

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1 not know exactly what's coming but we have a

2 pretty good idea of some of the worst parts.

3 So if you could tell us a little bit

4 about that before we get to anything else.

5 COMMISSIONER ZUCKER: Sure. So the

6 Governor has committed to the highest-quality

7 healthcare in the State of New York. And we

8 recognize that -- and that involves a lot of

9 healthcare transformation. We recognize much

10 is happening in Washington. We hear, as all

11 obviously you hear from your constituents,

12 I'm sure, calls about what will happen with

13 the Affordable Care Act.

14 In New York, the Governor's New York

15 State of Health program has provided

16 3.6 million New Yorkers with healthcare

17 coverage. We recognize that if this ACA were

18 repealed, that would be a major concern, with

19 millions of people potentially losing

20 healthcare.

21 I've been in contact with the

22 Governor's team in Washington on a regular

23 basis to try to see where we are. We read

24 the news, I read the news, it's changing

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1 every day as to where we are. But I can

2 assure you that the Governor is committed to

3 making sure that healthcare for New Yorkers

4 will be not only the best in -- best in the

5 nation, and we will guarantee that.

6 SENATOR RIVERA: That actually leads

7 me to my second question, because it seems

8 that as part of that preparation, I figure

9 that that's the reason why this language,

10 which was referred to earlier by my colleague

11 Kemp Hannon, was injected in there. And

12 while I certainly share the concerns that you

13 expressed, and certainly everyone in this

14 room has, I also share the concerns that my

15 colleague has, as far as it being -- I need

16 you to explain to us a little bit more about

17 why do you think that it's necessary for you

18 to have the authority, in the middle of a

19 budget year -- or, I'm sorry, in the middle

20 of the year, period.

21 I understand there might be some

22 crises. But to take the Legislature

23 completely out of that process, and basically

24 we're giving you carte blanche, I don't get

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1 it. So could you explain it to me?

2 COMMISSIONER ZUCKER: So this goes

3 back to sort of the issue of the budget, as

4 you mentioned before, about the budget --

5 making adjustments to the budget in the

6 middle of the year for emergency -- for any

7 situation that potentially is an emergency.

8 Now, I -- I know you're sort of tying

9 this to the ACA or potential repeal of the

10 ACA, but let's see where we are on that in

11 the coming months on that. But I think in

12 the bigger picture, if there is an emergency,

13 there should be an opportunity and an avenue

14 by which the changes -- the budget can be

15 adjusted appropriately to meet that without

16 increasing the overall budget as well.

17 And on the issue of the ACA, you know,

18 I look forward to working with you and to

19 working with all of the Legislature, because

20 this is -- we're in this together on what's

21 going to happen with the ACA.

22 MEDICAID DIR. HELGERSON: And,

23 Senator, if I could just add something. The

24 language that you see in the health budget is

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1 language you see elsewhere in the budget.

2 SENATOR RIVERA: Oh, yeah, I know. I

3 know.

4 MEDICAID DIR. HELGERSON: So it's --

5 and I understand the concern. I will just

6 give you like -- the administration rationale

7 for it is that we don't know where reductions

8 in federal funding could come from, and we

9 don't know what the magnitude is. But I

10 think that the theory was that if we did see

11 a reduction in federal funding in, say,

12 Medicaid and there were extra funds elsewhere

13 in the budget, that a transfer within the

14 confines of the overall budget amount could

15 be made so as to preserve services in the

16 Medicaid program.

17 The idea would be not to use the money

18 to launch new initiatives, but simply to

19 preserve the programs as approved, in

20 essence, by the Legislature. I understand --

21 I'm not discounting your concern, I --

22 SENATOR RIVERA: You do acknowledge

23 that -- my time is short, and again, we're

24 going to have another part. But you do

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1 acknowledge that the language is broad enough

2 so that it -- although you explained the

3 rationale, the language doesn't state that.

4 It is broad enough -- I mean, correct me if

5 I'm wrong, but it is broad enough for you to

6 make these decisions without coming back to

7 us, which is my key here. We all recognize

8 what our responsibility is. As you see,

9 we're here on a Thursday, and look at how

10 crowded this place is, and over here.

11 So if we have an issue in the middle

12 of the year, certainly if there was something

13 that the federal government turned a spigot,

14 it would not go from Monday to Tuesday we

15 have no funding. So if from Monday to

16 Tuesday there's an issue, on Wednesday the

17 Governor could call a special session and

18 we'd be back here talking about what do we

19 need to do to deal with the crisis.

20 MEDICAID DIR. HELGERSON: Sure.

21 SENATOR RIVERA: So I have many other

22 things, so I will just ask one more in this

23 turn and then we might need to get back to

24 that. But on the issue of there's Article VI

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1 language that reduces reimbursement to

2 New York City on some public health programs,

3 36 percent to 29 percent, which amounts to an

4 $11 million hit. And it deals specifically

5 with some HIV-related issues or just that

6 type of -- those types of diseases.

7 So wouldn't it be -- why would you do

8 that, and isn't that going completely against

9 what we're trying to do as far as ending the

10 epidemic in the State of New York?

11 COMMISSIONER ZUCKER: So New York City

12 is a unique situation here because, first of

13 all, per capita they're getting more money

14 than other parts of the state. And the other

15 key thing about New York is they have the

16 opportunity, because they are a large city,

17 to get federal funds directly from CDC and

18 from other federal agencies. So we felt that

19 it is important that given that they have

20 that opportunity to get another source of

21 funds, that we would cut that back.

22 SENATOR RIVERA: We'll come back to

23 some other stuff.

24 Thank you, Madam Chairwoman.

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1 CHAIRWOMAN YOUNG: Thank you.

2 Mr. Chair?

3 CHAIRMAN FARRELL: Thank you.

4 Assemblywoman Jaffee.

5 ASSEMBLYWOMAN JAFFEE: Thank you.

6 Thank you, Commissioner.

7 I wanted to go back to the question

8 about Early Intervention programs. I'm

9 pleased that the Governor is recognizing that

10 this has become a major problem in terms of

11 the reimbursement for the Early Intervention

12 providers.

13 About a year and a half ago, I think

14 it is, when I chaired at that time the

15 Oversight Committee, I held a roundtable

16 discussion with our Early Intervention

17 providers as well as the fiscal agent and

18 some insurers, because there were very major

19 concerns in the community. We were losing

20 our Early Intervention providers, they could

21 not sustain their programs because they were

22 not being reimbursed. And the situation

23 was -- is really quite serious, and so I'm

24 pleased that the Governor is recognizing

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1 that.

2 What we heard during that discussion

3 was that there just -- the fiscal agent that

4 was chosen really was not providing any kind

5 of support or assistance for the Early

6 Intervention providers to be able to get

7 their insurance coverage, the insurance

8 response to their needs. And it was becoming

9 a very serious issue because they could not

10 financially sustain programs.

11 So the Governor is proposing revisions

12 to improve the insurance collections for the

13 programs. The question I have is that how

14 will this move forward and assist the Early

15 Intervention providers, because the fiscal

16 agent at this point, you know, this outside

17 corporation, really wasn't of any assistance

18 at all. So I'm hoping that there was some

19 language within the revisions that give them

20 much more requirements and are firmer in

21 those provisions to assure that the providers

22 are getting the funding.

23 And the second question I had was,

24 when was the last rate increase for the Early

108

1 Intervention providers, and is there any

2 discussion about improving that and

3 increasing that at this time?

4 COMMISSIONER ZUCKER: So on the first

5 question, so we believe, as I mentioned

6 before, we do believe that the budget

7 proposals will help facilitate the role of

8 the state fiscal agent. I will gladly, after

9 the hearing, sit down with the team and

10 discuss some of the details and making sure

11 that will actually be achieved, and I believe

12 it will. And we have experts in our

13 department who have looked at this issue of

14 Early Intervention.

15 On the second one, I am not sure about

16 the answer about a raise, but I will find out

17 for you.

18 ASSEMBLYWOMAN JAFFEE: I did pass some

19 legislation to have the fiscal agent be part

20 of their board discussions, because one of

21 the things that the fiscal agent noted in

22 that hearing, that roundtable, was that they

23 were not included. Now they are included,

24 and so they need to be in part of that

109

1 discussion and very active in involving

2 themselves with the providers so that they

3 can move forward in a much stronger way.

4 And, you know, there are quite a

5 number of providers that we've lost during

6 this time. I think the number is maybe

7 25 percent, generally. So I'm hopeful that

8 this will be a way to assure that the funding

9 that they are required to be provided comes

10 forward in a timely manner as well.

11 COMMISSIONER ZUCKER: I'm all in favor

12 of communication, so if that will help move

13 it forward, I'm glad to do that.

14 ASSEMBLYWOMAN JAFFEE: Because it

15 is -- you know, as a former special education

16 teacher, I can tell you how essential it is

17 for us to have Early Intervention programs in

18 our communities that can sustain the

19 opportunities for these children to be able

20 to get the needs that they have addressed in

21 order for them to become much more productive

22 as they move forward, and capable.

23 COMMISSIONER ZUCKER: And I will say,

24 as a pediatrician, I believe in Early

110

1 Intervention programs, and I have seen the

2 success that it has. So we need to make sure

3 we do whatever we can to keep moving it

4 forward.

5 ASSEMBLYWOMAN JAFFEE: So I'm hopeful

6 that as we move forward that the fiscal agent

7 will be much more engaged and assisting in

8 this process.

9 COMMISSIONER ZUCKER: We will -- okay.

10 ASSEMBLYWOMAN JAFFEE: I also just

11 have -- just briefly want to thank the

12 Governor for his discussion regarding testing

13 and monitoring drinking water. As you know,

14 I had the well testing legislation I passed

15 in Rockland County many years ago, and it

16 really has made a difference, especially when

17 you purchase a home, knowing, if there is a

18 private well, that the water is safe for you

19 to drink. And so I'm glad that the Governor

20 is doing that as well as expanding it to the

21 public water systems. I think that is

22 essential, especially given at this time that

23 so much has happened with regard to water

24 quality and water supply.

111

1 COMMISSIONER ZUCKER: We thank you for

2 your foresight in seeing this a decade ago,

3 and appreciate that.

4 ASSEMBLYWOMAN JAFFEE: In fact we

5 passed it a number of years in the state --

6 the Assembly has passed it every time. But

7 I'm glad the Governor has picked this up,

8 because I think it will make a huge

9 difference when people purchase homes,

10 knowing that if it's a private well that it's

11 safe and the quality of water is significant.

12 Thank you very much.

13 COMMISSIONER ZUCKER: Thank you.

14 SENATOR KRUEGER: Thank you.

15 Senator Jim Seward.

16 SENATOR SEWARD: Thank you.

17 And thank you, Commissioner Zucker and

18 Mr. Helgerson.

19 I wanted to return to a discussion on

20 ambulance service in the state. As a matter

21 of fact, right behind you I see seated a

22 number of ambulance providers that are with

23 us today, and I recognize some faces.

24 There's some right from my own area.

112

1 As you know, the Governor's budget

2 proposal in effect includes language that

3 eliminates the supplemental Medicaid payments

4 that have been included in the last number of

5 budgets. These are supplemental Medicaid

6 payments to our ambulance providers. And,

7 you know, as I look at the situation, our

8 ambulance services are an integral part of

9 our healthcare delivery system in the state.

10 Very often the ambulance is the gateway to

11 healthcare delivery in our state, and what

12 happens in that ambulance on the way to the

13 hospital or any other medical provider is

14 critical to improve patient outcomes and by

15 doing that, of course, also help to lower the

16 ultimate costs of healthcare.

17 The problem is in terms of the

18 Medicaid rates paid to our ambulance

19 providers. The Medicaid rate has been

20 dramatically below the costs of providing the

21 service. And with the number of people

22 who -- the increased number of people who

23 have signed up for Medicaid through the

24 exchange, the trend is the actual Medicaid

113

1 usage of ambulance services is up. And we

2 have a very inadequate Medicaid rate being

3 paid to the ambulance providers.

4 And so this is exactly why we have

5 inserted supplemental Medicaid payments in

6 the last number of budgets, and of course

7 that is matched by federal payments as well.

8 I've always viewed this as a Band-Aid or at

9 least a lifeline to our ambulance providers,

10 but critically important to them.

11 So I'm very concerned about the

12 proposal to eliminate the supplemental

13 ambulance payments, or there's language about

14 reprogramming those dollars, but we really

15 don't know what that means.

16 So I have a three-part question.

17 Number one, do you recognize that we do in

18 fact have a problem here? And number two,

19 where is the report that was due to us on

20 December 31st in terms of a study of Medicaid

21 rate adequacy as it relates to ambulance

22 services, where is that report? And what is

23 your recommendation for ambulance Medicaid

24 rates going forward?

114

1 MEDICAID DIR. HELGERSON: Sure, so I

2 can answer that. So the report is near

3 complete. It took us a little bit more time

4 than anticipated, primarily because the

5 providers -- we had to gather cost

6 information from providers, but there was

7 some hesitancy, some concern that once the

8 data was submitted to us that it would

9 potentially be made public. And many of

10 these entities are competitors, and there was

11 a fear that this information would be seen as

12 proprietary. Now, I argue that the

13 information we were asking for is very

14 similar to what we see in terms of

15 information from almost any other provider

16 that submits a cost report to the state.

17 But that said, we tried to be

18 respectful of some of those concerns, but it

19 did take us a little bit more time to gather

20 the data to drive the report. But the report

21 is near final.

22 Our intent with our budget proposal is

23 that that $6 million will be invested within

24 ambulance services, and it will be basically

115

1 invested in ways consistent with the findings

2 of the report. So as soon as the report is

3 disclosed or finalized, we will put it out

4 for everyone to see, and that will show you

5 exactly where we think investment should be

6 made.

7 I think what the report will show --

8 and as I say, we haven't quite finalized it.

9 But I think we anticipate that over the next

10 several years we'll be looking to make

11 targeted investments in the area, because I

12 think overall we do conclude that there are

13 some rate issues embedded within ambulance

14 services.

15 I would say you are right, Medicaid

16 enrollment has grown because of the

17 Affordable Care Act, but the uninsured rate

18 has also declined precipitously. In fact,

19 we've cut the uninsured rate in half in

20 New York because of the Affordable Care Act.

21 So there's some benefit and some challenge

22 there in terms of for ambulance providers,

23 along with anyone else.

24 But that said, I think that the

116

1 report -- which will be out very shortly, in

2 the next week or so -- will provide a lot

3 more clarity in terms of our intention. And

4 happy to answer any questions from the

5 Legislature on it, and apologies for it not

6 being with you sooner.

7 SENATOR SEWARD: So you say in the

8 next week or so.

9 MEDICAID DIR. HELGERSON: Yes.

10 SENATOR SEWARD: That's critically

11 important, because at this point it's

12 impossible for us to make a judgment

13 regarding, you know, how we will go forward

14 in this budget.

15 I have concerns with the lack of that

16 report and that information. I have very

17 grave concerns about, you know, the

18 elimination of the -- what we have done in

19 the past in terms of the supplemental

20 Medicaid payments. But we'll have to make a

21 judgment in terms of what you're recommending

22 in that report. But you're not sharing --

23 you can't share it with us, your

24 recommendations, today?

117

1 MEDICAID DIR. HELGERSON: So as I say,

2 the recommendations really are a product of

3 that report. So -- but as I say, those --

4 and I apologize, I wish we would have gotten

5 it done quicker. Some of the issues I

6 described made it a little challenging. But

7 it will be coming out shortly, and I think

8 we'll have plenty of time to answer your

9 questions in advance of -- before the budget

10 gets finalized.

11 SENATOR SEWARD: Did you -- the first

12 part of my question was do you recognize that

13 there is a problem here.

14 MEDICAID DIR. HELGERSON: I think

15 that -- and while we, as I say, haven't

16 finished the report, I think the analysis

17 that's been done to date does suggest that

18 there are some issues embedded within

19 ambulance reimbursement that need to be

20 addressed. And I think one of the things

21 we'd like to do over the next several years

22 is to begin to address some of those

23 imbalances.

24 This year's global spending cap, as

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1 you'll see, is extremely tight. There

2 literally are no new investments this year,

3 and that's primarily a result of two factors.

4 Factor number one is the prescription drug

5 problem that we described earlier, and the

6 second is growth in managed long-term care,

7 which you also have seen some proposals in

8 our budget to look at.

9 But because of that cost pressure,

10 unfortunately we don't have a lot of

11 flexibility this year. But we potentially

12 will have more flexibility next year, pending

13 what happens in Washington.

14 SENATOR SEWARD: Well, thank you.

15 We'll have to make our judgments once we see

16 that report in the next week or so.

17 ASSEMBLYMAN OAKS: Assemblyman

18 Garbarino.

19 ASSEMBLYMAN GARBARINO: Thank you,

20 Bob.

21 Just a follow-up. Under the drug

22 price proposal, there's a proposed

23 $55 million in savings. Where is that coming

24 from? Is there a set list of drugs that

119

1 you're already looking at? Or, I mean, how

2 did you come up with the number 55 million?

3 MEDICAID DIR. HELGERSON: So as

4 mentioned by Dr. Zucker, the kinds of issues

5 that we see where this proposal could be

6 applied, or there's basically a subset of

7 those issues, we looked at where those issues

8 historically have occurred and what the rates

9 of increase have been.

10 And working with our actuaries, we did

11 some estimates in terms of what we thought

12 could be done as a result of the power of

13 this proposal. And so it was really looking

14 at historic -- because in essence, the

15 proposal is in essence prospective. We don't

16 know in the next 12 calendar months what

17 manufacturers will do relative to their

18 pricing strategies. So as a result, it's

19 hard -- what we've provided to legislative

20 staff, happy to provide to members, are some

21 examples of drug company practices in the

22 past, to give you a sense of the magnitude.

23 But basically, in the case of the

24 Medicaid savings, the 55 million, in essence

120

1 it's a combination of some supplemental,

2 additional supplemental rebates that we will

3 be generating, as well as some proceeds from

4 the surcharge that would return back to

5 Medicaid, as it would return back to any of

6 the purchasers.

7 But as Dr. Zucker said, our goal with

8 this proposal is not to actually put any

9 manufacturer in the penalty box. Our goal is

10 that they will change behavior, as they did

11 in the case of generics, in response to our

12 300 percent ceiling on price increases. And

13 as a result, we will generate savings not

14 through surcharge revenue or through

15 additional rebates, but simply lower prices

16 and slower growth in pharmaceutical

17 expenditures overall.

18 ASSEMBLYMAN GARBARINO: But doesn't

19 the state already pay the cheapest -- under

20 federal Medicaid law, don't we already pay

21 the cheapest prices out there?

22 MEDICAID DIR. HELGERSON: That does

23 not insulate us from the kind of practices

24 that we have seen. We get federal rebates

121

1 designed to provide us with lower prices, but

2 the phenomenon of things like hepatitis C and

3 the rise in the cost of that have been the

4 key factor that's driving billions of dollars

5 of additional expense. And just because we

6 get some additional things that allow us

7 cheaper, doesn't mean that a bad practice by

8 a manufacturer is prevented.

9 ASSEMBLYMAN GARBARINO: But, I mean if

10 a drug is increased in price, you know, we

11 are limited to only the CPI. So if it goes

12 up 500 percent, like you said before, for a

13 PBM but CPI is only 1 percent, the state only

14 has to pay that additional 1 percent.

15 So if a PBM is willing to negotiate a

16 500 percent increase, who are we to tell

17 them, you know, what they privately

18 negotiated? Who are we to say, "No, you know

19 what, you don't have to pay that, we're

20 setting this price"?

21 MEDICAID DIR. HELGERSON: So what

22 you're referring to is a federal change that

23 is designed to slow the growth of drugs that

24 have been already on the market, to allow

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1 price growth of no more than CPI.

2 And that policy was an outgrowth of

3 practices that -- and we could give you some

4 examples of drugs where we saw, particularly

5 as you approach the end of the patent life,

6 all of a sudden spikes in prices, where it's

7 the same molecule, the same exact drug that

8 was available 10 years before, and now the

9 price -- in the case of one example we looked

10 at, over a decade the price of Abilify

11 increased by 2.5 times, even though the drug

12 Abilify was no different than it had been

13 when first introduced into the market. And

14 so those kind of practices, we believe, will

15 begin to be hemmed in by the CPI policy.

16 That policy does not stop a

17 manufacturer's first price out of the box

18 being outrageous, and that is exactly the

19 problem we saw with the hepatitis C agents,

20 that that CPI policy does nothing to prevent

21 that practice.

22 ASSEMBLYMAN GARBARINO: All right, I

23 understand that. So you have this DURB board

24 that's going to address those new drugs. Are

123

1 there any -- you know, does the DURB take

2 into account the R&D? It's only 12 percent

3 of drugs that go to trial, make it. So are

4 they only looking at the R&D for that

5 specific drug that made it, or are they

6 taking into it the other costs of the

7 manufacturers? Because based on the law, I

8 don't think there's anybody from the

9 manufacturers on the DURB board, under the

10 increased numbers.

11 So are they looking at the other costs

12 that the manufacturers have to spend?

13 Because, you know, I'm afraid that what this

14 is going to do is it's going -- you know,

15 it's a dangerous proposal that might squash

16 innovation. You know, if they can't make up

17 the money that they spent on 88 percent of

18 drugs that didn't make it, you know, what's

19 going to happen here?

20 MEDICAID DIR. HELGERSON: Yeah, I

21 would say that clearly our goal is not to

22 squash innovation, our goal is to identify

23 the outliers -- where there's a bad practice,

24 where a manufacturer exploits their patent

124

1 period to charge a price that is completely

2 beyond the pale. That is the goal. I mean,

3 and as I'm saying, only a very small subset

4 of drugs would ever be applicable for the

5 surcharge in the Governor's proposal. The

6 vast majority of drugs that come to market

7 are not priced in these kind of ways, and

8 therefore would not be impacted negatively in

9 any way.

10 Obviously we will be pulling

11 information from a wide variety of sources.

12 We will include information that is provided

13 directly by the manufacturer, who in essence

14 will be given an absolute opportunity to

15 justify their costs, including reflecting the

16 R&D that they put into it.

17 I think the issue, and it's been well

18 publicized -- there are many examples that

19 you can look across in the last few years of

20 where even when you take into account those

21 R&D costs, even when you take into account

22 other types of circumstances, you really

23 can't -- and I think most rational people

24 can't really justify or find a way to justify

125

1 some of these prices.

2 But as said, our hope at the end of

3 the day is that there's a chilling effect

4 from this policy and we don't actually ever

5 have to enact this program, because practice

6 will change from the recent times.

7 ASSEMBLYMAN OAKS: Thank you.

8 Senator?

9 CHAIRWOMAN YOUNG: Thank you.

10 Our next speaker is Senator Liz

11 Krueger.

12 SENATOR KRUEGER: Good morning.

13 So I feel like I want to do

14 lightning-rounds, because --

15 CHAIRWOMAN YOUNG: I'm sorry, Senator,

16 before we do that, I'd like to announce that

17 Senator Leroy Comrie has just joined us.

18 SENATOR KRUEGER: Thank you.

19 CHAIRWOMAN YOUNG: Thank you. Sorry

20 about that.

21 SENATOR KRUEGER: Okay, now

22 lightning-round.

23 So Assemblymember Cahill before raised

24 the issue with you about the Essential Health

126

1 Plan and the $20 per month premium that

2 you're expecting people to pay. I just want

3 to highlight, the percentage amounts reflect

4 incredibly low incomes. And these are

5 working people, so assume incredibly low

6 incomes minus 40 percent off for taxes. So

7 that dollar amount can make a difference.

8 But you further propose in this budget

9 that you're going to index the increases,

10 based on the CPI --

11 MEDICAID DIR. HELGERSON: Correct.

12 SENATOR KRUEGER: -- that you use for

13 other insurance packages. Well, this

14 population is much more like a Medicaid

15 population than the private insurance. So

16 Medicaid's been a 3 percent increase, not a

17 CPI of like 17 percent for the private

18 insurance.

19 So I oppose the whole proposal. But I

20 would urge you at least to, if you're looking

21 at indexing, reflect a Medicaid reality, not

22 a private insurance reality. Can I ask you

23 to consider that?

24 MEDICAID DIR. HELGERSON: Always open

127

1 to further consideration as we move forward.

2 Obviously the purpose of that policy -- that

3 policy can be re-explored by the Legislature

4 each and every year as we move forward.

5 You know, I think the broader point is

6 that in every state other than New York and

7 Minnesota, this program does not exist and

8 people are buying insurance through the

9 qualified health plans and are paying

10 considerably more than even under the

11 Governor's proposal. So we still think, at

12 the end of the day, overall the essential

13 plan remains very affordable, compared to

14 virtually every other state in the country.

15 SENATOR KRUEGER: Well, we've had

16 better success than most states, I think,

17 because we were smart about it. So I don't

18 want us to reverse our trend.

19 And there was discussions about

20 what-if with other government funding

21 decreasing during the year and ACA and all of

22 that. But I'm particularly concerned about

23 the loss of money for reproductive and

24 women's health because it does appear that

128

1 Congress is fast-tracking trying to do away

2 with funding for reproductive health, Planned

3 Parenthood centers.

4 What is the state going to do to make

5 sure these providers are kept whole in this

6 budget year pending a loss of the federal

7 money?

8 COMMISSIONER ZUCKER: Well, the

9 Governor is committed to the issues of

10 women's health. We've seen this with the

11 issues of breast cancer, the Breast Cancer

12 Initiative, we've seen this with --

13 SENATOR KRUEGER: I'm not challenging

14 his commitment, I'm saying what are we doing

15 with the money when they lose the federal

16 money?

17 COMMISSIONER ZUCKER: Well, we will

18 look -- we will look and see where the

19 resources are and -- to be sure that all of

20 what the women's health clinics and all that

21 they serve will be -- those needs will be

22 met, whether issues of sexual health, issues

23 of Planned Parenthood and others.

24 SENATOR KRUEGER: So you know how much

129

1 money, right, because you have all that data.

2 And they're actually testifying later, and

3 they've broken it down also. So we're

4 talking a decent chunk of money between the

5 various funding streams and the matches with

6 Medicaid and the Title XX. So --

7 COMMISSIONER ZUCKER: Sure.

8 SENATOR KRUEGER: So you are watching

9 that and --

10 COMMISSIONER ZUCKER: We're watching.

11 SENATOR KRUEGER: Are you prepared to

12 say you're committing to making sure we don't

13 lose the dollars for these important programs

14 this year?

15 COMMISSIONER ZUCKER: We will watch

16 and take a look at those programs and see

17 where we are.

18 SENATOR KRUEGER: The Governor's

19 budget proposes a three-year extension of

20 HCRA within the budget. HCRA is an enormous

21 tax package for healthcare. There have been

22 concerns raised that the money is not

23 actually going for what it was intended to go

24 for originally. I personally believe we

130

1 ought to do a separate evaluation of HCR in

2 2017, and where we're going. But let's just

3 talk about two issues within it quickly.

4 One, the formula for bad-debt charity

5 payments through HCRA doesn't actually seem

6 to match which hospitals are actually

7 providing the most care to the indigent

8 bad-debt charity population. So is there any

9 plan to reevaluate how that section of HCRA

10 is distributed?

11 COMMISSIONER ZUCKER: I will go back

12 and look at how the distribution is, although

13 HCRA -- we're not decreasing anything on --

14 we're changing the program, the accounts

15 of -- the HCRA program accounts at all. I

16 mean, HCRA's been involved in Doctors Across

17 New York and many other programs.

18 So -- but I will look and see where

19 the numbers are and how that's being divided

20 up.

21 SENATOR KRUEGER: No, I agree, you're

22 not saying you're going to change it. I'm

23 saying it's time that everybody, including

24 the Legislature, ought to take a look at it.

131

1 Because how that money is spent is very

2 different than the original commitments that

3 were met -- that were offered to the public

4 when we created and then later continued

5 HCRA.

6 COMMISSIONER ZUCKER: There are some

7 excellent services that HCRA is providing --

8 the school-based health clinics and many

9 other areas. So no --

10 SENATOR KRUEGER: I don't disagree. I

11 think there's really important programs in

12 there. I'm saying for the sake of

13 transparency and a dialogue between the

14 Legislature, the public and the Executive,

15 it's time to take a look at that.

16 Because it's over --

17 COMMISSIONER ZUCKER: We will do that.

18 Glad to do it.

19 SENATOR KRUEGER: -- I think it's over

20 6 billion or just below 6 billion a year.

21 COMMISSIONER ZUCKER: I'll have to

22 check. I'll check.

23 SENATOR KRUEGER: All right, thank

24 you. And then -- oh, zero. Damn. Maybe

132

1 I'll have Round 2. Thank you.

2 COMMISSIONER ZUCKER: Okay.

3 CHAIRWOMAN YOUNG: Thank you.

4 ASSEMBLYMAN OAKS: Assemblyman Ra.

5 ASSEMBLYMAN RA: Thank you.

6 I just wanted to go into the proposal

7 for the Healthcare Regulation and

8 Modernization Team. And I was just looking

9 for some more specifics, because obviously,

10 you know, regulation may in some instances

11 here be a misnomer, because we're also

12 talking about statutory or potential

13 statutory changes that may be recommended,

14 but in particular with these demonstration

15 teams, actions that would normally be the

16 purview of the Legislature.

17 So can you expand how you feel these

18 demonstration teams would work?

19 COMMISSIONER ZUCKER: Sure.

20 So the issue here is that we have been

21 living in an environment that is dramatically

22 changing in how healthcare is being

23 delivered. And we are living with

24 regulations that have been put into place

133

1 in -- years ago. And it needs -- the whole

2 system needs an upgrade. I mean, we

3 upgrade -- we upgrade our phones, we upgrade

4 information that's out there. And we feel

5 that it is important -- and the Governor's

6 commitment is -- that we need to look at all

7 these regulations and get them up to the

8 21st century.

9 And that's what we're going to do. We

10 will work with you, work with the Legislature

11 on this. But I think that in an effort to

12 make sure that we are providing 21st-century

13 care, those regulations need to change,

14 including everything from scope of practice,

15 certificate of need -- and I can go down the

16 list, but I'm sure you know them as well.

17 ASSEMBLYMAN RA: So going into

18 something like the scope of practice, which

19 in many ways can be a legislative issue, when

20 you do one of these demonstration projects,

21 though, I mean, it doesn't seem specific as

22 to how long one of those could go on. Is

23 there any, you know -- I guess this is some

24 type of an experiment, I guess, for lack of a

134

1 better word, of a new technique or a new

2 expansion of a scope of practice. How long

3 would something like that go on before there

4 would be, you know, work with the Legislature

5 on a permanent change?

6 COMMISSIONER ZUCKER: So we will --

7 this is where we want to work with you on

8 this. I think that we need to start to look

9 at the regulations that are out there, figure

10 out what is just literally outdated, what

11 other new things need to be put in place.

12 And with regards to scope of practice,

13 there has been a dramatic change. We -- 20

14 years ago nurse practitioners, physician's

15 assistants were not doing the things that --

16 for instance, Assemblyman, they weren't as

17 big a component of healthcare delivery.

18 Today they are a significant component of

19 healthcare delivery. We need to move these

20 things forward. Pharmacists -- we've been

21 talking a lot about drug prices, but

22 pharmacists in general are an integral part

23 of the system of healthcare delivery. And we

24 need to change the scope of practice so that

135

1 they are more -- the critical roles that they

2 play, the regulations match that.

3 We're glad to work with you on this.

4 ASSEMBLYMAN RA: Yeah, I mean I would

5 certainly agree this is a field that's always

6 changing. Technology changes rapidly, all

7 these different things. So I think that's

8 appropriate and putting together people that

9 are dealing with these things, practically,

10 in the field, is a great thing and we've done

11 it in many other areas. But I think my

12 concern and the concern of a lot of other

13 people is the potential for, through these

14 demonstration projects, things to be done

15 that are normally the purview of the

16 Legislature. So I think I -- I guess I'd

17 rather see it in a way that, you know, they

18 would come to us and say, We need to

19 modernize this, this, this and this, which

20 would be great, and then hopefully the

21 Legislature would take appropriate action.

22 COMMISSIONER ZUCKER: So this is where

23 we would sit down with legislators, other

24 stakeholders, experts, the department, all of

136

1 us, sit down and have a meeting of the minds

2 and say, Okay, what are some of the things

3 that we need to do, what are some of the

4 challenges that you have experienced, that

5 you've heard from your constituents, some of

6 the things that the hospitals have told us,

7 some of the things that patients, obviously,

8 who are your constituents, have told you, and

9 our expertise from within the department.

10 So we will do this. We'll move

11 forward.

12 MEDICAID DIR. HELGERSON: And I think

13 we actually have, Assemblyman, a precedent

14 for this. The Legislature granted to the

15 Departments of Health, OMH, OASAS and OPWDD

16 commissioners the ability to waive

17 regulations on a case-by-case basis that

18 stood in the way of DSRIP objectives. We've

19 done that now a couple of hundred times.

20 It's been very well received. In essence, it

21 allows us to test some regulatory flexibility

22 that eventually could help inform broader

23 policy that we could bring back hopefully to

24 the Legislature. In that case it's

137

1 time-limited to the DSRIP period, so it's

2 basically until the end of the decade.

3 But I do think there's some really

4 important lessons there that this team will

5 be able to look at that -- and then obviously

6 if there's more structural change to be made

7 on a statewide basis, we'll have to bring

8 that back to the Legislature.

9 ASSEMBLYMAN RA: And then I just

10 wanted to ask about one other thing. The

11 capital funding and Montefiore, is the

12 criteria that that $50 million came from

13 similar to that safety-net legislation that

14 was passed by the Legislature and vetoed by

15 the Governor? Or what was the methodology to

16 come to that number?

17 COMMISSIONER ZUCKER: So the

18 $50 million was given to Montefiore --

19 Montefiore serves a million lives in the area

20 of the Bronx, and we felt that that -- in an

21 effort for them to continue to move forward

22 what they're doing in healthcare

23 transformation, this would be an appropriate

24 allocation of resources.

138

1 ASSEMBLYMAN OAKS: Thank you.

2 Senator?

3 CHAIRWOMAN YOUNG: Senator Savino.

4 SENATOR SAVINO: Thank you, Senator

5 Young. Thank you, Commissioners.

6 I want to go back to the issue that

7 Senator Seward brought up earlier about the

8 ambulances. As you know, many of them are

9 sitting behind you, and we'll be hearing from

10 some of them later on today, so I'm not going

11 to belabor the point. I understand the

12 report is coming; we anticipate there will be

13 some changes.

14 But I just want to make the point and

15 stress it that we're going to hear from them

16 later about there hasn't been an increase in

17 ambulance rates to them since 2008. And with

18 the looming minimum wage increases and the

19 compression issue that it places on them,

20 this is really placing many of these

21 ambulance companies in an untenable

22 situation.

23 And we're seeing the same effect on

24 them that we're seeing across the human

139

1 service providers in the state, whether they

2 be direct care professionals or they be home

3 care providers or they be in our daycare

4 centers, you know, where we have people who

5 are highly skilled and qualified but because

6 of this hard cap on Medicaid, they are stuck

7 in a low-wage industry. And we're going to

8 be losing people who we depend upon to take

9 care of our most vulnerable people, whether

10 they be the previously mentioned population

11 or moving people who are sick -- we're going

12 to be losing them to fast food work.

13 I mean, so I just think we really need

14 to think about what we're saying as a state

15 when we keep them under this hard cap. So I

16 just want to make that statement clearly.

17 Now, with the limited time I have

18 left, I would like to talk about my favorite

19 subject, medical marijuana.

20 (Laughter.)

21 COMMISSIONER ZUCKER: How'd I know?

22 SENATOR SAVINO: No one else has

23 brought it up, I will.

24 I do want to say thank you to the

140

1 department for rapidly making the changes

2 that have been requested. You know, the

3 program has only been up and running for two

4 years. We would like to see it grow, we

5 would -- no pun intended. But I do think

6 that you have been responsive to changes that

7 have been requested, and I want to thank you

8 for that.

9 The one thing I would caution, though,

10 is -- I know there seems to be some direction

11 that you might be moving in about expanding

12 the number of licenses. I would strongly

13 caution against that at this point. Right

14 now we have five registered organizations who

15 are struggling financially because the entire

16 burden is upon them. And we would not want

17 to see one of them go under.

18 The reality is they have excess

19 product. We don't have excess patients. And

20 I know that you are working towards expanding

21 the patient base, working with physicians,

22 and we're doing the best we can there. I do

23 think, though, that the way we can expand

24 access to patients who are far-flung around

141

1 the state -- because we only have 20

2 dispensaries -- is the creation of a limited

3 license for dispensary only. And I think

4 that's something that you should consider.

5 That, in my opinion, will do a lot more to

6 get access to patients than expanding fully

7 registered organizations.

8 And finally, I really, really think

9 that you all should come out and see what you

10 have created here in New York State. From an

11 industry perspective, it is considered the

12 best medical model in the country. And to my

13 colleagues, if you have not had the

14 opportunity to go and visit one of these grow

15 houses, you really should go see what we are

16 doing here in New York State. It is amazing.

17 And quite frankly, you are largely

18 responsible for the model that we have right

19 here. So you should own it, be proud of it,

20 and go take a look at it.

21 COMMISSIONER ZUCKER: Thank you.

22 CHAIRWOMAN YOUNG: Thank you, Senator.

23 ASSEMBLYMAN OAKS: Yes, I just had a

24 couple of questions.

142

1 When you were speaking with

2 Assemblyman Gottfried earlier, you talked

3 some about pharmaceutical rebates. And you

4 said you knew how much that it -- do we have

5 the numbers for the recent year and what we

6 anticipate in this budget for being the total

7 amount of the rebates?

8 MEDICAID DIR. HELGERSON: Sure. So

9 there's two kinds of rebates. There's what

10 we call the over rebates, or the federal

11 rebates referenced earlier, where the

12 rebate's associated with we being, quote,

13 unquote, guaranteed lowest price. That's the

14 vast majority of the rebates. Those rebates

15 account for roughly about 40 percent of total

16 drug spend.

17 The remaining rebates, which are the

18 supplemental rebates, which are either

19 negotiated on behalf of the state or by the

20 state for fee-for-service or by the Medicaid

21 managed care plans, account for about 5

22 percent of total spend.

23 So doing the math off the top of my

24 head, I think the drug spend is somewhere in

143

1 the 6-to-7-billion-dollar range, so that

2 gives you a flavor. But I can get you the

3 exact numbers. But just roughly, of our

4 gross spend, about 45 percent is offset by

5 rebate.

6 ASSEMBLYMAN OAKS: And do we

7 anticipate that as a growing number in this

8 year's budget?

9 MEDICAID DIR. HELGERSON: We

10 anticipate that the percentage will stay

11 about the same, but obviously as pharmacy

12 spend grows, so do the rebates.

13 Now, unfortunately the rebates don't

14 cover all the growth in total gross

15 expenditure, but they obviously do offset.

16 So rebate revenue goes up as pharmacy spend

17 goes up.

18 ASSEMBLYMAN OAKS: With the Medicaid

19 growth cap, is that applied to the full

20 amount spent on pharmaceuticals, or is it on

21 the rebate?

22 MEDICAID DIR. HELGERSON: So the

23 Medicaid global spending cap applies to the

24 state share of Medicaid expenditures. So

144

1 there are in essence, in New York, three

2 forms of support for Medicaid. There's the

3 federal share, which is the largest, there is

4 the state share, and then there's the local

5 share. And local share was capped a number

6 of years ago, and in fact because of the

7 Affordable Care Act has actually declined

8 because enhanced federal monies because of

9 the Affordable Care Act has reduced the local

10 share.

11 The global cap applies to the state

12 share -- specifically, about 90 percent of

13 the state share, not all of it. Certain

14 parts of the program, since the beginning of

15 the global cap, have been outside. Most of

16 that's within OPWDD. And so that -- the

17 global cap itself applies just to that state

18 share. So the local share has a separate cap

19 and then federal share -- so with DSRIP or

20 other things where we've got additional

21 federal funds, those are not capped.

22 ASSEMBLYMAN OAKS: So when we get the

23 rebates, does that come back to the Medicaid

24 program or does it --

145

1 MEDICAID DIR. HELGERSON: Yes. Yes.

2 ASSEMBLYMAN OAKS: It does. Back to

3 the General Fund?

4 MEDICAID DIR. HELGERSON: It basically

5 offsets the state share.

6 ASSEMBLYMAN OAKS: Thank you.

7 When the commissioner of the Office

8 for the Aging was here, they mentioned that

9 the NY Connects program is now going to be

10 funded under the cap. Do you know how much

11 is being allocated for that?

12 MEDICAID DIR. HELGERSON: So off the

13 top of my head, I can't remember the exact

14 amount, but yes. Although you'll see on the

15 global cap scorecard a little bit of savings.

16 We anticipated this.

17 The initial funding source was

18 Balancing Incentive Payment Program, which

19 was a federal program, enhanced federal

20 monies. We used those funds to help launch

21 the statewide application of NY Connects.

22 It's, as folks are aware, Aging Disability

23 Resource Centers that we had in a number of

24 counties, but was not a statewide program.

146

1 It is now a statewide program, and

2 we're very excited about that. We used

3 federal funds to launch it. But as those

4 federal funds phase out, we need to replace

5 that with state resources. And the global

6 cap, a couple of years ago, agreed that

7 eventually it would take on that

8 responsibility. But we did get a short-term

9 extension of the BIPP funds, so the fiscal

10 impact for us is a little bit less than the

11 global cap anticipated. That's why you see a

12 little bit of savings.

13 But the amount we're going to absorb,

14 I -- we can get it for you, I just can't

15 remember it off the top of my head.

16 ASSEMBLYMAN OAKS: But we don't have a

17 specific appropriation for NY Connects now?

18 MEDICAID DIR. HELGERSON: I don't know

19 whether or not there is a -- I don't have

20 the -- I don't understand -- I don't know

21 what the appropriation structure is for it.

22 But the idea is that the global cap would be

23 the source of the local dollars necessary to

24 keep -- because the thing about aging

147

1 disability resource centers are -- or

2 NY Connects, as we call them -- is that they

3 serve a more general population. They're the

4 place that families can go if they have a

5 member of their family who may now all of a

6 sudden need some additional help at home but

7 aren't Medicaid-eligible.

8 So they're providing counseling,

9 support, connection to services that are

10 beyond the Medicaid program. But the thought

11 was since BIPP was the funding source to

12 launch them -- and in fact a requirement of

13 that program was that we had statewide

14 access -- that it would make sense for the

15 Medicaid global cap to pick up those expenses

16 on a go-forward basis.

17 ASSEMBLYMAN OAKS: Thank you.

18 CHAIRWOMAN YOUNG: Thank you.

19 Senator Hannon.

20 SENATOR HANNON: A wide-ranging number

21 of different things.

22 I just want to return, Commissioner,

23 to the very first question I asked, because I

24 got some notes from people and they said, oh,

148

1 Senator Rivera was the first who talked about

2 the powers. Obviously they came late to the

3 hearing, because my first question was the

4 powers that you've asked for for making

5 adjustments if there's a reduction in

6 spending.

7 It's far too much. I don't think it's

8 going to happen at all. The question will

9 be, is there going to be a reasonable

10 alternative? We do not intend to let people

11 run the things the way they want. It's a

12 consultive process. And as several leaders

13 in the Legislature have said this year, this

14 is a three-branch government. So I think we

15 can continue, I'll just make the point again

16 that I had made before.

17 A number of other things going

18 forward. And in regard to powers, the whole

19 transformation committee, it's a good idea.

20 You're absolutely right about the need to

21 modernize a lot of the standards that go into

22 how we do approval of health entities,

23 whether it's too elongated a process, too

24 elaborate, has too many artificial rules that

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1 are just archaic.

2 But I don't think it can be an MRT

3 process. It's not going to be something

4 where everybody meets, the gurus from your

5 department go behind black doors and then

6 come out with, you know, pronouncements: Of

7 the 40,000 things submitted to this

8 committee, we have come up with 80. So --

9 all due respect, Medicaid Director Helgerson,

10 so it really has to be a collaborative

11 process.

12 A couple of other -- lots of other

13 things. The Washington action. It's not

14 just the ACA. There were two things that

15 were very crucial to New York when they

16 passed it. One was the -- what we call the

17 Essential Health Plan, they called it the

18 Basic Health Plan. I'm very worried about

19 it. It became something we were able to

20 extend care to many people who didn't get it.

21 But we're one of only two states in the

22 entire nation that took advantage of it. And

23 I think we're especially fragile, and there

24 ought to be some type of consideration of

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1 what will happen if that does not survive.

2 One other thing is the DSH payments

3 themselves were reduced on the thought that

4 ACA would have greater coverage, therefore

5 hospitals would have more patients, therefore

6 you didn't need the disproportionate share

7 payments as much as possible. The question

8 will be, what will they deal with? Will they

9 repeal everything and therefore restore the

10 DSH, or whether they just repeal everything

11 and New York, which gets a high percentage of

12 the total DSH in the nation, will get hurt.

13 And the same thing in another way with

14 the graduate medical education, because we're

15 one of a few states to get a lot of graduate

16 medical education.

17 Construction. Your proposal is for

18 $300 million bonding, $200 million

19 appropriation, carving out about $50 million

20 for Montefiore and $30 million for community

21 health centers.

22 COMMISSIONER ZUCKER: Right.

23 SENATOR HANNON: I wonder if that's

24 going to be sufficient. I wonder if there's

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1 not going to be more proposals. There's

2 several thoughts to it. It's not just the

3 size of this, but it's the management of it.

4 Included as part of that management will be

5 knowing what the awards are from last year's

6 budget for $195 million. I think it's

7 essential to know what's happened with those

8 awards so we can make an evaluation as to

9 what more may be needed, whether -- and then,

10 as we're setting the rules for the

11 construction money this year, whether we

12 should simply allow people who were eligible

13 but did not win last year to be eligible this

14 year, whether we should have all new bidding,

15 or whether we should have a mixture of those

16 two rules.

17 But getting those out would be really

18 essential, and I don't see going along with

19 the construction until we see what happened.

20 But there is an extraordinary amount

21 of construction money that is out there. You

22 have the Brooklyn, you have the Utica, you

23 have the last year's 195, you have a

24 revolving loan fund of 19.5 million, you have

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1 10 million to behavioral health providers,

2 you have 10 million for the all-payer

3 database, and you have 30 million for the

4 SHIN-NY.

5 Now, we have gone through a lot of

6 different dialogue on the SHIN-NY. And I do

7 believe the department has done excellent

8 work, it's on the right course. But we

9 always expected that the appropriation of

10 30 million for SHIN-NY, 10 million for

11 all-payer database, would be a diminishing

12 appropriation. It's not. In fact, I think

13 it's the same number this year as it was last

14 year, and it's projected it may be the same

15 again next year.

16 I have asked for and the Senate has

17 asked for the budgets of the SHIN-NY per se,

18 the private organization called NYeC, and

19 then the subsidiary -- they're not even a

20 subsidiary, they're affiliate entities called

21 RHIOs, regional health information

22 organizations. The list of money from the

23 30 million that goes to the RHIOs is about 6

24 to 8 million each. I'd like to know what

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1 it's going for, how it's going, so we can

2 measure the progress and see where it is.

3 Going back to DSH, Senator Valesky

4 made that the point that all of a sudden in

5 October or November, SUNY Stony Brook, SUNY

6 Syracuse got letters that said, We're not

7 giving you the 30 million each you thought

8 you were getting in DSH. Right in the middle

9 of their budget year. Well, and you made the

10 point, Mr. Helgerson, that, well, everybody

11 else has a government entity that provides

12 the nonmatching share and allows New York

13 City, Nassau County, Westchester -- my point

14 to you, and it's not necessarily your area,

15 but SUNY is the state. SUNY should be

16 putting that up. Just saying that they're

17 different than the others and you don't have

18 a local government to do it is not an answer.

19 The state has that obligation. And

20 especially the obligation of not pulling the

21 rug out in the middle of a fiscal year. So I

22 think that needs to be totally rethought.

23 Senator Seward rightfully, and Senator

24 Savino, covered the report in regard to

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1 ambulance and where we're going on that.

2 The PBMs. One of your big proposals

3 is to have a disclosure piece for PBMs,

4 pharmaceutical benefit managers. There's no

5 fiscal attached to it, so it's really a

6 quixotic type of proposal. When I started

7 inquiring, the idea was, well, the state

8 needs to find out what the information is.

9 Well, I would strongly disagree that

10 you need to find out, because you have at

11 hand that information. The State Civil

12 Service Commission runs the Empire Program

13 for the, I don't know, 200,000 state

14 employees. They have a PBM. They got the

15 PBM by going out and having a request for

16 proposals. They formed the request for

17 proposals by hiring a consultant. All of

18 that is public information saying how these

19 PBMs work and don't work.

20 Also, each one of the Medicaid managed

21 care companies has a PBM. They're under your

22 thumb. Now, I know your proposal does not

23 deal with Medicaid PBMs, it only deals with

24 commercial. But how they work -- they're the

155

1 same PBMs, and how they work is exactly the

2 same.

3 So I'm really puzzled by this whole

4 thing and don't know where we need to go,

5 because I'm also challenged by the same thing

6 as you are in regard to drugs. I mean, we do

7 have to do something. We have screamed about

8 different things like the EpiPens, which we

9 helped create, and then when the -- Mylan put

10 it up to $600, we got the Attorney General to

11 say he'd do an antitrust investigation. It's

12 starting to come down.

13 This week we saw Marathon Drug, in an

14 outrageous thing, take a drug that was used

15 and still available in Europe for $1200 a

16 year, change a molecule, go through the FDA,

17 say it's now on the market for $89,000 a

18 year. Well, a lot of people screamed. And

19 as last I read, they go -- they're rethinking

20 that. Well, they ought to. It's for an

21 orphan sickness, and it needs to be

22 addressed.

23 But I don't know that we need to do --

24 I don't know, do we have the power to do what

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1 you're suggesting, whether we have the

2 constitutional power to tell a company: You

3 must sell it to us, and you can only charge

4 so much. They always have the right not to

5 sell it to us. But can we go in and say, We

6 can set the price for you? I don't know if

7 we have that power. I don't know if that's a

8 taking. We cannot do takings. I think there

9 needs to be a way to entice them to do this

10 and get these things to be reasonable,

11 because not only you complain about the

12 prices to your systems -- hospitals do, HMOs

13 do. We know that it has to be addressed.

14 Long-term care. It is a growing

15 crisis in the state, and it will lead me into

16 comments on the global cap. When the MLTC,

17 managed long-term care companies, are the

18 ones that are the conduit to funds -- and

19 perhaps management -- to home care and to

20 certain patients in nursing homes, one would

21 think that might be a system that would work.

22 Home care complains bitterly. Nursing

23 homes for the patients that are under managed

24 care complain bitterly. And when I've had

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1 very fierce conversations with the managed

2 long-term care plans, they complain bitterly

3 about what you're doing to them.

4 And I said this last year during the

5 budget conference committees, so it's not

6 new. And it's gotten worse. What I'm afraid

7 of, in the course of -- during the year,

8 Medicaid Matters came out with a very thick

9 report as to what is going on with managed

10 long-term care and the number of denials that

11 are happening to cases. And how those

12 denials, when they go to fair hearing

13 appeals, are overturned. A substantial

14 percentage, over 90 percent, are overturned.

15 And now one of the legal services in

16 New York City has gone to federal court.

17 They're going to use that type of overturning

18 high percentage as their proof. All of a

19 sudden, we're going to be faced with the

20 courts running it, we're going to be faced

21 with the same type of problem we had with our

22 overreimbursement in mental health or having

23 the federal government run our jails. It

24 needs to be addressed.

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1 And we might as well say, look, it's

2 being held down because we have to control

3 the cost because of the global cap. The

4 global cap has served a purpose of holding

5 spending. But it's also a global cap that is

6 far too flexible, has far too many leaks,

7 doesn't cover the problem.

8 You said to Senator Young that there

9 are other health expenditures that are not

10 under the cap. We know you had to, as a

11 matter of practicality, put the minimum wage

12 outside the cap. We know in the cap there's

13 a thing called the mental health improvement

14 of $2 billion. That doesn't necessarily have

15 to be in there. You moved something -- you

16 just told us about you moved something else

17 under the cap, something that I think --

18 NY Connects. Assemblyman Oaks questioned it.

19 This is not any longer more than a

20 shibboleth and a facade. We have to go back.

21 I know that you have done an admirable job of

22 controlling the spending and doing a lot of

23 delivery of care in a more efficient and

24 economical manner. But the cap has outlived

159

1 its purpose and needs to be addressed.

2 Whether you can do it for this budget or not,

3 we just have to recognize we're not going

4 there usefully in the future.

5 And lastly, I don't know why we need a

6 two-year budget for Medicaid. If we're going

7 to be that worried about Washington's action,

8 I don't see you having a two-year budget

9 whatsoever.

10 Those are my comments. We'll have a

11 lot of negotiation between now and

12 March 29th.

13 COMMISSIONER ZUCKER: Thank you.

14 CHAIRWOMAN YOUNG: Do you have any

15 response?

16 (Laughter.)

17 COMMISSIONER ZUCKER: Well, a couple

18 of things. A couple of quick things.

19 One is your comments about the capital

20 and the 30 million for the community

21 projects. And that's a minimum, because the

22 people are just assuming it's just

23 30 million. It's a minimum.

24 The other issue is the SHIN-NY. And I

160

1 believe that the health information network

2 is really the glue that is going to move us

3 forward into this 21st century of healthcare

4 and all the changes that we're doing. So I

5 recognize that you feel we continue to put

6 money into it. It's complicated. This whole

7 system is quite complicated. But we are

8 making great strides in this. And I

9 anticipate that -- soon that it will be sort

10 of a little more self-sufficient. But I

11 recognize that --

12 SENATOR HANNON: I know it's

13 complicated. And four years ago I said,

14 we're not doing any of it. And then the

15 compromise was, well, we'll give you a lot of

16 information and we'll have a committee that

17 will meet once. Well, that committee didn't

18 meet once, it's met 10 times. I've been at

19 each meeting. And it's useful. And as I

20 say, that's why I know that the department

21 did a very good job in information. And it's

22 now functioning statewide, but it needs

23 further growth. But it's not something we

24 just do automatically.

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1 COMMISSIONER ZUCKER: Right.

2 And on the issues of the federal

3 government, we're watching and we're engaged

4 to see where this goes. And I recognize that

5 the changes are happening relatively quickly,

6 and we need to see where we are on that.

7 The issues of the global cap, did you

8 want to comment on that?

9 MEDICAID DIR. HELGERSON: Yeah, just a

10 couple of things. One, per-recipient

11 spending in New York Medicaid is now less

12 than we spent in 2000. So we have in fact

13 bent the cost curve quite substantially.

14 We've narrowed the gap between the national

15 average and what we spend on a per-recipient

16 basis, and that's been verified by

17 independent sources.

18 No question there are challenges, both

19 right before us and essentially on the

20 horizon, with changes in Washington. But

21 that said, I do think that the global cap has

22 provided a lot more transparency than this

23 program ever had. And it's introduced a

24 level of management oversight that didn't

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1 exist before and a level of accountability

2 that didn't exist before.

3 And lastly, although this year is not

4 such a year, but in other years where we've

5 been able to hold costs below the allowable

6 trend, we've been able to make targeted

7 investments. There are probably about

8 30 hospitals in this state that are open

9 today in rural and in urban settings that

10 would not be open if it were not for savings

11 generated under the global cap.

12 There are people in supportive housing

13 today -- we have the largest Medicaid-funded

14 supportive housing program in the country.

15 We would not have had that if it were not for

16 the fact that we had the global cap allowable

17 growth and the ability, when we beat that

18 trend, to make investments, and now spend

19 about $100 million in those kind of

20 investments.

21 So I think overall the state has been

22 well-served by it. That said, each and every

23 year we should continue to revisit it and

24 welcome the scrutiny the Legislature brings

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1 to that process.

2 COMMISSIONER ZUCKER: And the last

3 thing is also we do believe this is -- the

4 pharmaceutical proposal is legal, and we will

5 move forward with it.

6 ASSEMBLYMAN OAKS: Assemblyman Byrne.

7 SENATOR HANNON: Well, wait a minute,

8 I got one more comment.

9 Global cap? No. We've kept the

10 hospitals -- work with the hospitals has been

11 extraordinary, whether it's been in

12 inner-inner city or real rural, but we've had

13 a VAP program, we have a VAPAP program, we've

14 had a VBP QUIP program. This is -- this

15 year, it's close to -- it's $300 million.

16 That's money that's flowing. The other

17 programs I read, that's not the global cap.

18 The savings, the management you have, yes.

19 But we need a better structure to work

20 this around. Maybe when we get a chance to

21 look at HCRA -- and we're not making it

22 permanent nor one year, the various

23 proposals. When we look at HCRA, maybe we

24 can structure it that way. But already,

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1 think of it, MRT is five years old. It's

2 time to renew it. And believe me, I haven't

3 even mentioned DSRIP. So ...

4 MEDICAID DIR. HELGERSON: Yes. My

5 point, Senator, was that those funds, which

6 now are almost $500 million to provide that

7 extraordinary assistance, are all confined

8 within the confines of the global cap. So we

9 were able to find savings generally in the

10 program to help finance those programs.

11 If we had not had the savings -- in

12 addition to that, we lost a billion dollars

13 on a prospective basis in the middle of a

14 budget year -- in the middle of budget

15 negotiations, because of the changes in the

16 OPWDD financing system mandated by the

17 federal government. We absorbed that without

18 having to make a single reduction in a

19 benefit to any New Yorker or to raise taxes

20 or do anything else. And that was a direct

21 result of the fact that the global cap helped

22 drive efficiency and drive efficiency in the

23 sense we were reducing our per-recipient

24 spending.

165

1 SENATOR HANNON: I'll let you have the

2 last word.

3 (Laughter.)

4 CHAIRWOMAN YOUNG: Thank you.

5 ASSEMBLYMAN OAKS: Now, Assemblyman

6 Byrne.

7 ASSEMBLYMAN BYRNE: All right, thank

8 you.

9 I know some of the questions were

10 asked and answered already, so thank you for

11 that.

12 Something that I see in my community

13 is the ever-growing rise of the heroin and

14 opioid addiction. And I know that we've

15 spent money on this in the past, and there's

16 $200 million in funds dedicated to fight this

17 crisis this year. My question is in regards

18 to naloxone and funding for that. How much

19 has been spend on funding Narcan in the past?

20 COMMISSIONER ZUCKER: So. On the

21 naloxone, we've spent $7 million on that.

22 But I think it's important to

23 recognize, 5200 lives have been saved as a

24 result of that, and 186,000 people have been

166

1 trained in the use, including 9500 law

2 enforcement. And this is one of the biggest

3 issues that we are facing, not only in

4 New York but right across the country. And

5 we've got to tackle it. It is a public

6 health crisis.

7 ASSEMBLYMAN BYRNE: I completely

8 agree. I see this personally as a volunteer

9 firefighter and EMT in my district. One of

10 the things that we do see is an increase in

11 costs for ambulance services because of this

12 growing problem, particularly where I'm from

13 in the Hudson Valley. Is there any funding

14 available in the budget this year of that

15 $200 million to help the ambulance services

16 for Narcan?

17 MEDICAID DIR. HELGERSON: Right. On

18 the ambulance services, I understand the

19 concern and issue. In fact, in the

20 Hudson Valley we have a great example within

21 DSRIP of Ellenville Hospital, which is in the

22 Catskill Mountains, a critical-access

23 hospital that identified their

24 superutilizers, the people who went to the

167

1 emergency room 10 or more times in a

2 six-month period of time. And when they dove

3 into the root cause, 85 percent of it was

4 opioid addiction. And it actually galvanized

5 that small community into a community-wide

6 effort to really address the opioid crisis.

7 The other stat I would say -- which

8 blew me away -- is the U.S. population makes

9 up 5 percent of the world's population, yet

10 80 percent, today 80 percent of all the

11 opioid scripts written worldwide are in the

12 United States.

13 So you're absolutely right that opioid

14 addiction is a massive public health

15 challenge that faces us today, and we need to

16 grapple with it in every way, shape or form.

17 As to ambulance services, you know,

18 that's where that report comes out. We need

19 to look and we have been looking, and look

20 forward to the release of the report, and

21 then working with the Legislature to

22 potentially, over a period of years,

23 implement the recommendations of that report.

24 ASSEMBLYMAN BYRNE: Thank you.

168

1 CHAIRWOMAN YOUNG: Thank you.

2 Senator Rivera.

3 SENATOR RIVERA: I'm baa-ack.

4 A couple of things. Let's start --

5 let's just go over one more as it relates to

6 the potential cuts that might happen from the

7 federal government. One in particular that

8 I'd be interested in would be if you have

9 been looking particularly at the services

10 that are provided by Planned Parenthood in

11 places of the state that are hard to access

12 where they are the main providers of

13 healthcare for women. Have you been thinking

14 about what cuts could happen? Because that's

15 something that could happen much quicker than

16 changes to the ACA or something else. Have

17 you all been thinking about that?

18 COMMISSIONER ZUCKER: Right. So we've

19 been looking at this issue and trying to --

20 as I mentioned to Senator Krueger, we're

21 trying to be sure that the women's health

22 services will always be available across

23 New York State.

24 SENATOR RIVERA: It will certainly be

169

1 important, and particularly in parts of the

2 state where that is the only place where

3 folks can access care.

4 Let's go quickly back to -- well, we

5 were talking as far as the Article VI

6 language. I know that that was related to

7 the reductions in reimbursement rates for

8 New York City, as opposed to other

9 localities, that impacts public health

10 programs. We dealt with it very, very

11 quickly at the end of the -- you know, when I

12 was trying to wrap up. So I want you to walk

13 me through that again as far as why the

14 choice was made to do that for the City of

15 New York and not for any other locality, and

16 what is the reasoning behind it?

17 COMMISSIONER ZUCKER: Well, that goes

18 back to the -- you know, this is -- obviously

19 we're looking at the budget closely, and as I

20 mentioned before, that per capita -- it's

21 only 42 percent of the -- I think it's 40,

22 43 percent of the population is in New York

23 City, but they're receiving 63 percent of the

24 funds.

170

1 So we -- and so we have cut it back.

2 But we've also, as I mentioned before, the

3 city has the advantage that they can still

4 get federal funds coming from CDC, coming

5 from HRSA, coming from other parts of the

6 federal government --

7 SENATOR RIVERA: Under normal

8 circumstances, of course. Remember, Orange

9 Madness.

10 COMMISSIONER ZUCKER: Right. Right.

11 But they do have the opportunity to access

12 additional funds. And I feel that that would

13 be a legitimate reason for moving from

14 36 percent to 29 percent for them.

15 SENATOR RIVERA: It certainly is --

16 you know I represent folks in the Bronx, and

17 you know very well, because that's -- it's

18 your old haunts.

19 COMMISSIONER ZUCKER: I know. I know.

20 SENATOR RIVERA: I represent the

21 neighborhood where you grew up. And there

22 are more than a few instances across the

23 budget -- not just in health, but across the

24 budget -- that seems to be a little, you

171

1 know, poke in the eye to the city where it's

2 not necessarily necessary, pardon the

3 oxymoron.

4 COMMISSIONER ZUCKER: So --

5 SENATOR RIVERA: And this seems one of

6 them. And we're talking about $11 million.

7 Which in the big scheme of things -- you

8 know, $150-some-odd billion -- is not that

9 much, but considering the type of programs

10 that will be impacted, it is a big deal.

11 COMMISSIONER ZUCKER: We always -- I

12 mean, the department is committed to

13 providing the public health services to the

14 city, and there's many things that we are

15 trying to move forward to help in the bigger

16 picture of public health for the city and

17 some of the projects that they have.

18 SENATOR RIVERA: All right, a couple

19 more things. Some of my colleagues expressed

20 their concerns as it relates to ambulances

21 generally. And you're referring -- you keep

22 referring to a rate reform report that should

23 be coming out imminently. Obviously, there's

24 been seven or eight different ways that the

172

1 question has been asked; I figure that you're

2 not really saying much of what's in the

3 report until the report is public. That's --

4 I can -- you're saying yes.

5 MEDICAID DIR. HELGERSON: That's

6 correct.

7 SENATOR RIVERA: Okay. So as it

8 relates specifically, can you give us any --

9 I know that people hate spoilers, but any

10 spoilers related to Medicaid rates as far as

11 what is going to happen to ambulance

12 companies and the fact they haven't changed

13 in as long as they have? Anything you can

14 spoil for us before the report comes out?

15 MEDICAID DIR. HELGERSON: I think that

16 the budget proposal that's already on the

17 table clearly suggests that we believe that

18 embedded within an ambulance reimbursement,

19 there are issues that need to be addressed.

20 And the report will identify what some of

21 those -- what those issues are. And we look

22 forward to working with the Legislature to

23 address these issues now and in the years to

24 come.

173

1 SENATOR RIVERA: And you said that

2 that report, its release is imminent?

3 MEDICAID DIR. HELGERSON: It's

4 imminent. Yup, the next couple of weeks.

5 SENATOR RIVERA: All righty. We'll

6 come back to you on that.

7 Lastly -- at least for now -- the

8 $500 million in capital funding, we talked

9 about -- a couple of my colleagues talked

10 about it. There are $30 million that are for

11 community-based providers. Was there a

12 thought -- and that's correct, right?

13 COMMISSIONER ZUCKER: Yes.

14 SENATOR RIVERA: Was there a thought

15 of making that a larger pool as it refers to

16 community-based providers, considering the

17 high need of those types of providers?

18 COMMISSIONER ZUCKER: All right, so

19 two things there. One is the $30 million is

20 a minimum. So it could be more than that.

21 That's first.

22 And also, you know, the way we see

23 this moving forward is that it's not just

24 hospital versus ambulatory care, it's this is

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1 a health system that needs to transform into

2 a seamless process. And so a lot of the

3 hospitals we're working to help be -- to

4 basically oversee some of these community

5 services that -- or community health systems

6 that are in place. So I don't want it to be

7 looked at like there's a fine line, that this

8 money goes here and the other money goes

9 there and that the services aren't going to

10 come across.

11 So clearly, this is all a big

12 transformation. But again, the 30 million is

13 just a minimum.

14 SENATOR RIVERA: Thank you, Madam

15 Chairwoman.

16 CHAIRWOMAN YOUNG: Thank you.

17 ASSEMBLYMAN OAKS: Chairman Gottfried.

18 ASSEMBLYMAN GOTTFRIED: I'm not sure

19 the community-based providers are reassured

20 to hear that you envision them becoming part

21 of a seamless system under hospital

22 domination. I know you didn't that word, but

23 I think that's what they probably heard.

24 I was going to ask about the problems

175

1 with managed long-term care, but that's been

2 talked about by several folks. But I do want

3 to raise one issue in that area. The

4 Article VII bill says (a) that no one may get

5 more than 120 days of Medicaid home care

6 except through an MLTC. But (b), if you are

7 not "nursing home eligible" you may not

8 enroll in an MLTC.

9 This means that if a patient needs

10 more than 120 days of home care, but is not

11 nursing-home eligible, there is no way for

12 Medicaid to provide that needed home care.

13 Right? You can only get it if you're

14 nursing home-eligible, and if you're not,

15 then you can only get it through an MLTC, but

16 you can't join an MLTC.

17 Now, this language was in last year's

18 budget. We asked the same question. I don't

19 think we ever got an answer. And now the

20 language is back.

21 So how are we going to accommodate,

22 under this language, the patient who needs

23 more than 120 days of home care but is not

24 nursing home-ready? Or do they just not get

176

1 home care?

2 MEDICAID DIR. HELGERSON: So I can

3 tell you the intent. And I am not a lawyer,

4 so I -- we can certainly get you a definitive

5 legal response to explain the manner in which

6 that language was structured.

7 But the intent of the policy is to

8 change the eligibility criteria for managed

9 long-term care to actually a standard that I

10 believe was the case prior to 2011, which is

11 to basically say that in order to be eligible

12 for managed long-term care, you have to be in

13 need of a nursing home level of care.

14 We changed the policy to basically

15 extend eligibility to individuals who don't

16 meet that higher threshold but are deemed to

17 be in need of 120 days of home and

18 community-based care, a lower standard. The

19 intent of the policy is that individuals not

20 eligible for managed long-term care --

21 meaning that they have a need less than the

22 nursing home certifiable standard -- that

23 they would receive home care services through

24 Medicaid fee-for-service. That is the way in

177

1 which individuals who need some level of home

2 care that doesn't meet the standard today,

3 the 120-day standard, is they get it through

4 their local districts, who work with

5 providers in their area to assign home care

6 on an as-needed basis.

7 Now, the policy change doesn't affect

8 the large number of people who are in managed

9 long-term care. The vast majority of those

10 who are eligible for the program have been

11 deemed to be nursing home certifiable, so the

12 policy will not change them.

13 But anyone who is affected, they do

14 not lose their home care services, they

15 simply will get them through fee-for-service.

16 ASSEMBLYMAN GOTTFRIED: So you think

17 that the clause that says you cannot get more

18 than 120 days of home care unless you get it

19 through an MLTC, you think that clause means,

20 oh, you can also get it through

21 fee-for-service Medicaid, we were kidding

22 about the MLTC part?

23 MEDICAID DIR. HELGERSON: So --

24 ASSEMBLYMAN GOTTFRIED: You don't have

178

1 to be a lawyer to know that those words are

2 not in the statute.

3 MEDICAID DIR. HELGERSON: Right. So I

4 guess all I can tell you is -- and I can

5 refer back to counsel who drafted the

6 language for the Article VII bill. But I can

7 tell you our intent. And if there is

8 something that the lawyers think in the

9 writing and the drafting of it that is

10 inconsistent with our intent, we are more

11 than happy to look to provide greater

12 clarity.

13 But in no way, shape or form is the

14 Governor's proposal designed to restrict

15 access to home care services. Under the

16 Medicaid state plan, these are entitled

17 services. And all we're saying is that we

18 want to limit the participation in the

19 managed long-term care program to those who

20 are in need of a -- who are deemed in need of

21 a nursing home level of care and to use local

22 districts and the fee-for-service system for

23 those who need a level of home care services

24 that's less than that standard.

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1 ASSEMBLYMAN GOTTFRIED: Okay. All

2 I'll say on that point, I will eagerly await

3 the legal explanation of that. You've still

4 got a few hours to do a 30-day amendment to

5 change the bill.

6 As I say, we raised this point a year

7 ago. The discussions went round and round,

8 and there was never really an answer.

9 On Early Intervention -- we talked

10 about that earlier, but I want to go back to

11 it. At a 2014 public hearing, in sworn

12 testimony, DOH stated: "As part of the

13 statement budget for state fiscal year

14 2012-2013, several reforms for the program

15 were enacted. The two main goals of those

16 reforms were to provide administrative and

17 fiscal relief to municipalities and increase

18 the amount paid by private insurers for EI

19 services without mandating new coverage. To

20 maximize insurance reimbursement, the 2013

21 statute included a requirement that providers

22 submit claims directly to insurers using a

23 new state fiscal agent, a contractor of the

24 department, for fiscal management of claims."

180

1 Now, in '07-'08, before the fiscal

2 agent took on the job of, quote, to maximize

3 insurance reimbursement, the EI program got

4 $13 million from insurance companies. In

5 2016, with the fiscal agent, we got

6 $12 million from the insurance companies, a

7 million dollars less. According to the

8 2012-2013 Executive Budget Briefing Book,

9 these reforms were supposed to save

10 localities $99 million over five years, but

11 total EI payments by counties have actually

12 risen almost $20 million since then.

13 How can we in good conscience continue

14 to pay about $8 million a year to a fiscal

15 agent that gets us less money?

16 COMMISSIONER ZUCKER: So we -- this

17 is -- this goes back to what we were talking

18 about a little bit before, that -- I

19 understand your comments that you feel like

20 the investment is not -- we're not getting

21 reimbursement for the investment that we're

22 putting in there.

23 But we would hope that the changes

24 that we put into the budget will allow the

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1 fiscal agent to be able to increase the

2 amount of return that we're getting from

3 these commercial payers.

4 I hear what you're saying. I'd be

5 happy to sit down --

6 ASSEMBLYMAN GOTTFRIED: Okay, but most

7 New Yorkers -- I think it's two-thirds of

8 New Yorkers -- who have nonpublic health

9 coverage get it through an employer-sponsored

10 self-insured plan which is not subject at all

11 to our regulations, so we're not going to get

12 any more blood from that stone.

13 Insurance companies, when they reject

14 EI claims, I think the most common grounds

15 for rejection is "that the provider is not in

16 our network." The language in the budget

17 bill isn't going to change that. It's just

18 going to require EI providers to keep banging

19 their head against that brick wall, even

20 though when they submitted their claim for

21 last month's work and were told they weren't

22 in network, when they submit the claim for

23 next month's claim, they're again going to be

24 told that they're not in network, they're

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1 just going to be mandated to keep spinning

2 wheels. How is that going to get any better?

3 COMMISSIONER ZUCKER: Well, part of it

4 is to get parents also to provide more

5 information. There's some issues, there's

6 some administrative issues here --

7 ASSEMBLYMAN GOTTFRIED: Excuse me,

8 information isn't going to make their

9 coverage not subject to a risk of preemption,

10 and more information isn't going to make

11 their provider get included in the company's

12 network.

13 COMMISSIONER ZUCKER: Right. But at

14 times when information is not accurate, the

15 insurers, whether it's in this situation or

16 others, they just end up denying the coverage

17 and saying that, well, we didn't have the

18 right data. I have this personally, just saw

19 this the other day with myself and some

20 information. They said, we don't have the

21 right information, we're not paying.

22 And so I think that that would help

23 facilitate it, and I would think it would

24 help facilitate the role of the state fiscal

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1 agent to move this forward.

2 I will gladly sit down -- maybe we can

3 sit down at another point and just, you know,

4 work through some of these things and address

5 it with some of the experts we have on the

6 team regarding Early Intervention and see how

7 we could move this forward.

8 ASSEMBLYMAN GOTTFRIED: Well, you

9 know, we've had a lot of conversations with

10 them over the last 10 years or so. I don't

11 think we've ever gotten useful information

12 from them. But we'll keep trying.

13 COMMISSIONER ZUCKER: I'll gladly sit

14 down afterwards and work this through, figure

15 out how we could do this. And the goal is

16 obviously to provide, one, these children

17 with Early Intervention and, two, to make

18 sure that there's reimbursement for it.

19 So ...

20 ASSEMBLYMAN GOTTFRIED: Okay, that's

21 it.

22 CHAIRWOMAN YOUNG: Thank you,

23 Chairman.

24 For a second round, Senator Golden.

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1 SENATOR GOLDEN: Thank you, Madam

2 Chair.

3 The -- simple questions and answers.

4 This was already asked a couple of times, and

5 it's been answered, but I just want to

6 clarify. And it's on the supplemental

7 ambulance cuts and the payments. You did

8 say, Commissioner, that the ambulances that

9 will be doing and providing this service will

10 be paid the supplemental payment while this

11 process is going on, correct?

12 COMMISSIONER ZUCKER: Correct, yes.

13 SENATOR GOLDEN: Thank you.

14 The $650 million for life sciences,

15 we're obviously very thankful that it's

16 coming out. I proposed one for $500 million

17 last year, the Governor has upped it to

18 $650 million. We look for the regional hubs.

19 We think it's good that they're going to do

20 this here in this Capital Region. But

21 obviously we'd like to see what's going to

22 happen across the state -- downstate,

23 upstate -- and to make sure that there's a

24 balance, and of course that there is an

185

1 opportunity for us to take a lead.

2 California, Texas, Massachusetts are eating

3 our lunch. New Jersey is stealing jobs left

4 and right and companies left and right. We

5 need to get ahead of the biotech and biomed

6 field and the technology field, and this is

7 the impetus and way to do that. Do you

8 agree?

9 COMMISSIONER ZUCKER: This is a -- the

10 issue of life sciences and the Governor's

11 commitment to this is not just centered on

12 one area of the state, this is across the

13 state. And success in this arena requires

14 partnerships throughout the state,

15 public-private partnerships. The

16 $650 million will move that forward. The

17 $150 million to start moving forward with a

18 state lab will be critical.

19 We bring that up and I mentioned that

20 about the Capital Region because the lab is

21 here, and it is tied to many other parts of

22 government. And so that's one part. But the

23 bigger picture of life sciences will be

24 across the entire state on this. And this

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1 requires public-private partnerships.

2 SENATOR GOLDEN: Excellent.

3 This is probably an expected question

4 for me as well. SUNY Downstate, the hospital

5 and of course the medical school, we do plan

6 to keep that hospital operating and as a

7 functioning hospital and part of the network

8 here in the City and State of New York,

9 correct?

10 COMMISSIONER ZUCKER: I couldn't catch

11 which --

12 SENATOR GOLDEN: The hospital, I'm

13 asking if there are any plans for any changes

14 at SUNY Downstate.

15 COMMISSIONER ZUCKER: Downstate, yes.

16 So we are committed to moving forward with --

17 obviously we recognize that they serve a

18 community, and many people have asked about

19 this. And we are looking at it as part of --

20 it was addressed in the plan that was

21 provided to us by Northwell when we

22 contracted with them about the issues with

23 Downstate.

24 I would add also one other thing,

187

1 because you had mentioned this before and I

2 didn't -- I was thinking about it afterwards,

3 about the capital and about the other

4 projects. We do have a lot of DSRIP projects

5 out in Brooklyn and in other areas there, so

6 that is separate from capital. And there's a

7 lot of programs that are being supported by

8 that as well. So I just -- you know, I

9 forgot to mention that before.

10 SENATOR GOLDEN: Well, I was focusing

11 on the actual development of this --

12 COMMISSIONER ZUCKER: Right. I know.

13 SENATOR GOLDEN: -- new corporation

14 that there would be funding set aside in the

15 budget that would allow this to happen.

16 Because we're not talking about a few

17 dollars, we're talking about probably, for

18 this to take place, a couple of billion

19 dollars over a period of time. So you need

20 to obviously map that out, the strategy, over

21 the next couple of years. I don't see that

22 in the budget, and I think we need to have

23 that in the budget.

24 There was one more good question I

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1 believe -- oh, SUNY we asked about. I want

2 to go back to generic drug pricing for a

3 second. And this is another area that's been

4 asked and answered, to a large degree; the

5 Governor's proposal on the ceiling on the

6 reimbursement for generic prescription drugs.

7 One of the areas is choosing the

8 lowest price out of four different sources.

9 And one of those sources is the MAC, the

10 maximum acquisition cost. How do you do

11 that? What data do you use to come up with

12 that amount?

13 MEDICAID DIR. HELGERSON: Sure. So

14 the typical way that state Medicaid programs

15 reimburse pharmacies for generic drugs is

16 what's called the SMAC, the state MAC price

17 list. We use multiple data sources to

18 compile that list. And the idea is just to

19 make sure that list is updated in the state.

20 And we have a contract with a pharmacy

21 benefit manager, Magellan, who supports the

22 state in updating and maintaining that list.

23 You know, generics are a fast-changing

24 environment. Just because a drug is generic

189

1 does not mean it's cheap. So the example

2 would be something that's just come off

3 patent could still be just as expensive as

4 the brand. But at some point, once it

5 becomes what's called a multisource drug, the

6 price can drop like a stone. So we have to

7 be very nimble to adjust the price so that we

8 are not overpaying at any point.

9 But also, as we've seen in recent

10 years, prices can rise. And they can rise

11 because of, you know, generic manufacturer

12 bad behavior. And so that's why we also have

13 a process in place where pharmacists can

14 provide us with invoices and other

15 information, so if our MAC price is too low,

16 we could adjust upward to reflect what the

17 market really is.

18 SENATOR GOLDEN: Both you and Senator

19 Hannon pointed out extreme cases. I'm just

20 concerned about those that, you know, get hit

21 with ingredient shortages, which is going to

22 cause the prices to go up, and changes in the

23 MAC price. So that will be taken into

24 consideration, obviously. And we're not

190

1 going to make a mistake here and somebody

2 gets hurt, so there will be some exceptions

3 to this that --

4 MEDICAID DIR. HELGERSON: Yes,

5 absolutely. So what happens is that -- the

6 idea here is that we will look at any drug

7 and consider implementing the mandatory

8 rebate. It's a mandatory rebate, just to be

9 clear, on the manufacturer, and it has no

10 impact on the pharmacist. The pharmacist

11 will be paid whatever the MAC price is. But

12 if we see a price go up by more than

13 75 percent -- so this is the same drug --

14 these are generic drugs, they were originally

15 brands, in most cases they've been on the

16 market for 15, 20 years. So the real

17 question is why did the price go up by more

18 than 75 percent. It could be that there's a

19 temporary shortage, and that's appropriate.

20 But what we've seen is a number of instances

21 where we've seen these kind of price

22 increases that really can't be explained by

23 sort of temporary issues but more by sort of

24 noncompetitive behavior.

191

1 SENATOR GOLDEN: Thank you, gentlemen.

2 I don't know constitutionally how you get

3 that done, but thank you for your testimony

4 here today.

5 CHAIRWOMAN YOUNG: Thank you.

6 CHAIRMAN FARRELL: Thank you.

7 Assemblyman Raia, for a second go-round.

8 ASSEMBLYMAN RAIA: I won't take that

9 long. I just had a couple of quick

10 questions.

11 With respect to inappropriate

12 prescribing of opioids for doctors in the

13 Medicaid program, it seems to be a little

14 fuzzy as to whether or not there's due

15 process for these doctors. Is there just

16 going to -- you know, if something happens,

17 someone makes a complaint, do they get a say

18 in whether or not they are in the program or

19 out?

20 MEDICAID DIRECTOR HELGERSON: Sure.

21 So there's a proposal in the budget that

22 basically allows the department -- and we

23 have this authority to already, in

24 consultation with OMIG and MFCU, to

192

1 potentially disenroll someone from the

2 program based on cost. Now, once that

3 determination is made, the provider has due

4 process rights. This proposal doesn't change

5 that.

6 However, we have detected bad behavior

7 relative to this. And as I said, while the

8 vast majority of prescribers in New York

9 State and across the country have come to

10 realize just how problematic this practice

11 is, we still see that there are outliers in

12 terms of practice. And while we are loath to

13 want to kick anyone out of the program, we

14 think this is just one additional deterrent

15 that will exist for us to ensure that we

16 aren't having the healthcare industry leading

17 directly to people becoming addicted to

18 opioids.

19 ASSEMBLYMAN RAIA: All right. And one

20 last question.

21 How much do we spend on

22 pharmaceuticals in the Medicaid program after

23 we take out all of the rebates?

24 MEDICAID DIR. HELGERSON: Yes, so I

193

1 think the gross spend is like $6 billion or

2 something like that, and then the rebate

3 aggregate is about 45 percent.

4 ASSEMBLYMAN RAIA: Thank you.

5 CHAIRWOMAN YOUNG: Thank you.

6 Senator Comrie.

7 SENATOR COMRIE: Thank you, Madam

8 Chair.

9 I wanted to ask you a couple of

10 questions. The first question is you

11 mentioned that there are about another

12 $500 million in additional capital support

13 for essential healthcare providers, including

14 a minimum of $30 million for community-based

15 providers.

16 I represent Queens, and it seems like

17 everything is going to Brooklyn or the Bronx.

18 Can you give me an idea on what's happening

19 on the Queens level, and specifically in

20 terms of --

21 COMMISSIONER ZUCKER: Sure. So first,

22 and to clarify about the monies to the

23 communities, and Assemblyman Gottfried's

24 comment that I am sort of tying it to the

194

1 hospitals, we're not. We're supportive of

2 all the community health programs that are

3 out there, and the $30 million again is a

4 minimum, it's not what the final amount is.

5 We are moving forward with a lot of

6 projects within Queens, both -- whether it's

7 the DSRIP projects for -- and the PPSs that

8 we have out there, but also a lot of the

9 other capital projects as well are there.

10 There's a lot of hospitals that are -- from

11 the hospital standpoint, a lot of hospitals

12 that are tied to other hospitals, and they've

13 become more of a network. But --

14 SENATOR COMRIE: Well, I'm

15 specifically concerned about Jamaica

16 Hospital, which is a Tier 1 trauma center.

17 COMMISSIONER ZUCKER: Sure. Right by

18 JFK Airport.

19 SENATOR COMRIE: I know it's tied

20 into all the -- everyone's consolidating

21 networks now. But Jamaica Hospital, just to

22 be focused, needs a lot of upgrading,

23 modernization to be able to accommodate

24 people. It's almost embarrassing when a

195

1 police officer or a firefighter has to go

2 there and the facilities there -- much less

3 the constituents that have to go there for

4 Trauma 1.

5 St. John's, as you know, in the

6 Rockaways, is seriously underbedded,

7 underserved. And I haven't seen anything in

8 the proposals about either of those.

9 COMMISSIONER ZUCKER: So I will look

10 back at the -- and I'll have the team look at

11 the monies that we have allocated to

12 different facilities and see which ones are

13 in Queens. I can't tell you off the top of

14 my head. But there is as much a commitment

15 there as to any of the other boroughs, and

16 for that matter, anywhere else in the state,

17 to make sure any of the safety-net hospitals

18 are -- needs are available to them.

19 SENATOR COMRIE: Okay. I hope so,

20 because it seems like that -- I haven't seen

21 a detailed breakdown. I'd like to get a

22 detailed breakdown. Hopefully Queens is in

23 that balance and in that mix, and hopefully

24 we can make sure that that happens as well.

196

1 COMMISSIONER ZUCKER: Sure. Sure.

2 SENATOR COMRIE: I'm concerned about

3 the consolidation of the -- possible

4 consolidation of the 39 public health

5 programs into pools. And I hope that, you

6 know, we can make sure that people don't

7 drown in those pools and the public programs

8 that traditionally get money and provide

9 excellent service don't wind up losing

10 opportunities to continue the level of

11 service and/or get locked in at --

12 COMMISSIONER ZUCKER: Right. That's

13 not the objective at all. We're trying to

14 create some more efficiencies in the system.

15 We recognize that, you know, with 39 of those

16 programs, that it would fall in one of the

17 four or five categories that we have.

18 We recognize that there has been

19 concern by you and some of the other

20 legislators, but we believe that this is a

21 better way to provide more efficiencies,

22 decrease some of the administrative burdens

23 as well.

24 SENATOR COMRIE: Will these pools be

197

1 decided by -- who's going to sit in the pools

2 to make the decision?

3 COMMISSIONER ZUCKER: Well, what I can

4 do is get you the list of how we're looking

5 at the pools. And mainly it is -- if a -- a

6 pool that we have identified would clearly

7 have the programs that sort of match what

8 they are, if it's disease prevention or if

9 it's the health promotion pool or if it's

10 epidemiology. We'll look at the pools

11 together that way.

12 SENATOR COMRIE: Okay. I only have a

13 limited amount of time. I'm concerned about,

14 as Senator Savino mentioned, the OPWDD

15 staffing and the ability to make a decent

16 living out of a difficult job, and the idea

17 that people would rather go to the private

18 sector than work in the public sector because

19 of the salaries involved in it. And I hope

20 we can make some corrections on that.

21 And also the safe staffing issues and

22 how we can look at that across the state to

23 make sure that both the staff and the

24 patients are taken care of. I'm just going

198

1 to rant now because I only have 30 seconds

2 left.

3 COMMISSIONER ZUCKER: That's okay.

4 SENATOR COMRIE: You know, I'm also

5 just concerned and if you could get back to

6 us about the update on childhood lead

7 poisoning prevention.

8 COMMISSIONER ZUCKER: Sure. Sure. We

9 put a report out about that. And down in the

10 city, the schools have provided us

11 information. We still haven't received all

12 the information from all the schools in the

13 state. We have about 86 percent upstate of

14 lead -- reports about their lead pipes as

15 well.

16 SENATOR COMRIE: Okay. And any type

17 of redevelopment on Medicaid or the

18 redevelopment of a healthcare regulation

19 modernization, I would hope that the

20 Legislature is involved with that as well and

21 it's not just done from a level of -- where

22 we can make sure that the community and all

23 of the advocates can have a chance to be

24 heard.

199

1 COMMISSIONER ZUCKER: Agreed.

2 SENATOR COMRIE: I understand the need

3 for modernization, but I'm concerned that

4 people may drown in the pool as they're not

5 able to be heard or not able to give their

6 suggestions as to what modernization should

7 be.

8 COMMISSIONER ZUCKER: I'm a big

9 believer in hearing everyone's opinions on

10 these issues.

11 SENATOR COMRIE: Thank you.

12 CHAIRWOMAN YOUNG: Thank you, Senator.

13 CHAIRMAN FARRELL: Thank you.

14 CHAIRWOMAN YOUNG: You're in the home

15 stretch, so that's good.

16 (Laughter.)

17 CHAIRWOMAN YOUNG: I just had a couple

18 of follow-up questions. Senator Hannon and

19 Senator Golden asked about the capital for

20 hospitals. And I commend the Governor, I

21 applaud him for the $500 million that's

22 included in this proposal. The question I

23 have, though, in light of the needs that

24 hospitals have all over the state, is

200

1 $500 million enough?

2 COMMISSIONER ZUCKER: So, you know,

3 having worked in the hospitals and seen the

4 challenge in the infrastructure and the

5 changes that need to be there, there's always

6 more money that could be provided to help

7 move this up to speed.

8 I think that we need to -- this is a

9 major investment to start moving forward on

10 some of those things and those projects. We

11 have already put out -- and when you look at

12 the amount, we've put $1.2 billion in

13 capital, another $500 million, and we

14 continue to invest. The Governor is

15 committed to all the hospitals across the

16 state, and particularly recognizes that some

17 of the areas of the state where these

18 safety-net hospitals are not only central to

19 the community and the care that the community

20 receives, but it's also central to jobs as

21 well, because those hospitals often are where

22 a lot of people are employed.

23 So we are working on this to try to

24 move this forward. So a first step, but we

201

1 continue to deal with this and we're happy to

2 deal with it in the budget negotiations.

3 CHAIRWOMAN YOUNG: Thank you.

4 When will the $195 million for the

5 Health Care Facility Transformation Program

6 be announced?

7 COMMISSIONER ZUCKER: That will be

8 soon.

9 CHAIRWOMAN YOUNG: Very soon?

10 COMMISSIONER ZUCKER: Yes, within this

11 quarter.

12 CHAIRWOMAN YOUNG: Within a month?

13 COMMISSIONER ZUCKER: Within the

14 quarter.

15 CHAIRWOMAN YOUNG: Within the quarter,

16 okay. Right, it has to be -- Senator Hannon

17 is reminding me that it has to be done before

18 we can do new funding. So okay. Thank you,

19 Senator.

20 I wanted to follow up on HCRA, and I

21 know Senator Krueger brought it up a little

22 bit. But have all the recommendations of the

23 HCRA modernization task force been

24 implemented?

202

1 COMMISSIONER ZUCKER: I have to get

2 more information and get back to you on some

3 of those issues with the HCRA.

4 CHAIRWOMAN YOUNG: Okay. So is there

5 a detailed accounting of all HCRA revenues

6 that is available to the public?

7 COMMISSIONER ZUCKER: Sorry, I

8 couldn't hear you.

9 CHAIRWOMAN YOUNG: So I know, Jason

10 was talking to you at the same time, but

11 that's okay. I have that up here all the

12 time, by the way.

13 But is there a detailed accounting of

14 all the HCRA revenues that is available to

15 the public?

16 COMMISSIONER ZUCKER: I think there

17 is.

18 You want to answer?

19 MEDICAID DIR. HELGERSON: We just

20 published recently, actually, a report on

21 HCRA, so that provided a lot of information.

22 If there's a desire for more information

23 beyond what's in that report, happy to

24 provide it.

203

1 In terms of the modernization

2 recommendations, I mean, I believe -- we

3 believe that basically all those

4 recommendations have in fact been

5 implemented.

6 CHAIRWOMAN YOUNG: Okay, thank you.

7 Final question -- two more questions.

8 The first has to do with the Medicaid minimum

9 wage investments regarding home care workers

10 and managed long-term care plans. And we've

11 kind of talked about that today. But it's

12 regarding direct salary costs and related

13 fringe benefits. And currently MLTC

14 enrollment is the second largest driver of

15 increased spending under the Medicaid global

16 cap.

17 The question I have is, how do -- so

18 there's funding to take care of minimum wage

19 increases for those workers. How do we

20 ensure the minimum wage funding gets to the

21 workers from the Medicaid managed-care plans?

22 Because that could be a problem.

23 MEDICAID DIR. HELGERSON: Sure. It's

24 a good question. So the monies, because it's

204

1 a managed care product -- and this is not

2 just unique to -- although we're talking

3 about mostly in the case of home care,

4 because that's where the impact is felt

5 initially. But obviously as we further phase

6 in the minimum wage, impacts will begin to be

7 felt in other sectors. And we are almost

8 entirely a Medicaid managed care state.

9 So what we're doing in the case of

10 home care is we're going to be collecting a

11 lot of information, not only from the plans

12 but actually one of the areas where we

13 haven't had a good sight line in has been in

14 the case of the LHCSAs, the licensed

15 agencies, who have not been required to

16 submit cost reports. So we are actually

17 going to be collecting cost report

18 information from them for the first time.

19 And in that cost report information we

20 will see across all the LHCSAs -- and there

21 are hundreds of them -- we will actually see

22 how much money they're spending and where the

23 dollars that were allocated are going and are

24 they actually going into worker wages,

205

1 because that is absolutely our intent.

2 Our Division of Budget colleagues, who

3 in essence control the purse strings relative

4 to the funds -- you know, as I said, they are

5 outside the global cap -- they will provide

6 us the funds on as-needed basis. They've

7 been very clear they want a detailed

8 accounting. And I know the Legislature also

9 expressed that desire in the legislation in

10 the legislation that was passed last -- or in

11 the budget last year. And so we take that

12 responsibility very seriously. So we're

13 going to be collecting that information from

14 those agencies and making sure that the

15 dollars that are allocated for this purpose

16 are in fact going directly into wages for

17 workers.

18 CHAIRWOMAN YOUNG: Thank you. I want

19 to give a shout out to the ambulance folks

20 here today, and I'm glad my colleagues asked

21 some of the questions I was going to ask.

22 (Applause from audience.)

23 CHAIRWOMAN YOUNG: And finally,

24 though, I did want to ask -- there seems to

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1 be an issue, and I hear anecdotally and my

2 colleagues do also, that there's an

3 underreporting of heroin deaths in rural

4 areas. And could you address that? Because

5 it may be because of a stigma or, you know,

6 somebody may die because they asphyxiated and

7 that's the cause of death rather than an

8 overdose. And I think that we need to figure

9 out a way so that we have more accurate

10 reporting.

11 COMMISSIONER ZUCKER: Right. So we

12 get data quarterly, and we are looking at

13 these reports. And I understand what your

14 concern is, whether someone comes in and the

15 cause of death is listed as one thing but in

16 actual fact it may have been related to

17 heroin. And we're trying to sort this out

18 and trying to figure out a better system and

19 to get more information and be sure it's

20 accurate, because that has been brought to

21 our attention before, I know.

22 CHAIRWOMAN YOUNG: Thank you.

23 So I want to sincerely thank both of

24 you. You have such an incredible, awesome

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1 responsibility in protecting the health of

2 New Yorkers. And I know that you're very

3 dedicated and devoted to that task. So I

4 want to say thank you, thank you for all the

5 time you've spent with you us today, and we

6 look forward to continuing to work with you.

7 So thank you very much for your testimony.

8 COMMISSIONER ZUCKER: Thank you very

9 much.

10 MEDICAID DIR. HELGERSON: Thank you.

11 CHAIRMAN FARRELL: Thank you.

12 CHAIRWOMAN YOUNG: Our next speaker is

13 Superintendent Maria T. Vullo, New York State

14 Department of Financial Services.

15 (Pause in proceedings.)

16 CHAIRWOMAN YOUNG: Can we have some

17 order, please. Please take your

18 conversations outside. Could we have some

19 order, please.

20 Welcome, Superintendent.

21 Could we have some order, please.

22 Please take your conversations outside.

23 Welcome, Superintendent. We're so

24 happy to have you here today.

208

1 SUPERINTENDENT VULLO: Hi. Thank you.

2 CHAIRWOMAN YOUNG: Glad to see you,

3 and we look forward to your testimony.

4 SUPERINTENDENT VULLO: Thank you,

5 Senator.

6 Has my written testimony been handed

7 out? Just want to make sure.

8 ASSEMBLYMAN OAKS: Yes.

9 SENATOR KRUEGER: Yeah.

10 SUPERINTENDENT VULLO: Great. Great.

11 Okay.

12 So good afternoon, Chairpersons Young

13 and Farrell, Vice Chair Savino, Chairpersons

14 Hannon, Gottfried, Seward and Cahill, ranking

15 members, and all distinguished members of the

16 State Senate and Assembly. Thank you for

17 inviting me to be here today. This is my

18 first appearance before the Legislature at

19 budget hearings, and I am happy to provide my

20 perspective and answer your questions.

21 I have now been the superintendent, or

22 acting, of the Department of Financial

23 Services for almost a year. It has been a

24 very busy year, and I am privileged to work

209

1 for Governor Cuomo and serve all New Yorkers

2 in this important role.

3 I understand from the invitation that

4 this hearing is to address DFS's portion of

5 the health budget, and I will therefore focus

6 my comments accordingly, after some

7 background about DFS's budget and our

8 healthcare work this year.

9 As you all know, DFS's mission is to

10 strengthen New York's financial services

11 industries, safeguard our markets from fraud,

12 and protect New York consumers. Under

13 Section 206 of the Financial Services Law,

14 DFS's operating expenses are assessed to

15 industry. The Executive's budget for DFS

16 proposes about $254 million in budget

17 appropriation, a 1.7 percent increase from

18 last year, due to contractual salary

19 increases.

20 As DFS superintendent, I manage a

21 staff of more than 1,350 individuals,

22 supervising the activities of more than 1,400

23 insurance companies with assets of more than

24 $4.3 trillion, and nearly 1,500 banking and

210

1 other financial institutions with assets of

2 more than $2.6 trillion. DFS licensees

3 include nearly 200 life insurance, 1,100

4 property/casualty insurance companies,

5 approximately 100 health insurers and managed

6 care organizations, and 300,000 individual

7 insurance licensees. Our licensees also

8 include approximately 250 state-chartered

9 banks, approximately 1,200 other licensed

10 financial services companies, and 7,600

11 mortgage loan originators and servicers.

12 As this is the joint budget hearing on

13 health, it should come as no surprise that I

14 have spent a substantial amount of my time

15 this past year, and even more so since

16 November, addressing New York's healthcare

17 market. At DFS we have been working with our

18 commercial health insurers and our colleagues

19 at the Department of Health, the New York

20 State of Health, and the Medicaid team, to be

21 prepared for whatever happens at the federal

22 level and to protect New Yorkers in their

23 healthcare needs.

24 In the health field, this past year at

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1 DFS we were privileged to help draft and

2 issue guidance regarding the Governor's

3 landmark legislation that mandates health

4 insurance coverage with no cost-sharing for

5 breast cancer screenings and diagnostic

6 imaging for the detection of breast cancer,

7 including diagnostic mammograms, breast

8 ultrasounds, and magnetic resonance imaging

9 covered under an insurance policy.

10 I was also privileged to serve as a

11 member of the Governor's Heroin and Opioid

12 Task Force, and thereafter to assist with the

13 landmark legislation to increase access to

14 addiction treatment, expand community

15 prevention strategies, and combat the

16 over-prescription of opioids. As New York's

17 insurance regulator, I also protected women

18 who suffer from maternal depression, are

19 victims of domestic violence, and who seek

20 reproductive healthcare, ensuring access to

21 insurance when needed.

22 The strength and vibrancy of

23 New York's commercial health insurance market

24 has been a priority of DFS this year. The

212

1 process of setting the 2017 health insurance

2 rates involved carefully examining the rates

3 requested by insurers, applying sound

4 actuarial principles, considering the

5 insurer's financial condition, and taking

6 into account the need for a competitive

7 New York marketplace that supports consumer

8 choice. Our final determinations permitted

9 increases for individual policies offered

10 through the New York State of Health

11 exchange, and for small group commercial

12 plans, due primarily to increasing costs of

13 prescription drugs and other healthcare

14 costs. Nonetheless, we reduced insurers'

15 requested increases by more than 28 percent

16 overall, which will save consumers more than

17 $302 million in 2017.

18 It is important to note that since the

19 Affordable Care Act, enrollment in the

20 individual market went from approximately

21 20,000 members to over 300,000, and premiums

22 dropped by more than 50 percent, not counting

23 federal tax credits. In New York, our

24 uninsured rate has declined from 10 percent

213

1 to 5 percent. Presently, we have 16 insurers

2 participating in our individual market and

3 21 insurers in our small group market.

4 In addition, to further ensure market

5 stability in New York's health insurance

6 market, in June we issued an emergency

7 regulation to address certain unintended

8 consequences from the federal risk adjustment

9 program in New York's small group market for

10 the 2017 plan year, and we worked

11 collaboratively with the federal Centers for

12 Medicare & Medicaid Services in issuing that

13 regulation.

14 Notably, CMS subsequently issued its

15 rules for risk adjustment for the 2018 year,

16 which included one of the factors that we had

17 identified, resulting in a significant

18 reduction of the statewide average premium to

19 reflect the medical loss ratio, as risk

20 adjustment should factor in medical expenses

21 and not administrative costs or profit. DFS

22 currently is reviewing, for the 2018 plan

23 year, the continued impact of federal risk

24 adjustment on both the individual and small

214

1 group markets in New York.

2 The Governor's Executive Budget

3 proposes DFS initiatives as part of

4 Article VIII legislation, and there are two

5 that specifically involve health that I would

6 like to discuss: prescription drug costs and

7 pharmacy benefit manager reform.

8 First, for the New York State

9 commercial market, prescription drug costs

10 have been the biggest drivers of health

11 insurance premium increases. In 2015,

12 pharmacy expenses were 25 percent of the

13 total premiums in New York State,

14 significantly higher than the second largest

15 category of premium expense, which was

16 inpatient hospitalization, which was

17 18 percent. In 2015, New York sales of

18 branded drugs exceeded $200 billion, and the

19 cost of specialty drugs -- which is only 1

20 percent of the market, but such a greater

21 cost, has skyrocketed.

22 Despite considerable efforts by the

23 New York State Medicaid program to maintain

24 affordability through formularies, preferred

215

1 drug lists, rebates, and utilization

2 management, total drug costs have grown by

3 over $1.7 billion over the past three years,

4 or 38 percent.

5 Accordingly, the Governor's Executive

6 Budget includes important proposals to

7 maintain affordability of prescription drugs

8 in New York. The first proposal, as you've

9 heard from the Commissioner of Health,

10 authorizes the Department of Health to

11 collect cost and pricing information from

12 drug manufacturers in order to establish

13 state pricing benchmarks for certain drugs

14 for the Medicaid program. The existing Drug

15 Utilization Review Board will conduct those

16 reviews for certain categories of drugs where

17 the pricing is exorbitant relative to

18 development costs and therapeutic value.

19 That review will establish the benchmark for

20 pricing in the Medicaid program.

21 Then turning to DFS's role in this

22 proposal, the Governor's proposal would then

23 require drug manufacturers and wholesalers to

24 pay a 60 percent surcharge to the Department

216

1 of Tax and Finance applied to all first sales

2 in New York State on gross receipts generated

3 from drug costs in the commercial insurance

4 market that exceed that DURB state pricing

5 benchmark in the Medicaid program. That

6 surcharge amount will be paid into a fund

7 held at DFS, which DFS will distribute to

8 health insurers and Medicaid in proportion to

9 their relative costs with respect to those

10 drugs that generate the surcharge.

11 Surcharge amounts paid to commercial

12 insurers will be used to reduce premiums paid

13 by consumers. In this way, the proposal

14 would benefit New Yorkers by maintaining

15 affordability of healthcare coverage.

16 The second proposal I'd like to

17 discuss is the pharmacy benefit manager

18 reform proposal. The Governor's Executive

19 Budget includes a proposal for DFS to

20 regulate pharmacy benefit managers servicing

21 New York consumers. PBMs are involved in

22 almost every aspect of prescription drug

23 delivery, from the manufacturers to the

24 insurance companies to employers, and of

217

1 course the individual pharmacies.

2 The proposed bill grants DFS

3 regulatory authority over PBMs to provide us

4 with the oversight necessary to reduce the

5 cost of drugs and limit any abusive or

6 unreasonable practices. As prescription drug

7 costs have skyrocketed, PBM profits have

8 doubled. We are aware of at least 18 states

9 that regulate PBMs in some way, and we

10 believe that New York should as well.

11 Under our proposal, DFS's authority

12 over PBMs would come in two measured phases.

13 First, PBMs would be required to register

14 with DFS by June 1 of this year, and each PBM

15 would be required to provide information

16 requested by DFS. Any company-specific

17 proprietary information will be confidential,

18 just like DFS receives similar confidential

19 information from its other regulated

20 entities.

21 After conducting a thorough review

22 through the registration and

23 information-gathering process, DFS would

24 license PBMs beginning January 1, 2019.

218

1 Based on the review of information obtained

2 during the registration phase, DFS would

3 develop a comprehensive set of regulations

4 that could include requirements that PBMs

5 disclose certain information to clients or to

6 the public and, importantly, that conflicts

7 of interest, deceptive practices, and unfair

8 trade practices be eliminated.

9 The goal of this proposal is to either

10 eliminate the significant conflicts of

11 interest that exist in current PBM models, or

12 manage the conflicts under tight regulation

13 to ensure that the financial incentives of

14 PBMs, insurers, employers and consumers are

15 aligned and that every effort is made to

16 manage the costs of prescription drugs.

17 The Governor's Executive Budget

18 includes other proposals relevant to DFS,

19 including proposals to regulate student loan

20 servicers, to protect vulnerable adults, and

21 to provide DFS with administrative

22 supervision authority, as 31 other states

23 have, in order to protect our insurance

24 market and the guaranty funds in New York

219

1 from insurance company failures.

2 The Governor's budget also includes a

3 proposal that DFS have the authority to ban

4 bad actors from the business of banking,

5 insurance, or financial services in New York

6 if, after a hearing, the DFS superintendent

7 determines that the individual has done

8 something so severe as to have a direct

9 bearing on his or her fitness or ability to

10 continue participating in the industry.

11 I would think that everyone would be

12 on the same page with this proposal. No one

13 should want misconduct or malfeasance to

14 persist in our financial services industry,

15 and the disqualifying events set forth in the

16 statute reflect this goal of addressing truly

17 bad actors.

18 Indeed, the Financial Services Law

19 expressly provides that one of DFS's

20 obligations is to reduce or eliminate fraud

21 or unethical conduct in the financial

22 services industry. Since it is DFS that

23 regulates the financial services industry in

24 New York, it is appropriate that DFS have the

220

1 authority to disqualify persons working in

2 the industries over which DFS -- and not any

3 other state official -- has supervisory

4 oversight every day.

5 Under this proposal, disqualifying

6 events include acts of fraud, certain

7 criminal convictions, the making of material

8 misrepresentations to DFS or other

9 regulators, or conduct constituting such

10 gross misconduct, incompetence, or

11 dereliction of responsibility as to

12 compromise the banking, insurance, or

13 financial services industries in New York.

14 This proposal is similar to the statutory

15 disqualification provisions existing in the

16 federal securities laws that are enforced by

17 the Securities and Exchange Commission and

18 the Financial Industry Regulatory Authority,

19 as well as the disqualification powers that

20 the Federal Reserve -- which is the federal

21 counterpart to DFS -- has for the banking

22 industry.

23 Also, the administrative process in

24 this bill is not materially different than

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1 processes that lawyers, doctors, real estate

2 agents, and other professionals must follow

3 if a charge is brought against them for

4 malfeasance. The proposal provides due

5 process to those charged by DFS in a

6 proceeding as well as the ability of the

7 individual to seek redress in court if DFS

8 determines that he or she should be

9 disqualified.

10 New York sits at the financial center

11 of the world. Giving DFS this ability

12 protects our markets from recidivist bad

13 actors and, equally importantly, communicates

14 the message that we have zero tolerance in

15 New York for those who seek to defraud

16 consumers and undermine the fundamental

17 ethics and fairness of our system.

18 Finally, I would like to update you on

19 the Health Republic liquidation. On May 11,

20 2016, pursuant to an order of the Supreme

21 Court in New York County, I was appointed

22 liquidator of Health Republic, which as you

23 know was a nonprofit corporation formed

24 pursuant to the Federal Co-op Program. As

222

1 liquidator of Health Republic, my first

2 priority has been to build a process for

3 resolving policy-related claims in a fair and

4 expeditious manner.

5 Prior to its liquidation, Health

6 Republic paid all claims up to November 2015,

7 and all members were transitioned to new

8 plans. Currently there are approximately

9 700,000 remaining policy-related claims that

10 require resolution. We believe the true

11 valid claims are much less than this figure.

12 To ensure that the claims are

13 accurately and properly determined in a

14 liquidation of this size and claim

15 complexity, we have engaged a court-approved

16 claims auditor to determine those claims that

17 are in compliance with plan designs,

18 benefits, exclusions and eligibility

19 requirements, and to remove what we believe

20 are many duplicative claims. We expect the

21 audit will be substantially complete by this

22 May, and we will be then issuing claims

23 determinations in the form of Explanations of

24 Benefits/Allowances beginning in the second

223

1 quarter of 2017 and through year-end.

2 Claimants will have the opportunity to appeal

3 the EOBs under the court-approved claims

4 adjudication procedures.

5 From the start, I have been committed

6 to an honest and transparent process for

7 Health Republic's liquidation. We publish on

8 our website relevant events and court orders,

9 as well as financial information. I have

10 directed an audit of the companyís financial

11 statements for year-end, which will be

12 completed shortly. The unaudited

13 September 30, 2016, financial statement

14 contains an estimate of about $212 million in

15 policy-related claims, which amount is not a

16 determination of the actual amount of claims.

17 As I mentioned, there is a claims audit

18 underway that will determine the actual

19 amount of claims.

20 That said, it is fair to say Health

21 Republic's liabilities exceed its current

22 assets. Presently we are assessing the

23 merits of Health Republic's claims against

24 the federal government, including

224

1 approximately $432 million due under the Risk

2 Corridors Program and $51 million due under

3 the Federal Reinsurance Program, as well as

4 what we anticipate will be the federal

5 government's claims of offset for start-up

6 loans provided to Health Republic and amounts

7 allegedly owed for risk adjustment, which we

8 dispute.

9 As many other states with similar

10 co-op failures have argued, congressional

11 limits on funding these federal programs in

12 2014 caused significant solvency risk for the

13 co-ops. Court actions are underway by many

14 other states, and we are considering whether

15 to join those actions, while seeking to be as

16 efficient as possible in managing the

17 liquidation process and steadily decreasing

18 the expenses of the process. In addition, we

19 are assessing other potential third-party

20 claims, including against directors and

21 officers, and the availability of a D&O

22 policy.

23 Apart from potential action against

24 the federal government, we do not believe

225

1 that there will be significant additional

2 assets with which to pay claims. We will not

3 know the amount of the liabilities until the

4 end of this year at the earliest, and

5 payments to claimants cannot be made until

6 the dueling claims with the federal

7 government are resolved. We will continue to

8 provide updates throughout the year and will

9 remain committed to a fair, efficient and

10 transparent process.

11 During my confirmation hearings I

12 promised candor and transparency and spoke

13 about my belief in a fair process and a

14 deliberative approach. Throughout the year,

15 I have been consistent in my outreach to

16 stakeholders and in my interactions with both

17 industry and consumers, as well as the public

18 at large. I have employed my authority based

19 on substantive analysis and a deliberative

20 process.

21 I have also been responsive to

22 legislative inquiries, and my staff is ready

23 and willing to assist all of your

24 constituents. When you call or write, I

226

1 answer. Or, as today, I appear in person.

2 My team at DFS is working hard every

3 day to build on our successes and make New

4 York's financial services industries work

5 better for both industry and consumers, and

6 we are doing all of this effective work as

7 efficiently as possible and within our

8 budget.

9 Thank you. I look forward to your

10 questions.

11 CHAIRWOMAN YOUNG: Thank you,

12 Superintendent.

13 CHAIRMAN FARRELL: Thank you.

14 SUPERINTENDENT VULLO: Thank you.

15 CHAIRWOMAN YOUNG: That's great.

16 Our first speaker will be Senator

17 James Seward, who is chair of the Senate

18 Standing Committee on Insurance.

19 SUPERINTENDENT VULLO: Sure.

20 CHAIRWOMAN YOUNG: Senator?

21 SENATOR SEWARD: Thank you, Chair

22 Young.

23 SUPERINTENDENT VULLO: Good afternoon,

24 Senator.

227

1 SENATOR SEWARD: And to Superintendent

2 Vullo, welcome back to the Legislature. It

3 seems like yesterday you were before the

4 Senate for the confirmation process.

5 And I must say, I note today you've

6 brought along some very able staff members

7 with you. But please tell your children I

8 miss them, because they were right with you

9 through the whole confirmation process.

10 SUPERINTENDENT VULLO: They were,

11 thank you. But they didn't think it was

12 particularly interesting. But that's okay.

13 (Laughter.)

14 SENATOR SEWARD: You know, I could

15 tell by the look on their faces.

16 We appreciate the update on Health

17 Republic and that whole liquidation process,

18 as well as I know you recently responded to a

19 letter from Senator Hannon --

20 SUPERINTENDENT VULLO: You had sent me

21 a letter, I responded to it.

22 SENATOR SEWARD: -- and me, and we

23 appreciate that information and ongoing.

24 You know, obviously we in the

228

1 Legislature are very concerned about the

2 payment of the legitimate claims -- you know,

3 that providers provided service and then, you

4 know, were left unpaid. And we demonstrated

5 that in last year's budget by setting up that

6 Health Republic Insurance Fund. I mean, it's

7 dry; there's no money in it at this point.

8 But at some point, either through the

9 liquidation process or, you know, funding

10 this fund that was in last year's budget,

11 we'd like to see these claims paid.

12 My question is I understand that there

13 was a recent court decision which did hold

14 the federal government responsible --

15 SUPERINTENDENT VULLO: Yes.

16 SENATOR SEWARD: -- for payment, I

17 think it was over $200 million for a -- in

18 terms of the Oregon --

19 SUPERINTENDENT VULLO: Oregon and

20 Alaska, correct.

21 SENATOR SEWARD: Why haven't we moved

22 forward with some sort of action against the

23 federal government? Because as you point out

24 in your testimony, there's a considerable

229

1 amount of federal monies that did not come to

2 New York that obviously Health Republic was

3 counting on, and that would provide

4 substantial funding for the payment of the

5 claims that I've outlined. I mean, why

6 aren't we moving forward there?

7 SUPERINTENDENT VULLO: Well, Senator,

8 there have been a number of actions filed

9 across the country in different venues, and I

10 have been monitoring it and watching it very

11 closely. There is no statute of limitations,

12 which is the first question I asked, having

13 litigated for many, many years. And to

14 monitor those actions in order to make what I

15 believe would be the best and the most

16 efficient determination as to where to file

17 and how to do it.

18 In my mind right now, you know, we

19 have a very favorable decision that came out

20 of the federal Court of Claims on

21 February 9th, which you alluded to, which was

22 a determination of liability. Damages

23 haven't yet been decided. And that has

24 certainly prompted me to think now about -- I

230

1 have a draft complaint -- to think about

2 going into the federal Court of Claims.

3 The alternative has been the district

4 court, and I've been waiting to see, quite

5 honestly, what has happened. There was

6 another judge in the federal Court of Claims

7 that came out with a decision a few months

8 ago that denied the government's motion to

9 dismiss but didn't come up with a substantive

10 ruling. And so, you know, I've been watching

11 that. There's also very extensive litigation

12 costs that I've trying to avoid.

13 So for example, there's a case that is

14 a class action with a plaintiff's law firm

15 that's seeking a large contingency fee. I'm

16 not seeking to join to give a contingency

17 fee.

18 So I'm trying to do it in the most

19 efficient manner as possible. And we weren't

20 the first out there, because there were other

21 co-ops that filed first for other reasons,

22 and it just made the most sense to me to

23 watch what's going on. And we now have a

24 very favorable decision. But again, there's

231

1 no statute of limitations, so I'm being very

2 protective of the expenses as well as the

3 strategy of where might be the best approach

4 to get the most effective result.

5 So I'm very pleased with that

6 decision. It doesn't have an actual judgment

7 attached. The other thing about the federal

8 Court of Claims is that the federal Court of

9 Claims can get a judgment issued against the

10 government, which the district court can't.

11 And so that's where we've been really doing

12 the analysis.

13 I hope that helped.

14 SENATOR SEWARD: Well, thank you for

15 that explanation. It strikes me that it's

16 not a question of if, it's when. When

17 appropriate, and timing.

18 SUPERINTENDENT VULLO: That is

19 correct, certainly at this stage. You

20 know --

21 SENATOR SEWARD: Depending on

22 developments.

23 SUPERINTENDENT VULLO: -- the issues

24 are a matter of first impression in many

232

1 respects. And if I would have jumped the gun

2 and filed the lawsuit and gone through

3 litigation expenses of a lawsuit only to have

4 an unfavorable result, I don't think that

5 would have been the best use of limited

6 resources. And that's why I chose this

7 approach. And I've been sitting on a

8 complaint that's ready to go for that reason.

9 SENATOR SEWARD: Thank you.

10 Certainly a theme throughout the

11 Governor's proposal -- and I'm sure others

12 will address this as well -- is, you know,

13 the pharmacy costs. And as we know in the

14 health insurance area that, you know, this

15 reflects -- you know, it's a driver in terms

16 of health insurance premiums. And certainly

17 no one can argue with an effort to try to

18 control those costs of prescription drugs.

19 When it comes specifically to the PBM

20 proposal, when I think of the PBMs and the

21 health insurers, you know, there's that

22 contractual agreement between the two.

23 They're both what I would describe as pretty

24 sophisticated entities. And, you know, they

233

1 reach an agreement and there's every

2 incentive, it would seem to me, on the part

3 of the PBM to deliver pharmacy cost savings

4 to the health insurer as an effort to hold

5 down costs.

6 You know, I know through the prior

7 approval process that the department receives

8 all kinds of detailed financial information

9 from the health insurers as you go through

10 your rate-setting process. When it comes to

11 the drug cost, can you describe what type of

12 information you receive and how that relates

13 to the setting of premiums? And don't you

14 have at that time, the department, have the

15 opportunity to assess the performance of

16 their contractual agreement with a PBM at

17 that time? Rather than getting in the

18 middle, having the department get in the

19 middle of a contract between two pretty

20 sophisticated entities. I'm not sure they

21 need the consumer protection that the

22 department may -- is talking about providing

23 here.

24 SUPERINTENDENT VULLO: Okay. So,

234

1 Senator, the PBMs have a connection to pretty

2 much every aspect of the delivery of

3 prescription drugs to the consumer. They do

4 have contractual arrangements with some

5 health insurers. They do have arrangements

6 with employers. They have relationships with

7 the manufacturers. They have contracts with

8 the individual pharmacies. And the large

9 ones have their own mail-order pharmacies and

10 the like.

11 So we think that the issue of who

12 PBMs are acting for is one that's very, very

13 open to question. Because they are getting

14 the spread pricing between the manufacturers

15 to the individual pharmacies. Yes, they are

16 getting certain servicing fees from, for

17 example, health insurance companies. But

18 what about all the profit that they're

19 getting in the mail-order pharmacies, which

20 is not in any way something that we have the

21 insight into?

22 So there are some very serious

23 concerns about what we do see and the

24 information we do have from the prior

235

1 approval process, as you mentioned, which is

2 25 percent of the increased costs of premiums

3 are prescription drug costs. And at the same

4 time, the major PBMs, their profits have

5 doubled.

6 So there's something there. We don't

7 know exactly what it is. But we have good

8 reason to believe that there might be some

9 very significant cost savings and, at a

10 minimum, to identify where does the PBM have

11 the obligation to. It's not necessarily the

12 consumer here, because again, they have their

13 own pharmacies, mail-order pharmacies. The

14 individual pharmacies are not getting the

15 full benefit, they're getting what is forced

16 on them in terms of the amount that they get

17 for their services, and then the spread

18 pricing that the PBM gets.

19 So our proposal we think is actually

20 quite measured. Some other states have tried

21 this in different ways, where they have gone

22 right at let's impose this requirement, that

23 requirement. Instead, we have said have them

24 register with us, have them provide us with

236

1 certain necessary information so we can

2 understand and have the data as to what the

3 prices are versus, frankly, what the

4 obligations are, what the return to the

5 consumer is, and why the costs are so high in

6 the commercial insurance premiums.

7 And then after that, we would have

8 very comprehensive regulations to identify

9 what we think needs to be fixed in the PBM

10 market and the licensing regime.

11 So I think our approach is very

12 measured to really try to get at the crux of

13 the problem. We don't have the information

14 that we need to really manage this problem.

15 SENATOR SEWARD: I guess as a quick

16 follow-up, following that logic, if DFS

17 regulates these entities, why shouldn't DFS

18 then regulate, you know, auto repair shops or

19 hospitals -- you know, other entities that

20 the health insurers have relationships with?

21 SUPERINTENDENT VULLO: Well, the

22 prescription cost drug costs go to the heart

23 of what we're dealing with every day in terms

24 of premiums. I mean, I hear all the time the

237

1 costs of premiums, of healthcare costs. This

2 is the largest. It's more than inpatient

3 hospitalization as a cost contributor to

4 premiums. So it is directly connected to

5 what DFS does regulate. And as I said, 18

6 other states, mainly through their insurance

7 departments, have done things to try to

8 regulate PBMs in different ways.

9 Our proposal is different. Our

10 proposal I think is more measured. But I

11 think this goes directly to a real problem

12 that impacts the regulatory that we have, the

13 regulatory authority that we have and our

14 ability to actually address what is such a

15 driver that I can't do anything with right

16 now.

17 SENATOR SEWARD: Okay, just one

18 additional question and we'll turn it over to

19 others.

20 I know through your confirmation

21 process we had quite a discussion and I think

22 we both share the belief that it's very

23 important to balance the needs of both the

24 consumers of insurance in our state and our

238

1 financial services industry -- you know,

2 health insurers and the other insurers around

3 the state. You know, when you know, take a

4 look at all of the financial services

5 industry as a whole, they employ thousands

6 and thousands of New Yorkers and have a

7 tremendous impact on our economy in a very

8 positive way.

9 When I look at the Governor's

10 proposal -- and I'd like your thoughts on

11 this -- do you have any concerns about how

12 this would impact the mission of DFS which

13 also, in addition to being the regulator, is

14 to also work to enhance and cultivate growth

15 in our financial services industry in the

16 state? When we created DFS back in 2011, we

17 put that very plainly in your mission

18 statement as one of your goals. And many of

19 the proposals that I see in the Governor's

20 proposed budget are items that were rejected

21 by the Legislature at the time we established

22 DFS back in 2011.

23 But do you have any concerns about,

24 you know, kind of a dampening effect on those

239

1 hardworking men and women in the financial

2 services industry, including our health

3 insurers? Is there a dampening effect when

4 there are proposals to increase fines by

5 10 times and have -- you know, increasing the

6 powers of DFS in terms of managing certain

7 insurers and -- you know, and then you

8 mentioned the bad actors, so-called bad

9 actors provisions, with a minimum of -- I

10 would say a minimum of due process included

11 there.

12 Do you have any concerns that that

13 could have a dampening effect on the

14 financial services industry of our state?

15 SUPERINTENDENT VULLO: Senator, if I

16 had those concerns I wouldn't have proposed

17 those bills. So no, I don't.

18 And I don't think that any of the

19 proposals that are relevant to DFS in the

20 Governor's budget should impact any of the,

21 you know, employment of good men and women in

22 this state. The ones that you mentioned -- I

23 mean, I spoke about the bad actors bill. I

24 mean, that is something that regulators

240

1 across the country have the authority to do

2 under administrative processes.

3 We saw, in the financial crisis of

4 2008, the problem with, you know, individuals

5 not being held accountable. This is a very,

6 very small segment of people that we're

7 dealing with. And it is, I think, essential

8 to be able to have the power -- and it is an

9 administrative process, but it has the

10 ability for due process in court -- to be

11 able to, when we identify, we have -- you

12 know, as the regulator we have great insight

13 into companies. And again, it's a very small

14 proportion of the overall industry, just like

15 everything. I would never say -- this is a

16 good, vibrant industry, but you can have bad

17 actors in any industry. And actually to

18 promote the growth of it and to maintain its

19 stability, you need to make sure that we have

20 zero tolerance for people who are not

21 actually following the rules and engaging in

22 ethical conduct. And that, I think, is the

23 essence of that proposal.

24 On the fines, we have a proposal that

241

1 actually ties it to what the damages might

2 be. Currently, if someone files a willingly

3 false statement of material fact with the

4 agency, and that's one violation, I can fine

5 them a thousand dollars. That, to me, is not

6 deterrence to prevent people from filing a

7 materially false statement with a government

8 agency.

9 So -- and again, this is not directed

10 at any large group, but it is essential to

11 the deterrent purpose and to maintain the

12 stability of the markets, in my view.

13 SENATOR SEWARD: Well, thank you for

14 sharing your thoughts.

15 SUPERINTENDENT VULLO: Sure.

16 SENATOR SEWARD: I -- my view is

17 you -- and we'll have to think this through,

18 obviously, through the process. But it

19 strikes me that through the licensing, you

20 know, producer licensing and the other --

21 there are plenty of hammers that you have at

22 the department. No one wants, shall we say,

23 bad actors out there defrauding the public.

24 SUPERINTENDENT VULLO: Exactly.

242

1 SENATOR SEWARD: And you have, it

2 seems to me, plenty of powers to go after

3 those bad actors.

4 And so we'll be evaluating this

5 proposal.

6 SUPERINTENDENT VULLO: And I'd be

7 happy to share more thoughts, you know,

8 separately if you want.

9 Thank you.

10 SENATOR SEWARD: Thank you.

11 Thank you, Senator Young.

12 CHAIRWOMAN YOUNG: Thank you.

13 Chairman?

14 CHAIRMAN FARRELL: Thank you.

15 Assemblyman Cahill, chairman of the

16 Insurance Committee.

17 ASSEMBLYMAN CAHILL: Thank you,

18 Mr. Chairman.

19 Thank you, Superintendent, for being

20 here today.

21 I'm glad we had a chance to have a

22 little exchange before we got here so that

23 you were aware that we would probably go

24 beyond the issue of just the relationship of

243

1 the Department of Financial Services when it

2 comes to health insurance.

3 And I'd like to start by going back to

4 health insurance, and Health Republic in

5 particular, and the discussion that was had

6 with my friend Senator Seward. The question

7 was whether you are going to pursue a federal

8 legal action against the government for a

9 claim regarding monies due the State of

10 New York, and Health Republic in particular,

11 consistent with those actions that are

12 brought by other states.

13 Have you been in communication with

14 the Attorney General on how to proceed with

15 this suit? Because my recollection is you

16 wouldn't be bringing it just by yourself,

17 you'd be doing it with the Attorney General;

18 correct?

19 SUPERINTENDENT VULLO: No, that is not

20 correct. As liquidator, I'm actually not a

21 state agent, I am a private entity that is

22 the receiver of Health Republic. And that

23 action, just like in any other liquidation

24 proceeding, goes through the Liquidation

244

1 Bureau. So that's sort of separate from the

2 state agency, which is DFS. I actually wear

3 two hats in that regard. And the Liquidation

4 Bureau commences those actions.

5 When we go into court initially, when

6 it's DFS actually putting Health Republic

7 into liquidation, that is something that we

8 sometimes work with. But the Liquidation

9 Bureau handles those actions and actually has

10 private counsel many times doing that too.

11 It's a different fund, and it's a different

12 process.

13 ASSEMBLYMAN CAHILL: So you'd be going

14 in as liquidator, not as the superintendent?

15 SUPERINTENDENT VULLO: It's the only

16 role that I have for Health Republic, is to

17 go in as liquidator, that is correct.

18 ASSEMBLYMAN CAHILL: So the budget

19 proposal by the Governor -- not just in the

20 area of DFS but in many areas of the budget,

21 the Governor recommends significant changes

22 in the powers and authorities and

23 responsibilities of agencies, particularly

24 when it comes to things like the

245

1 investigative powers or prosecutorial

2 powers -- not to use the criminal

3 prosecutorial word, but the prosecutor to

4 execute even a civil action.

5 There has been some concern expressed

6 by the Attorney General regarding the reach,

7 particularly when it came to DFS. And the

8 changes would include more supervision, more

9 enforcement, expanding the ability to ban

10 operators. It would include the ability to

11 levy assessments and increase fines by a

12 thousand percent. In each instance, the

13 Attorney General has expressed a concern that

14 this is -- he didn't use the word usurping

15 the role of the Attorney General, but clearly

16 the memorandum that we received from the

17 Attorney General indicates that he believes

18 that this is an overreach. You responded and

19 you said no, it's not. Which is kind of what

20 I expected you would say.

21 These things were considered when the

22 Department of Financial Services was being

23 authorized in the first instance back around

24 2011, and rejected by the Legislature. What

246

1 has changed since 2011 other than who the

2 Attorney General is that would make it

3 reasonable for the Legislature to revisit the

4 powers, authorities, and duties of the

5 Department of Financial Services in this

6 regard?

7 SUPERINTENDENT VULLO: Thank you for

8 that question, Assemblyman.

9 So I did respond to the Attorney

10 General's letter last night. And I think

11 it's actually quite unfortunate that we have

12 this issue.

13 The proposals in the Governor's budget

14 don't take away in any way, shape or form any

15 of the power of Attorney General. They're

16 actually quite limited in what the proposals

17 are. And it was the same Attorney General in

18 2011, when DFS was created, as is the case

19 today. So that hasn't changed.

20 And the issue in 2011 was the Martin

21 Act, and we're not asking for the Martin Act.

22 What these provisions are are the --

23 so the fines, that's just increasing -- a

24 proposal to increase what the fines are that

247

1 currently exist in the Insurance Law that we

2 already enforce.

3 And as I set forth in my letter that I

4 sent last night, the Financial Services Law,

5 both in its introductory disposition as well

6 as in specific provisions, gives me the

7 enforcement authority over the banking and

8 insurance industries, just like the Banking

9 Department had before the merger and the

10 Insurance Department had before the merger.

11 I already have enforcement authority

12 that I utilize every day, just like any other

13 regulator does. I'm also a law enforcement

14 officer. The Attorney General is not a

15 regulator. I regulate the banking and

16 insurance industries, and if I see conduct in

17 the course of the regulation of that -- I

18 supervise, we do examinations every day of

19 our industries. And if something comes up in

20 that, we take action. Overwhelmingly, that

21 action is by agreement, by consent order. We

22 very rarely go to court.

23 The only thing that these

24 provisions are seeking to do on bad actors is

248

1 to make it clear that in my supervisory

2 regulatory role, I'm there with the company,

3 if I identify a problematic -- someone who

4 is, you know, engaged in malfeasance, I

5 should be able to remove that person through

6 the process that I have for other things.

7 So that wouldn't be something that the

8 Attorney General would ever do anyway,

9 because that information is not available to

10 him because it's in my regulatory authority

11 to do that. And in fact what we included in

12 the proposed bill is an explicit statement

13 that I can refer the matter to the

14 Attorney General, because there are

15 circumstances that we would want to do that.

16 So I actually -- I guess that's being

17 turned into something different. It was

18 including an explicit provision that I can

19 refer matters to the Attorney General that

20 somehow is making it suggest that I'm trying

21 to take away powers. It's just not the case.

22 ASSEMBLYMAN CAHILL: So -- but --

23 SUPERINTENDENT VULLO: And again, it's

24 unfortunate.

249

1 The student loan servicing is another

2 thing. That is a -- you know, we have a huge

3 debt crisis of students. There's 2.8 million

4 New Yorkers that have student debt, and the

5 average amount is over $32,000. We're trying

6 to regulate those servicers.

7 ASSEMBLYMAN CAHILL: Excuse me.

8 Before we use up the entire 10 minutes, isn't

9 DFS already required to cooperate with the

10 Attorney General? And why could not that

11 mandate that's already written into the

12 Financial Services Law to cooperate with the

13 Attorney General accomplish exactly what

14 you're suggesting needs to be done with

15 additional legislation?

16 And secondly, if you already have the

17 authority, why do you need to restate it here

18 in the language of the budget?

19 SUPERINTENDENT VULLO: The specific

20 authority that we're talking about is the

21 authority to ban bad actors.

22 ASSEMBLYMAN CAHILL: Okay, there's --

23 well, there's actually --

24 SUPERINTENDENT VULLO: That's the

250

1 specific authority. I have enforcement

2 authority --

3 ASSEMBLYMAN CAHILL: Excuse me.

4 There's several different sections that seek

5 to expand the authority, responsibility, and

6 reach of the Department of Financial

7 Services, not just the bad actors part.

8 There's several different, so ...

9 SUPERINTENDENT VULLO: There's a

10 provision that is also misunderstood on

11 unlicensed lenders. So I have requirements,

12 we have requirements in the existing Banking

13 Law that people must come to us and obtain a

14 license if they're going to be a lender, make

15 loans to New Yorkers.

16 There are people that refuse to come

17 to us, as they are legally required to do, to

18 get a license. What I'm asking for in that

19 provision is the ability to apply to people

20 who are flagrantly violating the law and not

21 coming for a license that I can go after them

22 in the same way I can go after somebody who

23 does comply with the law and get a license.

24 That's all that provision is.

251

1 And in that provision I say "and we

2 can refer the matter to the Attorney

3 General."

4 ASSEMBLYMAN CAHILL: We're going to

5 move on, because there's only a minute left

6 in the time that I have allotted.

7 SUPERINTENDENT VULLO: Okay.

8 ASSEMBLYMAN CAHILL: The concern that

9 has been existing and growing over the past

10 several years, and particularly last year, on

11 the -- in the area of long-term-care

12 insurance is that premiums have become

13 unaffordable, people who have invested in

14 these plans are not being able to rely upon

15 them the way that they thought they would,

16 the way that it was represented they would by

17 the State of New York, as a matter of fact.

18 What exactly is DFS doing to restore

19 the faith and trust of people who want to

20 invest in these plans, help them over this

21 circumstance, and correct this situation for

22 the future?

23 SUPERINTENDENT VULLO: Thank you,

24 Assemblyman. I share the concerns of all

252

1 New Yorkers who are experiencing increases in

2 long-term-care insurance premiums. This is

3 an unfortunate national problem caused by 15,

4 20 years ago the development of products that

5 were underpriced because of assumptions about

6 lapse rates, because of low interest rates

7 for a long period of time, and assumptions

8 about longevity and morbidity as well.

9 So the reality that we face -- and we

10 have a very thorough process at DFS. When an

11 insurer seeks premium increases for long-term

12 care, we evaluate their actuarial data, we

13 look at what the assumptions are, what the

14 benefits are, what the actuarial analysis is

15 as to what those liabilities would be

16 compared to the premiums that exist. And

17 unfortunately in a number of circumstances we

18 agree that certain increases are necessary.

19 We often reduce the amount that the

20 insurer is requesting, but we do it on an

21 actuarial basis. And what we have done is

22 two other things, is that we've offered the

23 consumer -- and this is not a perfect

24 solution, but it's honestly the best that we

253

1 could do -- is we offer them a choice. You

2 know, you could take the extra premium but we

3 require the insurance company to give them a

4 landing spot, such as a reduced inflation

5 rate, which ultimately could be a reduction

6 in benefit. But -- and to lay that out in

7 full consumer disclosure that they have that

8 choice.

9 What's interesting is that most

10 consumers do continue the coverage. They

11 don't lapse on it. But that's what we've

12 done.

13 The other thing that we've done when

14 we've approved rate increases is we've said

15 you can't come back to us for three years

16 with another rate increase.

17 My biggest concern is I don't want to

18 raise prices and then have an insurance

19 company come back and say, now I'm insolvent

20 and I have to be put in liquidation. That's

21 a real concern that I have, and so we

22 carefully address this.

23 It's a -- it's a -- it's a problem in

24 terms of developing products that will

254

1 provide what people believe that they are

2 contractually getting, and providing it in an

3 affordable way so that the insurance company

4 can actually pay out the claims based upon

5 the premiums that they're getting.

6 And I think that products such as --

7 you know, life insurance policy products that

8 have, you know, early benefits for long-term

9 care where you can actually get the benefit

10 if you -- you know, are good products. I'm

11 very open and I've talked to a number of

12 insurance companies, what other kinds of

13 products can we come -- because obviously

14 it's an impact on the Medicaid system when

15 people don't have, you know, the insurance

16 policy.

17 I have attended, you know, many

18 meetings with industry, working with the

19 Federal Insurance Office to try to -- it's

20 a -- it's a very difficult problem with not

21 very easy solutions, unfortunately.

22 ASSEMBLYMAN CAHILL: Thank you.

23 Mr. Chairman, I'll have to come back

24 after some of our colleagues have a chance to

255

1 talk.

2 Thank you, Superintendent.

3 SUPERINTENDENT VULLO: Sure.

4 CHAIRMAN FARRELL: Thank you.

5 CHAIRWOMAN YOUNG: Thank you.

6 Senator Hannon.

7 SENATOR HANNON: Madam Superintendent,

8 addressing Health Republic -- and you gave us

9 a pretty good explanation in a letter just

10 recently, and then more in your testimony.

11 You talk about, in your testimony,

12 approximately $432 million due under the Risk

13 Corridors Program. But there's actually

14 three parts of risk corridor. There's risk

15 corridor, there's risk adjustment, and then

16 there's reinsurance.

17 So what of the 432 would be risk

18 reduction? I mean, what -- because, as you

19 set forth in the letter, in 2014 Congress

20 appealed the risk reduction. And therefore I

21 wonder what of the risk adjustment is still

22 outstanding for Health Republic.

23 SUPERINTENDENT VULLO: Okay, there

24 are -- so there are -- it's the three Rs:

256

1 Risk corridor, risk adjustment, and

2 reinsurance. And the Risk Corridor Program

3 was specific to these nonprofit co-ops, which

4 were not nonprofits, so they required capital

5 in order to get rolling. And the Risk

6 Corridor Program was intended to actually

7 address the circumstance where in the early

8 phase of the development of the exchange,

9 that the companies couldn't really estimate

10 for sure what the population of the uninsured

11 becoming insured would be, and the Risk

12 Corridor Program was supposed to protect

13 against that with additional funding from the

14 federal government.

15 That's what Congress in 2014 -- they

16 reduced the funding from what it would have

17 been, a hundred percent, to under 20 percent.

18 And that created very large receivables for

19 all of the co-ops and certainly Health

20 Republic. The one that we knew of

21 immediately was I think about $130 million.

22 The $432 million amount that I

23 mentioned is what we have estimated as of

24 September 30. And big caveat, I've directed

257

1 an audit, we're going to look at it, we have

2 actually additional information. That's just

3 risk corridor.

4 The two other -- reinsurance was also

5 cut. That was about a $51 million amount.

6 Risk adjustment goes the other way. So risk

7 adjustment was the program -- and still

8 exists -- where insurance companies that have

9 healthier lives pay into the program to be

10 paid -- so that's insurance company to

11 insurance company, it's not federal monies.

12 And under risk adjustment, we believe

13 it's possible that the federal government

14 will claim an offset. We would argue

15 $400-something million, if say that number

16 turns out to be the accurate number, that we

17 are owed that we think that the federal

18 government may claim in offset for risk

19 adjustment, which we dispute, and potentially

20 the start-up loans. And our position is that

21 that set-off would not be appropriate.

22 So that's why this lawsuit issue, too,

23 is complicated, because it's not necessarily

24 just that one piece, it's is the government

258

1 going to claim these other things. And our

2 position is the federal government, under our

3 New York statute, is subordinate as a

4 creditor to policyholders. That

5 policyholders come first, it's an unsecured

6 loan, and we don't think that Health Republic

7 would have to pay it. That we can use -- but

8 do I think that somebody in the federal

9 government might disagree with that? Yes.

10 So we're evaluating it. It hasn't yet

11 been litigated and decided.

12 SENATOR HANNON: Well, thank you for

13 laying out why it's a complicated case.

14 That's huge.

15 In regard to ACA -- and I'm not so

16 sure I want an answer, but just the fact that

17 you're looking at it, especially your

18 department looking at the contingency in the

19 in the event the ACA is repealed, in part or

20 all. And the reason I don't want a full

21 answer is I don't think it's prudent. But I

22 hope you're doing that.

23 SUPERINTENDENT VULLO: We are actively

24 engaged and monitoring it very, very

259

1 carefully every day.

2 SENATOR HANNON: And one of the things

3 that we have, just an offset of all of

4 that -- and we did adopt as a statute, but we

5 still look to change it -- is changing the

6 size of the small group. We went to 100,

7 there's been a fair amount of I think valid

8 complaints, and that we ought to go back to

9 50, and at least consider that as a lot of

10 different changes are going around in the

11 next couple of years.

12 SUPERINTENDENT VULLO: Senator, I

13 think that there are so many various factors,

14 all of them should be considered when we see

15 what exactly happens in Washington. Because

16 none of these things can really be looked at

17 on its own.

18 Obviously, the funding that would come

19 from the federal government, the Medicaid

20 expansion, the Essential Health Plan -- there

21 are so many different factors, and then

22 figuring out what the commercial health

23 insurance program would be.

24 You know, on the small group market,

260

1 just like the large group market -- which is

2 not, you know, subject to prior approval --

3 you know, may actually have healthier lives.

4 So the argument on the small group market

5 expansion is that you get more healthier

6 lives the more people in the pool, or at

7 least it's spread out more. That's the

8 argument. Again, we'd have to look at each

9 individual piece depending upon what happens

10 at the federal level and what laws we have on

11 the books and might need modification to.

12 SENATOR HANNON: Almost on an

13 individual basis, as opposed to a company or

14 a broker basis, I've heard the complaints and

15 feel that it would be better to go to the

16 smaller group.

17 Let me just switch entirely to another

18 topic that you brought out, and that was in

19 regard to the powers of your agency or maybe

20 the powers of the Executive in regard to the

21 drugs.

22 Because I'm puzzled by -- we have,

23 obviously -- we run Medicaid, we regulate

24 Medicaid, we set the rules for Medicaid.

261

1 We've worked for the Drug Utilization Review

2 Board for Medicaid. What we don't do is deal

3 with the component parts of the policy, like

4 auto insurance or things like that.

5 But the Governor's proposal, as you

6 said in your testimony, requires drug

7 manufacturers and wholesalers to pay a

8 60 percent surcharge applied to all first

9 sales in New York and gross receipts

10 generated from drug costs on the commercial

11 insurance market that exceed the DURB state

12 pricing benchmark.

13 I just look at that as -- well, that

14 would be wonderful if we could wave a magic

15 wand and we reduce drug prices. However, I

16 just don't know where we would get the power

17 in order to do that. And the next part of it

18 would be, what would be the amount of money

19 you people would think we could recover?

20 Because it's going to be an extraordinary

21 type of academic/accountant/economic analysis

22 in order to determine excessive pricing. And

23 what's the benefit at the end? Because it's

24 not clear from our negotiations with the

262

1 Department of Budget what the benefit is to

2 this whole proposal for commercial insurance.

3 SUPERINTENDENT VULLO: So, Senator,

4 the DURB would be setting the benchmark state

5 price for the Medicaid program. And the

6 proposal also includes an expansion of DURB

7 to include economists and actuaries and

8 others on that review board -- which of

9 course, as you said, already exists to

10 address sort of pricing.

11 And there are only certain drugs --

12 not all drugs, there are only certain drugs

13 that would qualify for even that benchmark

14 pricing or then the 60 percent surcharge.

15 And they're the exorbitant-priced drugs where

16 you see the launch prices being way higher

17 than what development costs, research and

18 development costs would be, or the huge

19 spikes that we've seen, for example, with the

20 EpiPen and the like. So it's actually a

21 narrow category of drugs.

22 But the DURB would set those prices

23 for the Medicaid system. DFS would have a

24 representative on the DURB, but we wouldn't

263

1 do anything with respect to the setting of

2 those prices. The surcharge would be 60

3 percent for that excess above what the price

4 is that's set by the DURB for Medicaid

5 purposes. And if the pharmaceutical

6 manufacturer, for purposes of the commercial

7 market, was going to charge a price higher

8 than that, the Department of Tax and Finance

9 would have that 60 percent surcharge. And

10 the fund would come to me for purposes of

11 actually giving the benefit of that to the

12 insurance companies so that premiums can be

13 reduced or, the corollary in the Medicaid

14 program, based on the proportion of drugs.

15 So that's what the proposal would be.

16 So we wouldn't be involved in the setting of

17 the prices or anything. That's a pure

18 Medicaid function. We think that this is

19 appropriate and legal. And so I hope that

20 answers that, you know, in terms of what

21 DFS's role in that is.

22 SENATOR HANNON: I'm looking for a --

23 I'm looking for -- I'm looking for a number.

24 SUPERINTENDENT VULLO: So -- I'm

264

1 sorry. So the scoring, I think, for the

2 Medicaid program has -- I think it's

3 $55 million for the first year is the scoring

4 of that. And certainly the commercial

5 market, you know, is probably 10 million.

6 SENATOR HANNON: We have that scoring,

7 but we also have, in an answer from the

8 Division of Budget as to what's the

9 surcharge, and they said the $55 million

10 doesn't deal with the surcharge, hence that's

11 what --

12 SUPERINTENDENT VULLO: Correct. It's.

13 SENATOR HANNON: I have that in

14 writing, so hence I'm asking the question

15 what's the value of the surcharge.

16 SUPERINTENDENT VULLO: Yeah, I don't

17 have -- I don't have a number. I don't --

18 you know, I can certainly work with the

19 Division of the Budget on that if you'd like.

20 But I do know that it's been scored

21 for the Medicaid savings over a two-year

22 period. And certainly given the commercial

23 insurance market and the size of the

24 commercial insurance market that we regulate

265

1 at DFS, we certainly think that there are

2 sufficient savings to maintain affordability

3 of health insurance rates that could be --

4 that make this an appropriate Article VII

5 legislation.

6 SENATOR HANNON: The last point would

7 really be just a comment about the PBMs. One

8 of the rationales that was given to us in

9 discussions with Budget was "We want to find

10 out what the PBMs are all about and what they

11 do and how they do it." And in terms of

12 moving forward in discussion of what's going

13 on in this state with PBMs, we already find

14 out that all of Medicaid managed-care plans

15 have a PBM. We find out that the Civil

16 Service Department, which administers the

17 Empire Plan in this state, has a PBM and

18 acquired the PBM by a request for proposals

19 advice.

20 And then, after he finished testifying

21 on that question, Medicaid Director Helgerson

22 talked about getting a PBM for another

23 function, for the, quote, MAC function in

24 setting drug prices, so that the Department

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1 of Health directly contracted with a PBM for

2 advice.

3 I mean, the information is there.

4 That's one thing. It's why we're further

5 looking forward. And second, to the extent

6 we're starting to come up with regulating

7 these groups -- and I have no connection, no

8 love for them. We don't -- we don't --

9 they're not anything warm and fuzzy. But

10 what are we doing? If we contract with them,

11 use them, now we're going to regulate them

12 and try to squeeze them? And how are we

13 going to make the judgments for that?

14 Why don't we use the information we

15 have now in state government to figure out

16 where we're going? End of comment.

17 SUPERINTENDENT VULLO: Would you like

18 me to respond?

19 SENATOR HANNON: Sure.

20 SUPERINTENDENT VULLO: The -- you

21 know, there are three very large PBMs that

22 interact with the commercial market. And

23 certainly in the Medicaid system they have

24 contractual arrangements as well. There's

267

1 nothing wrong with the contractual

2 relationships with any, you know, commercial

3 or state entity with PBMs. But we know that

4 in the commercial health insurance market --

5 and we don't have the information with

6 respect to the contractual arrangements in

7 the commercial health insurance market. We

8 know that the drivers of that are very, very

9 different than the drivers of contractual

10 arrangements with a state Medicaid or

11 state-federal Medicaid market.

12 And that's where we have some real

13 concerns and why this proposal to license --

14 first register and then license the PBMs we

15 think will help maintain the affordability,

16 because of the multiple relationships that

17 the PBMs have in the delivery of prescription

18 drugs relevant to the commercial health

19 insurance market -- the relationships between

20 the individual pharmacies, the rebates from

21 the manufacturers, the spread pricing from

22 the manufacturers. Everything that I'm

23 talking about is about the commercial health

24 insurance market, where we don't have the

268

1 information about the contractual

2 arrangements, the pricing and who -- most

3 importantly, who's getting the benefit of

4 whatever administrative -- you know, large

5 contractual arrangements are supposed to make

6 things more efficient. Who's getting the

7 benefit of the arguably reduced costs? And

8 that's really why we want to regulate them in

9 the commercial market. Which has different

10 incentives from the governmental --

11 SENATOR HANNON: A comment and my

12 observation. As you're talking, I'm thinking

13 you regulate these insurers, you look at

14 their rate requests. In order to look at

15 their rate requests, you're looking at the

16 elements of their rates. You have an MLR

17 that they have to adhere to. I would think

18 that you have already the information needed

19 to do this.

20 SUPERINTENDENT VULLO: We don't,

21 Senator. We don't.

22 The insurance companies' relationship

23 with some of the PBMs, the contract is like a

24 servicing fee, you know, for sort of managing

269

1 the delivery process. We don't have the

2 mail-order pharmacy information that the PBM

3 has that's supplying them. We don't have the

4 price or the cost structure of that. We

5 don't have the information with respect to

6 the manufacturer rebates that the PBM may get

7 and how they're passed along. Are they truly

8 passed along to the insurance companies? We

9 don't have the relationship or the

10 contractual information or the pricing

11 information of the PBM contracts with the

12 individual pharmacies, because that's

13 divorced from the contract that the insurance

14 company has with the PBM for a management fee

15 or a servicing fee.

16 So there's a lot about PBMs that we do

17 not have that type of information. And to my

18 knowledge, nobody in the state does. And

19 that's why, again, other states have sought

20 to do it as well.

21 SENATOR HANNON: Well, if we contract

22 with these folks -- the Civil Service

23 Department does it for the Empire Plan, think

24 of how many covered lives there are in the

270

1 Empire Plan -- we ought to have that. They

2 were derelict in doing their contracting.

3 I just can't imagine that -- because I

4 have -- I don't -- see, my problem is when

5 we're launching a whole new regulatory

6 scheme, I'm wondering -- we ought to be doing

7 it correctly. And second, I'm not so sure we

8 do regulatory schemes that well. So witness

9 the rest of your requests.

10 So anyway, that's a dialogue we'll

11 continue at some point.

12 SUPERINTENDENT VULLO: Okay, thank

13 you.

14 SENATOR HANNON: But thank you very

15 much for really solid thinking in your

16 answers.

17 CHAIRWOMAN YOUNG: Thank you.

18 CHAIRMAN FARRELL: Richard Gottfried,

19 chair, Health Department -- Health Committee.

20 ASSEMBLYMAN GOTTFRIED: Yeah, you

21 wouldn't want me chairing the Health

22 Department.

23 (Laughter.)

24 ASSEMBLYMAN GOTTFRIED: I have many

271

1 fine qualities. Running anything is probably

2 not one of them.

3 (Laughter.)

4 ASSEMBLYMAN GOTTFRIED: So I have a

5 question about something you said. I can

6 certainly understand that a PBM would treat

7 Aetna, for example, just -- and not to single

8 them out -- which is a huge customer, that

9 they would treat them a little better than

10 they would treat a Medicaid managed-care plan

11 that may have 100,000 or 200,000 covered

12 lives. That's part of my concern.

13 But you referred -- you used the

14 expression that the drivers are different on

15 the commercial side than on the government

16 insurance side. What did you mean by that?

17 SUPERINTENDENT VULLO: The for-profit

18 motive of the commercial insurance industry.

19 And the for-profit motive of the PBMs. And

20 the contractual -- you know, the -- when

21 you're addressing the -- as Senator Hannon's

22 question was asking about, well, we have some

23 information in the Medicaid system with PBMs,

24 but we don't have in that all of the pieces

272

1 of the commercial health insurance market,

2 which are also different players in that

3 market than would be in just the contractual

4 discussions between, say, Medicaid and the

5 PBMs. Right? So the commercial market has

6 many different players, mostly for-profit

7 institutions, as are the PBMs.

8 ASSEMBLYMAN GOTTFRIED: But doesn't

9 the for-profit insurance company -- that

10 wants to send as much money to its

11 stockholders as possible -- have the same

12 desire for a lower price as the little

13 not-for-profit Medicaid managed-care plan?

14 SUPERINTENDENT VULLO: Well, I think

15 that -- you know, and this gets sort of --

16 gets complicated and involves, you know,

17 thinking about who has the sort of

18 contractual power in various negotiations.

19 You know, so if I were to ask a commercial

20 health insurer when they submit to me their

21 premium request to increase premiums and they

22 say, you know, we're asking for X percent

23 increase and you say, well, you know, that's

24 too much, and they say, well, prescription

273

1 drug costs are so high, and I can't do

2 anything about that because I don't have -- I

3 don't have the power over -- I need to

4 provide these drugs, I don't have the power

5 over that.

6 And you have the PBMs that are

7 actually negotiating some of those and

8 providing the delivery of the pharmaceuticals

9 either within their own captured companies

10 that are mail-order pharmacies -- which is

11 kind of interesting where that profit motive

12 is, in which direction does that profit

13 motive go.

14 ASSEMBLYMAN GOTTFRIED: Sure.

15 SUPERINTENDENT VULLO: Same thing with

16 the profit motive towards contracting with

17 the individual pharmacies and the

18 manufacturers. So where is the PBM in terms

19 of helping with the reduction of the cost to

20 the consumer?

21 And that's why we think PBMs really

22 are something that requires much greater

23 transparency at a minimum.

24 ASSEMBLYMAN GOTTFRIED: Okay. Thank

274

1 you.

2 CHAIRMAN FARRELL: Thank you.

3 Senator?

4 CHAIRWOMAN YOUNG: Senator Golden.

5 Oh, I'm sorry, Senator Krueger first.

6 SENATOR KRUEGER: Hi. Thank you so

7 much for your testimony today.

8 So something that I have raised with

9 your office quite a bit over the last several

10 years are the concerns I get from my

11 constituents and also from doctors and

12 hospitals, that we sign everybody up in our

13 exchange in the options, and then there are

14 not enough doctors to meet the demands of the

15 number of people who have signed into the

16 insurance companies. The doctors suddenly

17 discover they're off the exchange by certain

18 companies but were never told; others,

19 they're on, but were never told. When you go

20 to look things up for yourself about who are

21 the providers and you then use the navigators

22 to decide who you're going to sign up with --

23 and then once it's all done, you discover,

24 nope, they're really not there, nope, really

275

1 can't use those hospitals.

2 I even have a situation -- my district

3 has a hospital a few people have heard of,

4 Memorial Sloan-Kettering. It's fairly famous

5 for cancer care. There is not one insurance

6 company on the exchange that will use

7 Memorial Sloan-Kettering, even though we have

8 talked to Memorial, they will take the same

9 rate those companies are paying the other

10 hospitals.

11 I don't understand what we're not

12 doing right to ensure that once people get

13 into these insurance vehicles that I'm very

14 glad we have set up in New York State and

15 hope, as Kemp said, we don't see the collapse

16 of ACA and have to deal with all the things

17 that that might mean. How do we make sure

18 these insurance providers have robust

19 networks, aren't doing bait-and-switches?

20 And I really just don't understand how major

21 hospital institutions offering to accept the

22 same rates from these companies are shut out.

23 SUPERINTENDENT VULLO: So, Senator,

24 this is unfortunately one of those questions

276

1 that I have to say that in large part I don't

2 have the authority to do much about because I

3 can't demand that an insurance company

4 include certain doctors in the network.

5 The law does provide for the

6 Department of Health, in consultation with

7 DFS, to look at network adequacy and ensure

8 that the network is adequate. And I think

9 all of your points are very, very relevant to

10 the need for ongoing oversight over network

11 adequacy. But the individual contracting

12 relationships between the insurance companies

13 and providers is something that I don't have

14 any authority to demand that you include

15 certain -- but we can say your network is not

16 adequate.

17 The other piece of this, of course, is

18 the out-of-network coverage requirements.

19 And of course the Legislature and the

20 Governor did a lot in 2014 for out-of-network

21 coverage to ensure that there wouldn't be

22 surprise billing and the like. But we still

23 have in various places in the state, and

24 particularly downstate, more reduced

277

1 out-of-network coverage.

2 And certainly we just had a working

3 group that did a report on that, and I think

4 certainly we can think about more reforms in

5 all of these areas.

6 SENATOR KRUEGER: So I'll play devil's

7 advocate.

8 SUPERINTENDENT VULLO: Sure.

9 SENATOR KRUEGER: So much of today's

10 testimony back and forth with colleagues is

11 about does the state have the power to tell

12 drug companies what their prices can be, does

13 the state or should the state have the power

14 to tell the pharmacy benefit managers to show

15 us their books and prove to us that they're

16 transferring the monies the right way.

17 There's nothing that we can -- oh,

18 should you have the right to have more

19 criminal authority over certain kinds of

20 cases. What would you need to be given the

21 authority to hold these companies accountable

22 for the fundamental thing they're supposed to

23 be providing? You're signing up for

24 insurance to get healthcare; shouldn't they

278

1 have an obligation to ensure you actually get

2 what you're signing up for?

3 SUPERINTENDENT VULLO: Well,

4 certainly, if they have contracted -- when

5 they contract with the policyholders, whether

6 they be the employer or the individual on the

7 exchange, and they promise certain coverage

8 and they don't provide that coverage, we come

9 in and we make sure they provide the

10 coverage.

11 The question as to whether or not

12 there's a particular provider for that

13 coverage -- so long as they have what's

14 called an adequate network, the insured

15 doesn't necessarily, under current law, have

16 the right to a specific provider for the

17 coverage that the insurance plan provides.

18 But we certainly enforce the laws that

19 say that you promised certain coverage, you

20 must have that coverage with the copays or

21 whatever. But it's the particular decisions

22 as to what providers are in networks. And of

23 course individual providers, many of them

24 decide not to take insurance at all. And

279

1 so that's just something that we don't have.

2 I want to address your thing on the

3 criminal penalties. I do not have and am not

4 seeking criminal prosecution authority. So

5 that's something also in answer to

6 Assemblyman Cahill's question that is a

7 misunderstanding. I have criminal

8 investigatory authority, and if there's

9 something that we learn about that's of a

10 criminal nature, we refer it to district

11 attorneys or to the Attorney General, as the

12 case may be. So I am not seeking any

13 criminal prosecutorial authority in any of

14 these proposals, so that's an unfortunate

15 misunderstanding.

16 SENATOR KRUEGER: So let's go back to

17 the subexample for me. You sign up, you

18 discover that doctors you believed were in

19 the network are not, even though they were on

20 the website. You go in search of a doctor --

21 even though it might not be the same one you

22 had in the past -- and there is nobody who

23 can see you in any reasonable time frame.

24 What are the standards you can hold them to?

280

1 SUPERINTENDENT VULLO: Well, so then

2 that, if there is a circumstance where a

3 consumer was promised something and there's a

4 plan where there's treatment that is covered

5 but no provider in the consumer's geographic

6 vicinity to do it, then yes, and in most

7 cases the out-of-network coverage would allow

8 that consumer to get the out-of-network

9 coverage and not necessarily have to pay the

10 additional differential.

11 So there are certainly things in

12 individual cases. We get consumer complaints

13 all the time, and many of these types of

14 complaints we actually resolve. Some of it

15 is, you know, unfortunate misunderstanding,

16 but not for any fault on anyone. It's very

17 complicated to understand, and I get it, what

18 the policy provides.

19 So I would say, you know, we answer

20 these complaints all the time, we manage

21 those complaints, we contact and we make sure

22 that the consumer gets coverage. So any of

23 your constituents, send them our way and

24 we'll try to address individual ones as well.

281

1 SENATOR KRUEGER: We do, but we

2 continue -- it's almost -- I'd say it's

3 almost ubiquitous. And I don't know whether

4 it's something unique to Manhattan -- because

5 ironically, Manhattan has more doctors and

6 more hospital beds than statistically I think

7 anywhere else in the state, and yet when I

8 talk to other Manhattan electeds, it also

9 seems to be one of the biggest problem areas.

10 I don't know if you measure by

11 geography, because I would have actually

12 assumed it might have been a bigger problem

13 for Cathy Young in her district because rural

14 New York State has so many fewer options

15 than, say, the big City of New York. But

16 it's a constant struggle.

17 SUPERINTENDENT VULLO: And I can tell

18 you from personal experience, in Manhattan it

19 is.

20 So I don't think -- you know, I think

21 the number of providers who don't take health

22 insurance, the limitations of out-of-network

23 coverage in the individual market downstate

24 is certainly a greater issue than it is in

282

1 other places of the state, that is true.

2 SENATOR KRUEGER: I'm out of time,

3 thank you very much.

4 SUPERINTENDENT VULLO: Thanks.

5 CHAIRWOMAN YOUNG: Thank you.

6 Assembly?

7 CHAIRMAN FARRELL: Mr. Raia.

8 ASSEMBLYMAN RAIA: Thank you,

9 Chairman. And thank you, Commissioner. It's

10 good to see we both survived the snowstorm

11 last Thursday.

12 Under the Governor's Executive

13 proposal, DFS may request information

14 including but not limited to PBM services

15 disclosing any type of financial incentive or

16 relationship.

17 Isn't that information already

18 available out there for the most part, all

19 the contractual relationships between the PBM

20 and the insurance companies? Because I've

21 heard some folks say that it is out there.

22 SUPERINTENDENT VULLO: Well, again, I

23 mean there may be the contracts that an

24 insurance company has with the PBM. But

283

1 that's not going to give us what the PBM's

2 various other pieces of that puzzle are, and

3 the PBM's pricing and the PBM's costs and the

4 PBM's profit. We wouldn't have that. We

5 would have the contract that the insurance

6 company has. And we certainly see how

7 pharmaceutical prices impact premiums. But

8 again, we don't have the PBM side and the

9 PBM's relationships with the pharmacies, the

10 manufacturers, you know, their mail-order

11 pharmacies and the like. So that piece we

12 don't have.

13 ASSEMBLYMAN RAIA: I guess I'm a

14 little concerned about the "not limited to"

15 part. What type of things could you --

16 because I didn't even finish reading the

17 whole thing. It covers a whole lot of

18 aspects between the relationships between the

19 PBM and the insurance companies. And what

20 other types of things could you foresee that

21 the department might want?

22 SUPERINTENDENT VULLO: Well, it would

23 be anything relevant to the cost structure

24 that leads to prescription drug costs not

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1 being affordable to the consumer. I mean, in

2 many ways this is not different than, you

3 know, what DFS's authority is over its

4 regulated entities, which is oversight over,

5 you know, safety and soundness and financial

6 condition. And so we get, you know, this

7 type of information from all of our regulated

8 entities all the time, so it would be really

9 no different than that.

10 ASSEMBLYMAN RAIA: Okay. My next

11 question, I don't know if it should have been

12 directed to the health commissioner, but

13 maybe you can help me out. With respect to

14 the first sales of high-priced drugs, who is

15 reporting the first purchase? Is it the

16 wholesaler or is it the pharmacy? How do we

17 come up with the first -- you know, the first

18 sale in the state?

19 SUPERINTENDENT VULLO: Right. The

20 idea is to ensure that, you know, we are

21 getting the jurisdictional connection to

22 New York State and the first sale in New York

23 State, whatever that first sale might be.

24 ASSEMBLYMAN RAIA: Right. But is

285

1 it -- because most of the drugs go through a

2 wholesaler. So is it going to be the

3 wholesaler?

4 SUPERINTENDENT VULLO: Then it would

5 be the wholesaler, if that's the first sale

6 into New York State.

7 ASSEMBLYMAN RAIA: Now, neither the

8 wholesaler or the pharmacy really have any

9 control over the price of the drug, right,

10 that's going to come from the manufacturer?

11 SUPERINTENDENT VULLO: I'd assume so.

12 ASSEMBLYMAN RAIA: Okay. And then how

13 do we gather that information with respect to

14 Internet sales?

15 SUPERINTENDENT VULLO: So that

16 would -- that's an interesting question. I

17 mean, you know, Internet is always an issue

18 of when does it come into the state. The

19 idea, you know, would be to track it and that

20 way -- again, this is not something that I

21 would do at DFS, this is something that would

22 be done through Tax & Finance, which

23 addresses these issues all the time in terms

24 of ensuring that sales taxes and other types

286

1 of taxes are collected appropriately.

2 ASSEMBLYMAN RAIA: All right. Then

3 I'd be a little bit worried about interstate

4 commerce issues on that as well.

5 Thank you, Commissioner.

6 SUPERINTENDENT VULLO: Thank you.

7 CHAIRMAN FARRELL: Thank you.

8 Senator?

9 SENATOR KRUEGER: Senator Marty

10 Golden.

11 SENATOR GOLDEN: Thank you, Madam

12 Chair.

13 Thank you, Superintendent, for being

14 here today and for your testimony. I'll be

15 brief. Do you like that, Kemp?

16 The -- I too have some reservations as

17 to the regulation of PBMs. But I'm going to

18 tell you right now, you definitely raise the

19 bar when it comes to talking about the

20 mail-order pharmacies that are controlled by

21 these PBMs and what it's cost us here in the

22 State of New York. Since most of these

23 pharmacies are outside the State of New York,

24 we don't know what are the monies coming in

287

1 and the profits and how they're being taken,

2 and we should. And we should be able -- this

3 is at a disadvantage to our local pharmacies

4 and to the employment here in the City and

5 State of New York.

6 So you've definitely raised, I

7 believe, a serious question here and

8 hopefully we can assist you and work with you

9 and hopefully get some answers.

10 I'm going to go to another issue which

11 I don't think has been brought up, and that's

12 the cybersecurity. We understand that you've

13 taken over some areas of cybersecurity that

14 we believe is very important. I don't think

15 you go forward enough, I think, on the local

16 end of it -- the actual grand larceny, the

17 actual skimmer devices, those types of areas.

18 But we need to give you the tools that you

19 need, that you require to be able to make

20 this great state safe and the leader in

21 cybersecurity.

22 And your thoughts on what you may need

23 and your thoughts on where you think the

24 state can go in adding to that legislation.

288

1 SUPERINTENDENT VULLO: So thank you,

2 Senator Golden.

3 Actually, that's a timely question.

4 We actually this morning issued our final

5 cybersecurity regulation and the DFS role in

6 this, in our cybersecurity regulation, is a

7 regulation that requires the financial

8 services industry -- so the banks and the

9 insurance companies -- to establish

10 cybersecurity programs and policies so that

11 they are protecting New Yorkers in their

12 identities and their personal data and of

13 course from terrorist activities. You know,

14 for example, banks which actually not only

15 have data, but they also have cash, that a

16 cyberattack could get into that and could

17 have some very serious consequences to our

18 financial industry in New York. So that's

19 DFS's role.

20 The Governor has certain proposals for

21 cybersecurity that are different, they're

22 sort of homeland security type of proposals.

23 That's not my agency. I am focused on how do

24 we protect our financial industry and

289

1 requiring them, by regulation, to develop

2 risk-based programs to protect the

3 institutions.

4 And what I would say on that is I wish

5 the federal government would do something on

6 this too, but that's -- you know, because

7 we're first to actually do something about

8 the financial services industry and requiring

9 them to have programs.

10 Now, many of them have it already.

11 But I think it's really important to require

12 it and for us to be ever-vigilant, because an

13 attack on the financial services industry

14 is -- it's what keeps me up at night. And

15 certainly kept me up at night before the

16 Affordable Care Act problems came into play

17 this year. But that's what really keeps me

18 up.

19 SENATOR GOLDEN: Thank you very much,

20 Superintendent.

21 SUPERINTENDENT VULLO: Sure.

22 CHAIRMAN FARRELL: Thank you.

23 Assemblyman Cahill.

24 ASSEMBLYMAN CAHILL: Thank you,

290

1 Mr. Chairman.

2 Superintendent, I'd like to just go

3 back to the issues of the powers, duties and

4 responsibilities again. Let's start with the

5 penalty question, a little more specific.

6 How much did DFS raise with penalties in

7 2016?

8 SUPERINTENDENT VULLO: So I don't have

9 the exact number, but it's over a billion

10 dollars.

11 ASSEMBLYMAN CAHILL: Over how much?

12 SUPERINTENDENT VULLO: A billion

13 dollars.

14 ASSEMBLYMAN CAHILL: With a B,

15 billion?

16 SUPERINTENDENT VULLO: B.

17 ASSEMBLYMAN CAHILL: Okay. And where

18 does that money go? Does that go straight

19 into the General Fund, or does it go

20 elsewhere?

21 SUPERINTENDENT VULLO: Every penny

22 that I collect goes into the General Fund,

23 the operating fund.

24 ASSEMBLYMAN CAHILL: And with the

291

1 thousand-percent-increase proposal, how was

2 that percentage arrived at, that multiplying

3 fines by 10 times?

4 SUPERINTENDENT VULLO: The proposal on

5 fines is specific to the Insurance Law. And

6 it's moving 1,000 to 10,000 as the

7 per-violation fine, or treble damages or the

8 sort of economic gain, the greater of those

9 things. So I don't know how the -- I don't

10 think we're using that percentage thing.

11 That's what the specific proposal is with

12 respect to the Insurance Law.

13 ASSEMBLYMAN CAHILL: Why wasn't it

14 decided to be 5,000 or 20,000? Why was it

15 10,000?

16 SUPERINTENDENT VULLO: You know, it

17 used to be 500 and it went to a thousand. So

18 we don't think a thousand is sufficient to

19 deter for the types of things that we see at

20 times. And so we thought 10,000, but we

21 thought that the more important one was to

22 have it be the greater of that amount or

23 economic gain, which would work in both

24 directions. So if you have a very large

292

1 benefit that a company has gotten from

2 malfeasance, then you could look at the

3 economic gain. If it's a very small company

4 and that fine, you know, would be too much,

5 then you can sort of take that into account

6 as well.

7 As we do. I can tell you that when we

8 impose any fines, we look at the size of the

9 company and the ability to obviously pay the

10 fine, but also the deterrent purpose, which

11 is really what it's about. Separate and

12 apart from we often get money back to

13 consumers, you know, in restitution where

14 warranted. That's the analysis.

15 ASSEMBLYMAN CAHILL: And what do you

16 believe to be the fiscal of multiplying the

17 fines times 10 and introducing these other

18 conditions that would allow for significantly

19 higher fines? Would it be 10 billion, to go

20 from a billion?

21 SUPERINTENDENT VULLO: Yeah, I

22 don't -- it's hard for me to -- I mean, it

23 certainly would have a fiscal impact to it

24 because it would increase fines that go in.

293

1 But again, we don't necessarily take that

2 fine, we negotiate those fines. Almost

3 everything that we do is through consent

4 order, and we negotiate them. But it

5 certainly would have a fiscal impact to, you

6 know, add to that. And again, these fines

7 are specific to -- the ones that I'm talking

8 about -- the insurance industry.

9 Quite honestly, the $1 billion is more

10 on the banking side, the $1 billion that I

11 mentioned is more on the banking side. And

12 I'm not -- what I'm seeking on the banking

13 side is the lending authority. Because

14 that's just a -- frankly, a gap. It's a gap

15 that needs to be filled. And there's also a

16 gap on that side for the small dollar loans

17 that I believe very strongly needs to be

18 filled to prevent predatory lending.

19 ASSEMBLYMAN CAHILL: I would be very

20 interested in hearing what people believe to

21 be the fiscal impact of raising the fines

22 time 10.

23 I recognize that, you know, just like

24 when we raise the cigarette taxes, some

294

1 people give up cigarettes, but -- and maybe

2 some people will give up violating the rules

3 if you --

4 SUPERINTENDENT VULLO: That's the

5 hope.

6 ASSEMBLYMAN CAHILL: That's the hope.

7 But certainly it would result in a

8 significant change in revenue. And this is

9 real money. I mean, when you're talking with

10 B's, it's real money.

11 SUPERINTENDENT VULLO: Well, certainly

12 if you're talking about economic gain, it's

13 both real money and it's deterrence. And,

14 you know, I just want to be clear here, I'm

15 not proposing these things because I'm

16 looking to sort of just collect more money.

17 I am proposing it because I believe that it's

18 really essential that there be an appropriate

19 punishment that fits the malfeasance so that

20 the conduct doesn't occur.

21 Obviously, there will people that

22 violate the law, that's just the reality of

23 society. But I really want to stop the

24 behavior. And it's really difficult when you

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1 have somebody filing a false statement and

2 you can only say a thousand dollars.

3 And it's in those cases where I would

4 say, well, what's the economic gain from that

5 false statement? It's not even the $10,000,

6 right, it's the economic gain that I would

7 look for in those circumstances, because

8 those are circumstances where someone is

9 doing that -- and again, it's a narrow

10 group -- doing that for personal profit, and

11 not being forthcoming and candid with the

12 regulator. And so that's really where I'm

13 focused on these.

14 But it obviously has a fiscal impact.

15 And of course in the insurance industry the

16 fiscal impact to the state of any

17 malfeasance, which is also relevant to the

18 bad actors bill, is that, you know, what if

19 there's another failure? We have a guarantee

20 fund. The rest of the industry pays for

21 that.

22 So there's lots of fiscal impacts that

23 we would like to prevent by legislation that

24 permits us to sort of address malfeasance in

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1 an appropriate way.

2 ASSEMBLYMAN CAHILL: You're in the

3 department that deals in probabilities and

4 likelihoods and risks and returns and so on

5 and so forth.

6 SUPERINTENDENT VULLO: All the time.

7 ASSEMBLYMAN CAHILL: So I would hope

8 that you will be able to provide us with a

9 snapshot of what would be anticipated to be

10 raised in the budget. Since it goes to the

11 General Fund and we're facing a $2.5 billion

12 deficit, it's raising a billion dollars right

13 now, being increased times 10 -- if it

14 doubles or triples, it could erase the

15 deficit. It would be good to know that.

16 That's important budgetary information.

17 SUPERINTENDENT VULLO: Appreciate it.

18 ASSEMBLYMAN CAHILL: In terms of

19 administrative supervision, you're seeking to

20 expand the powers for administrative

21 supervision. Can you -- you can do it now,

22 can you not?

23 SUPERINTENDENT VULLO: No. And I'm

24 glad you asked that question, because it's

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1 quite important. Currently, for problematic

2 insurance companies, I have two powers. I

3 put them into liquidation, I can put them

4 into rehabilitation. The rehabilitation

5 route hasn't worked particularly well to

6 actually rehabilitate the company, as opposed

7 to it just being a transition into

8 liquidation. And both of those processes are

9 court processes.

10 The administrative supervision bill,

11 which is a National Association of Insurance

12 Commissioners, NAIC, model act that 31 states

13 have, that statute would give me the

14 authority to basically put an administrative

15 supervisor into the insurance company to

16 prevent something before it gets worse.

17 ASSEMBLYMAN CAHILL: So --

18 SUPERINTENDENT VULLO: Utilizing the

19 same standards that I could use for

20 liquidation and rehabilitation, but hopefully

21 to prevent something before it gets too far.

22 And I can say that the reason for

23 this, in my judgment, is there are

24 circumstances where bad management leads to a

298

1 company not being managed as well as it could

2 and could result in both a liquidation

3 proceeding and a hit to the guarantee fund.

4 And I think that's why this is a power that

5 the NAIC believes insurance commissioners

6 should have. There's a model act, and we can

7 do it.

8 You know, this has been something that

9 the department has wanted for a while. I've

10 pushed it forward, quite frankly, because I

11 think it's really important. Health Republic

12 is not irrelevant to this issue. Health

13 Republic cooperated, so they consented. If

14 Health Republic didn't cooperate and consent

15 and we had some, you know, blowup in a court

16 proceeding, we wouldn't have been able to

17 transition. It could have been worse.

18 ASSEMBLYMAN CAHILL: So I just want

19 to --

20 SUPERINTENDENT VULLO: So I think, you

21 know, there's -- but that's not the -- this

22 is a bill that, again, the NAIC has had a

23 model act.

24 ASSEMBLYMAN CAHILL: This is the same

299

1 as the NAIC act, it doesn't differ from the

2 model act except to make it

3 New York-specific? Or does it go beyond the

4 model act?

5 SUPERINTENDENT VULLO: It's modeled on

6 the model act. I don't want to say that

7 there's no specific change, but it's intended

8 to be modeled on -- for the administrative

9 supervision.

10 Where it's modeled on, in addition to

11 the NAIC, is Article 74 of our Insurance Law,

12 which has the standards for liquidation and

13 rehabilitation. Those same standards would

14 apply. So if somebody refuses to provide

15 information to us, refuses to testify under

16 oath, I can insert a monitor in there to

17 ensure that we get the information that we

18 need, for example. So, you know, I'm told,

19 Well, you have the authority to get all this

20 information. What if the company fails to

21 give me the information that I have the

22 authority to get? Right? So this helps me

23 to be able to impose a monitor to get that.

24 And again, it's for the malfeasance,

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1 the ones that management is not cooperative.

2 ASSEMBLYMAN CAHILL: Understood.

3 SUPERINTENDENT VULLO: That's not a

4 lot of not -- it's not a lot.

5 ASSEMBLYMAN CAHILL: So in each of

6 these instances, that and for bad actors as

7 well, these are authorities that you have but

8 you have to have some level of court

9 intervention before you can exercise that

10 authority, and the authority that you have

11 isn't as broad as you would like.

12 In addition, for the bad actors

13 piece -- and this will be my last question --

14 there is -- one of the circumstances under

15 which you can ban a bad actor is for an

16 unsafe or unsound practice.

17 SUPERINTENDENT VULLO: Right.

18 ASSEMBLYMAN CAHILL: Is that term

19 defined anywhere, unsafe or unsound

20 practices?

21 SUPERINTENDENT VULLO: Not in it. But

22 safety and soundness is what we do at DFS

23 every day. Right? So that's the test of

24 financial safety and soundness that we apply

301

1 in our supervision of the financial services

2 industries that we supervise. And so there

3 are a lot of unsafe and unsound business

4 practices that, you know, would fall under

5 that. So that's a --

6 ASSEMBLYMAN CAHILL: But the

7 definition would be up to you. There's

8 nothing in the statute, or you're not

9 proposing any specific definition or

10 parameters for what would be an unsafe or

11 unsound practice, is that a correct

12 understanding of what's being proposed?

13 SUPERINTENDENT VULLO: Well, under

14 that particular one. There's lots of other

15 provisions in terms of, you know, violation

16 of orders and all of the like that we're also

17 proposing this.

18 But again, what we would do in this

19 circumstance, if we determine that there was

20 an unsafe and unsound practice, we would

21 bring a charge against the company, we'd lay

22 out the facts and there would be a process

23 that they have due process. And if they

24 disagree, the individual that we say is

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1 banned, disqualified, they can go to court

2 and they can overturn it if they disagree

3 with us and a judge were to agree.

4 ASSEMBLYMAN CAHILL: Thank you.

5 SUPERINTENDENT VULLO: So it does have

6 due process and a court proceeding connected

7 to it.

8 ASSEMBLYMAN CAHILL: Thank you.

9 CHAIRMAN FARRELL: Thank you.

10 SENATOR KRUEGER: Thank you.

11 Senator Diane Savino.

12 SENATOR SAVINO: Thank you, Senator

13 Krueger.

14 Thank you, Superintendent. Nice to

15 see you again. I just want to ask you about

16 this issue of lending circles. I know the

17 Governor has some language in his budget that

18 would allow you to regulate lending circles

19 in New York State. And I'm just curious if

20 you could kind of tell us a little bit more

21 about what lending circles are, how many

22 there are in New York, any other states that

23 regulate them, and do we have any evidence to

24 suggest that there's some fraud in these

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1 lending circles. What is a lending circle?

2 SUPERINTENDENT VULLO: No. This is

3 actually -- this is actually a great

4 positive. A lending circle, these are

5 nonprofit organizations that provide

6 no-interest, no-fee loans to consumers to

7 help build credit.

8 So one of the biggest problems that we

9 have in certain underserved communities is

10 the inability of people to actually get a

11 loan because they don't have credit, or to

12 sort of have other types of financial

13 services because they don't have credit. So

14 these lending circles are nonprofit

15 organizations that are providing no-interest

16 and no-fee loans to consumers.

17 And all we are asking for in this bill

18 is to allow them to do this. And all they

19 have to do is register. It's not a big

20 regulatory thing. And what the bill requires

21 and mandates is -- to just ensure that this

22 is no-interest, no-fee, is they can't have a

23 profit motive in that. And it is purely to

24 actually assist in the building of credit.

304

1 California has this program, and there

2 are some nonprofits. And if we can pass this

3 bill, then it allows them to actually, you

4 know, do this. But it's regulation-light, if

5 that. It's not intended to do anything to

6 impact them, but to actually encourage that

7 type of activity. And frankly, if we can get

8 that information, we could help with some of

9 the underbanked and the credit issues that we

10 have. So that's why we're proposing it.

11 SENATOR SAVINO: Where do these

12 nonprofits get access to the capital? Where

13 do they get the money that they lend?

14 SUPERINTENDENT VULLO: Good

15 philanthropists.

16 SENATOR SAVINO: Really.

17 SUPERINTENDENT VULLO: Yup.

18 SENATOR SAVINO: And so they have this

19 model in California.

20 SUPERINTENDENT VULLO: Yes.

21 SENATOR SAVINO: Would this replace

22 like the lending that's done by like the

23 CDFIs, or would it supplement it? Would it

24 be personal lending? Would it be for

305

1 business lending? Or does it -- would it be

2 able to --

3 SUPERINTENDENT VULLO: Yeah, it's not

4 intended to supplement anything else, it's

5 just intended to bring these entities that

6 are doing -- and there's, you know, one major

7 one in particular in California -- to sort of

8 try to encourage that here in New York as

9 well, and others like it.

10 So it's a credit-building thing, it's

11 not intended -- I mean, the CDFIs, they're

12 all great too. But it's not intended -- I

13 mean, this is -- again, it's no-fee,

14 no-interest loans solely for the purpose of

15 credit building. And, you know, they're

16 nonprofits that have their financial backers,

17 basically.

18 SENATOR SAVINO: So you wouldn't be

19 regulating the product, you would just be

20 regulating the lender, right? Because --

21 SUPERINTENDENT VULLO: Yes. Yes. And

22 making sure that it really is nonprofit and

23 there's not a -- that it's working for its

24 intended purpose.

306

1 And I think it would help sort of grow

2 credit for New Yorkers in a way that could

3 help us in other things that we're trying to

4 do, quite frankly, to sort of expand

5 financial services to all communities in the

6 state. Because it's -- it is a -- it's a

7 concern of ours.

8 SENATOR SAVINO: And again, do we know

9 of any lending circles that are operating in

10 New York, and how many there are?

11 SUPERINTENDENT VULLO: No. We know

12 that there's one operating in California.

13 SENATOR SAVINO: Interesting. Thank

14 you.

15 SUPERINTENDENT VULLO: Sure.

16 SENATOR KRUEGER: Thank you.

17 CHAIRMAN FARRELL: Thank you.

18 SENATOR KRUEGER: And that's our last

19 Senate question, so thank you very much for

20 coming today to testify.

21 SUPERINTENDENT VULLO: Thank you.

22 Thank you for having me.

23 SENATOR KRUEGER: And our next

24 testifier is Dennis Rosen, the inspector

307

1 general, New York State Office of Medicaid

2 Inspector General.

3 And for those keeping track, this is

4 our 11:30 a.m. testifier. And so for those

5 of you who are scheduled for 7:30 tonight,

6 you know, go get the sleeping bags, get

7 comfortable, and come back with your

8 overnight material.

9 CHAIRMAN FARRELL: We've been joined

10 by Assemblywoman Yuh-Line Niou.

11 SENATOR KRUEGER: Good afternoon,

12 Dennis.

13 INSPECTOR GENERAL ROSEN: Good

14 afternoon.

15 SENATOR KRUEGER: We have your

16 testimony.

17 If everybody would take their

18 conversations outside. Thank you.

19 INSPECTOR GENERAL ROSEN: Okay.

20 Should I start?

21 I appreciate this opportunity to share

22 with you the activities and initiatives of

23 the Office of the Medicaid Inspector General.

24 OMIGís efforts to protect the

308

1 integrity of the New York Medicaid program

2 continue to serve as a national model. Our

3 investigative work, partnerships with state

4 and federal law enforcement agencies,

5 innovative auditing techniques, and OMIGís

6 extensive compliance initiatives and provider

7 education efforts are projected to result in

8 more than $2.3 billion in cash recoveries and

9 cost savings for 2016.

10 A core function of OMIG is identifying

11 and recovering Medicaid overpayments.

12 Preliminary numbers indicate 1,724 audits

13 were initiated and 1,707 were finalized in

14 2016. Cash recoveries for 2016 -- including

15 audits, third-party liability, and

16 investigations -- total more than

17 $418 million, representing an increase of

18 more than $79 million over our 2015 cash

19 recovery.

20 In addition to pursuing cash

21 recoveries, OMIG's cost-avoidance efforts

22 prevent, up front, improper Medicaid costs

23 and billings. Proactively eliminating

24 improper payments in the first place is far

309

1 more cost-effective than later identifying

2 and chasing after dollars that have been paid

3 out inappropriately. According to

4 preliminary data, OMIG's cost-avoidance

5 initiatives for 2016 saved nearly

6 $1.9 billion.

7 OMIG works both independently and in

8 collaboration with partners at all levels,

9 including local, state, and federal law

10 enforcement, provider organizations, and

11 managed care plan special investigation

12 units. OMIG also plays a critical role in

13 collaborative law enforcement actions that

14 result in the takedown of major fraud

15 schemes, enrollment fraud arrests, and drug

16 diversion cases.

17 For example, OMIG's pharmacists and

18 investigators worked with the Attorney

19 General's Medicaid Fraud Control Unit to

20 obtain the conviction and sentencing in 2016

21 of Long Island-based pharmacists Ira Gross

22 and Glenn Schabel for their roles in a

23 massive black-market HIV prescription drug

24 ring. The scheme involved the sale of more

310

1 than $274 million worth of diverted,

2 medically worthless medications from

3 wholesalers in multiple states to Medicaid

4 recipients in New York State. The pair were

5 sentenced to lengthy prison terms and ordered

6 to pay back more than $30 million to the

7 Medicaid program.

8 As part of the fight against opioid

9 abuse, OMIG has been very involved in drug

10 diversion cases. For example, in 2016 OMIG

11 investigators provided critical evidence that

12 helped lead to the conviction of Brooklyn

13 pharmacist Kian Gohari for illegally

14 distributing more than 25,000 medically

15 unnecessary oxycodone pills between 2012 and

16 2015. Gohari's accomplices bought

17 prescriptions for oxycodone and other

18 high-price medications from patients, filled

19 them, and then sold them on the black market

20 throughout the New York City metropolitan

21 area. He was convicted in federal court in

22 November of conspiracy to distribute

23 narcotics and conspiracy to commit healthcare

24 fraud, and he faces up to 30 years in prison.

311

1 Prescription opioid abuse is a

2 recognized national healthcare crisis, and

3 New York is not immune, as you all know. A

4 key tool in OMIGís arsenal to address this

5 epidemic is its Recipient Restriction

6 Program, which prevents duplicate

7 prescription fills through doctor or pharmacy

8 shopping by restricting patients suspected of

9 overuse or abuse to a single designated

10 provider, pharmacy, or both.

11 Preliminary data for 2016 show that

12 1,961 of the 2,331 Medicaid recipients whose

13 files were reviewed were recommended by us

14 for restriction to the appropriate managed

15 care plan, county agency, or New York State

16 of Health. As a result, more than

17 $58 million in cost savings to the Medicaid

18 program was realized.

19 Also, OMIG is a member of the Federal

20 Healthcare Fraud Prevention Partnership.

21 Working with the Centers for Medicare and

22 Medicaid Services, the Department of Justice,

23 the FBI, and national insurance companies,

24 OMIG helped identify practices and strategies

312

1 to address opioid abuse in general, and

2 opioid prescription abuse in particular. On

3 January 19th of this year, the Partnership

4 released a white paper entitled Healthcare

5 Payer Strategies to Reduce the Harms of

6 Opioids, which arose out of this

7 collaboration. It describes best practices

8 to address the dangers of opioids while

9 ensuring access to necessary therapies and

10 reducing fraud, waste, and abuse.

11 Overall, OMIG's 2016 preliminary

12 enforcement activity statistics are robust.

13 OMIG opened 3,493 investigations, completed

14 4,418, and referred 1,079 cases to law

15 enforcement and other agencies. Referrals

16 include 155 to the New York State Attorney

17 General's Medicaid Fraud Control Unit and 924

18 to the New York City Human Resources

19 Administration and other federal, state and

20 local agencies. In addition, preliminary

21 2016 data show OMIG issued 929 Medicaid

22 exclusions.

23 OMIGís Managed Care Investigation Unit

24 meets regularly with, and receives complaints

313

1 from, managed care organizations relating to

2 network provider fraud, and works with their

3 special investigation units to develop

4 comprehensive investigative plans.

5 Preliminary data for 2016 show that referrals

6 from MCOs to OMIG totaled 518, up from

7 344 referrals in 2015.

8 OMIG has also worked closely with the

9 State Department of Health in developing

10 amendments to the Managed Care Model Contract

11 to enhance program integrity. These

12 amendments include the creation of a

13 clearance process to ensure that OMIG and

14 MCOs are not duplicating audit and

15 investigative efforts; the submission by each

16 MCO of a quarterly report showing all

17 Medicaid overpayments it has identified or

18 recovered; a provision enabling OMIG to

19 obtain MCO assistance in recovering

20 overpayments made to network providers

21 identified by the state; and provision

22 allowing an MCO to share in recoveries made

23 as a result of a referral to OMIG. The model

24 contract is currently under federal review.

314

1 Lastly, OMIG continues to emphasize

2 provider outreach and education, particularly

3 in the area of compliance. Through a

4 comprehensive array of webinars, guidance

5 materials, self-assessment tools, protocols,

6 and presentations, OMIG's oversight

7 activities and educational efforts increase

8 provider accountability, contribute to

9 improved quality of care, and save taxpayers

10 dollars.

11 In 2016, OMIG issued 15 compliance-

12 related guidance materials and conducted more

13 than a dozen educational presentations and

14 seminars. The compliance section of the OMIG

15 website is among the site's most active

16 areas, with close to 40,000 visits to

17 compliance webinars, over 30,000 visits to

18 compliance publications, and more than

19 40,000 visits to compliance resources and

20 FAQs. Many of our webinars are accredited

21 for legal, accounting, or compliance

22 continuing-education credits. In 2016, we

23 had 439 participants receive credits, up from

24 428 in the prior year.

315

1 With the transformational changes

2 occurring in the Medicaid program, OMIGís

3 commitment to protecting the integrity of the

4 program and ensuring a cost-effective,

5 sustainable healthcare delivery system

6 remains unwavering.

7 Thank you. I am certainly happy to

8 address any questions. I'd ask you to speak

9 up. If you remember last time, sitting down

10 here, I had a little problem.

11 SENATOR KRUEGER: Thank you very much.

12 INSPECTOR GENERAL ROSEN: Let's try

13 it. But if you could speak up, I'd

14 appreciate it.

15 SENATOR VALESKY: We have extra chairs

16 up here.

17 INSPECTOR GENERAL ROSEN: I will --

18 I'll be up there. In fact, I think that

19 gentleman over there was one of the hardest

20 for me to hear.

21 But if you have questions, I'm happy

22 to answer them either here or up there.

23 SENATOR HANNON: I have no questions.

24 Each time I had a question in my mind, you

316

1 answered it in the next paragraph of your

2 testimony. Thank you.

3 SENATOR KRUEGER: I just have one

4 question.

5 INSPECTOR GENERAL ROSEN: Yup.

6 SENATOR KRUEGER: So I believe it's

7 Erie County, it might have been a couple

8 other counties of the state -- maybe I'm

9 wrong on Erie County. One of them, at

10 least -- one of our counties has started a

11 lawsuit against some of the opioid drug

12 makers for their falsifying and -- basically

13 falsifying information and basically

14 marketing their drugs even when they knew

15 what was going wrong, and that they are

16 attempting to challenge -- that this violated

17 the law.

18 Is there any parallel role for you in

19 that kind of work?

20 INSPECTOR GENERAL ROSEN: We're aware

21 of that, and I've had discussions. But in

22 terms of a lawsuit of that nature, there is

23 no role for us.

24 I think the largest role we have that

317

1 is often not fully realized by the public or

2 even you folks is that we work extensively,

3 as I touched on in the statement, with other

4 law enforcement agencies on drug diversion

5 cases, opioid abuse, and other related kinds

6 of cases.

7 And what will happen is you will read

8 about a major case brought by the Department

9 of Justice or, say, MFCU, or even a local

10 district attorney, particularly in New York

11 City -- and you very often might not see our

12 name in it, because they will issue a press

13 release talking about the case where they

14 will thank us for having worked the case up

15 and then coming to them to prosecute it.

16 But when they release the information

17 to the public, it's somebody's just been

18 indicted, that's the focus of the story, and

19 that's about the DOJ or the AG's office or

20 the district attorney. But you can bet that

21 in most cases where there's a major drug

22 prosecution, we've been involved.

23 And we have put a lot of work into it.

24 Usually we'll testify in the grand jury, but

318

1 it will be released by the prosecutor, the

2 story. And again, their press releases are

3 usually very grateful to us. They might even

4 have a quote from me, but it's not that

5 likely to make it into the press.

6 But again, our major efforts are

7 focused on the undercover stings. I

8 mentioned our Recipient Restriction

9 Program -- the folks that do that do a

10 wonderful job, too, of tracking prescribing

11 patterns by doctors or prescription filling

12 patterns by recipients. So we'll see, for

13 example, patterns where you've got doctors in

14 Queens who have a clientele that consists of

15 people 300 miles upstate that are coming down

16 there for prescriptions for dangerous

17 medications. And our folks will spot that,

18 they will see those patterns, they will look

19 at recipients' patterns, for example, in the

20 examples that I gave with respect to putting

21 people on restricted programs.

22 They do a wonderful job of tracking

23 what medications Dennis Rosen is taking, how

24 many of them he's taking in a month, and is

319

1 it off the charts. And we really have been

2 emphasizing that, because when I first came

3 to the agency, frankly, I got a phone call

4 that my secretary put through from a guy who

5 turned out to be the father of a

6 20-something-year-old son who had just had

7 his third emergency admission because of an

8 opioid abuse. And again, this kid was going

9 to two or three pharmacies, getting the same

10 prescription filled.

11 So we have really put an emphasis on

12 that, and that's where our focus has been in

13 these kinds of situations.

14 SENATOR KRUEGER: Thank you very much.

15 Assembly?

16 CHAIRMAN FARRELL: Thank you.

17 Assemblyman Gottfried.

18 ASSEMBLYMAN GOTTFRIED: Yeah, I

19 actually don't have a question, I just wanted

20 to say you and I have met several times and

21 talked through a lot of interesting issues.

22 And I just wanted to say, as far as I can

23 tell, you're doing a very good job. You

24 bring in money, you're helping to reshape

320

1 behavior, and nobody has complained to me

2 about anything you've ever done.

3 INSPECTOR GENERAL ROSEN: You haven't

4 even gotten a call from my wife?

5 (Laughter.)

6 ASSEMBLYMAN GOTTFRIED: So keep it up.

7 INSPECTOR GENERAL ROSEN: Now, I do

8 want to say that, you know, we're in a tough

9 role because we -- I want to do good law

10 enforcement, and I want to bring in money

11 that's been improperly collected so that we

12 can put it back into the program for good

13 providers and for recipients to get services

14 that they need. And particularly with the

15 global cap, that's very important.

16 But what is also important to me as a

17 regulator -- and I've always exercised this

18 kind of policy in other places that I've

19 been -- is that we do the reach-out to the

20 people that we're regulating and the people

21 that sometimes we might even do an audit of,

22 or go after in some fashion. And that's why,

23 frankly, I think our numbers are very good

24 with respect to enforcement and what we are

321

1 bringing in.

2 But on a personal level, the numbers

3 that also appeal to me as much are the ones

4 at the end that some people may think are a

5 little superfluous, but about the kinds of

6 outreaches that we do. And that's a

7 reflection of conversations that people such

8 as myself and other folks at the agency have

9 with the industry, where we try to be

10 engaged.

11 And I think if you are going to

12 regulate people, you had better know what

13 their issues are and you also better indicate

14 to them what your perspective is, and what

15 you think is important and what you don't

16 think is important, and what their safe

17 harbors are.

18 So again, I appreciate the

19 conversations with you, because you help to

20 clue me into what's going out there in the

21 world. Because the last thing I want to do

22 is regulate a significant industry like this

23 that impacts the public so importantly and

24 not have a good sense of what's going on out

322

1 there.

2 So again, I appreciate -- with a

3 number of you -- the conversations that we've

4 had.

5 CHAIRWOMAN YOUNG: Thank you.

6 CHAIRMAN FARRELL: Thank you.

7 CHAIRWOMAN YOUNG: Inspector General,

8 I had a few questions.

9 INSPECTOR GENERAL ROSEN: Yes. And

10 again, please speak up so I don't have to sit

11 next to you.

12 CHAIRWOMAN YOUNG: Okay. Yeah, I

13 remember that from last year, that you were

14 actually -- you actually joined us on the

15 dais.

16 So can you hear me now?

17 INSPECTOR GENERAL ROSEN: I'm sorry?

18 (Laughter.)

19 CHAIRWOMAN YOUNG: You've had so many

20 titles, it's hard to keep track of. But I'm

21 glad you're "Inspector General" now.

22 INSPECTOR GENERAL ROSEN: See, I'm

23 starting to get an echo with you now. So

24 if -- can I come up? Or can you repeat it a

323

1 little slower?

2 CHAIRWOMAN YOUNG: Okay. Well, I'll

3 ask -- how about this. I'll ask my first

4 question. Is OMIG currently on track to meet

5 its audit recovery target for the current

6 fiscal year?

7 INSPECTOR GENERAL ROSEN: An audit

8 target for the fiscal year, did you say?

9 CHAIRWOMAN YOUNG: For the current --

10 so the current -- the recovery targets for

11 this year are $1.16 billion, correct?

12 INSPECTOR GENERAL ROSEN: Let me --

13 I've got to come up there. I'm just having

14 trouble hearing you.

15 I could hear fine in the audience.

16 I'll just -- I'll get your question and then

17 I'll sit down.

18 CHAIRWOMAN YOUNG: Okay, I guess we

19 can do --

20 INSPECTOR GENERAL ROSEN: I'll sit

21 down.

22 CHAIRWOMAN YOUNG: Okay. Well, I was

23 asking about the $1.16 billion target for the

24 recovery this year for OMIG. And are you on

324

1 track for that?

2 INSPECTOR GENERAL ROSEN: Yes, we are.

3 CHAIRWOMAN YOUNG: Okay. We need a

4 mic.

5 SENATOR KRUEGER: The answer was yes,

6 they are.

7 CHAIRWOMAN YOUNG: How about this.

8 Why don't we --

9 INSPECTOR GENERAL ROSEN: Yes.

10 CHAIRWOMAN YOUNG: Okay. Does that

11 work?

12 INSPECTOR GENERAL ROSEN: Yes.

13 CHAIRWOMAN YOUNG: Okay, great.

14 So you are on track for the recoveries

15 this year. What new auditing strategies and

16 technological innovations is OMIG now using

17 or considering adopting in the future to

18 improve Medicaid fraud recoveries?

19 INSPECTOR GENERAL ROSEN: We are

20 constantly upgrading our software. We're

21 constantly interfacing with ITS, we have

22 private vendors that we deal with. And what

23 we've done in terms of dealing with an

24 industry that's really, as you all know,

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1 incredibly transformational at this time is

2 we form project teams from all different

3 units, so you've got people representing

4 every aspect of the agency where they focus

5 on specific issues that have to do with

6 what's happening in healthcare today.

7 So, for example, you were talking

8 about PBMs earlier and some of those issues.

9 We have a pharmacy team. We have a managed

10 care team that looks at counter data, and how

11 it can be improved, and looks at -- is

12 starting to look at the data that network

13 providers -- that is, providers within a

14 managed care plan, at their data regarding

15 their expenses and what they should get paid

16 and comparing that to the MCO's data that's

17 paying them, in counter data. So we are

18 getting educated with respect to that.

19 We've got a project team that deals

20 just with data issues to make sure they are

21 always, as best we can, within physical

22 constraints on the cutting edge of the kind

23 of software that we need to do the kinds of

24 things that I was talking about earlier. And

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1 to keep those numbers up and hopefully to

2 keep those rising.

3 So those are examples of how we are

4 trying to stay current. And, I mean, I have

5 been in a number of positions with the state,

6 leadership positions, and I have never been

7 in a position such as this with as many

8 challenges, frankly, as we have because of

9 the incredibly transformational changes that

10 are going on within this industry. Just to

11 move from fee-for-service to managed care is

12 incredible in terms of all the implications

13 it has, not just for the delivery of care but

14 even the metrics by which we measure whether

15 or not the job is being done.

16 You know, we've attended countless

17 meetings on value-based payments, which is a

18 whole 180-degree difference from

19 fee-for-service, where you're paid for

20 service. Now you're going to be paid based

21 on, is Dennis Rosen better for having gone to

22 you for services? If he's not, you're at

23 risk of not doing very well.

24 So those are the kinds of things that

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1 we're trying to do.

2 CHAIRWOMAN YOUNG: That's one of the

3 things that you didn't hear me say earlier,

4 was I've called you many titles over the

5 years --

6 INSPECTOR GENERAL ROSEN: Yeah.

7 CHAIRWOMAN YOUNG: So now "Inspector

8 General."

9 But -- so it sounds to me like you're

10 more focused on recoveries from providers

11 than beneficiaries.

12 INSPECTOR GENERAL ROSEN: Generally,

13 we are. But again, we will do recipient

14 reviews, as I said, to see if, for example,

15 somebody's getting the same prescription

16 filled three times. Which, one, takes money

17 out of the system improperly and, two, is

18 very dangerous for the recipient.

19 But usually the strategies involve

20 things like them going to, say, the managed

21 care plan and saying okay, Rosen needs to be

22 put on a restrictive program where he's got

23 one doctor, one pharmacy, that sort of thing.

24 We have collaborated with numerous

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1 prosecutorial agencies -- for example, there

2 are a couple of prosecutions last year

3 through the Manhattan DA's office that we

4 were very involved in where there were folks

5 living in houses that were worth over

6 $1 million who were collecting Medicaid.

7 CHAIRWOMAN YOUNG: I saw those

8 stories.

9 INSPECTOR GENERAL ROSEN: And we did a

10 lot of the groundwork on that, put a package

11 together and went to the -- we went to the

12 Manhattan DA's office, where we worked

13 collaboratively, and there were indictments

14 as a result then.

15 CHAIRWOMAN YOUNG: Do you see any

16 regional variations or trends?

17 INSPECTOR GENERAL ROSEN: Most of the

18 major problems are throughout the state. For

19 example, opioid abuse. Frankly, I think one

20 reason why it's getting so much attention now

21 is that it transcends all areas and all

22 classes. It's just not a working-class or a

23 poor person's dilemma now.

24 When I started out as a young lawyer,

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1 I was with the Legal Aid Society of New York

2 City for 10 years, in different positions,

3 and I saw -- there was an opioid crisis then.

4 But you didn't hear that much about it

5 because it was mostly limited to poor people

6 who needed Legal Aid lawyers when they got in

7 trouble. Well, now it's not that way

8 anymore.

9 So most of the trends that we see,

10 frankly, tend to be statewide.

11 CHAIRWOMAN YOUNG: Thank you.

12 Has outreach to providers regarding

13 compliance resulted in higher response rates?

14 INSPECTOR GENERAL ROSEN: I think

15 that -- you know, people will say: How much

16 fraud is there out there? The GAO, for

17 example, recently said it's 10 percent; some

18 say higher.

19 But I do think that everything I look

20 at, and I've tried to -- I've been in this

21 for almost two years now, and I've tried to

22 get educated on what the trends have been

23 over the years -- and I think in many areas

24 there is better compliance now than there

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1 was, say, five or 10 years ago.

2 And I think that has a lot to do with

3 outreach efforts, with telling the

4 industry -- I think there are a lot of folks

5 out there who want to comply, but they don't

6 have the right checks and balances, they

7 don't have the right program-integrity

8 program that they've established.

9 We've got a Bureau of Compliance that

10 goes out and tells people how to put a

11 program together, they'll audit people's

12 programs -- not to recover money from them,

13 but to explain to them how they can improve

14 their program integrity to be more in

15 compliance with federal or state standards so

16 that they can avoid the money going out

17 improperly. I think --

18 CHAIRWOMAN YOUNG: So it's not always

19 a gotcha mentality.

20 INSPECTOR GENERAL ROSEN: Yeah. I

21 think -- I mean, I've been dealing with fraud

22 and waste in one facet or another my whole

23 professional life, as an attorney and in

24 other respects, and I think, in my view, the

331

1 majority of money that is improperly spent is

2 done so out of somebody just not knowing how

3 to do it right -- having the right checks and

4 balances in place, so there isn't the waste.

5 Obviously there's, you know, other

6 kinds of fraud too, and we're very involved

7 with that with the prosecutors that I've

8 mentioned. But a lot of the money that's

9 wasted is wasted because people don't put the

10 right checks and balances in place.

11 CHAIRWOMAN YOUNG: How do you --

12 INSPECTOR GENERAL ROSEN: And we do

13 help with that. And that's why, again, I'm

14 very pleased with the kinds of statistics

15 we've got in terms of people going to the

16 website and doing our webinars.

17 CHAIRWOMAN YOUNG: How do you work

18 with the Attorney General in compliance

19 issues?

20 INSPECTOR GENERAL ROSEN: We have a

21 very good relationship with the Attorney

22 General's office. We have a statutory

23 obligation that if we find a level of

24 wrongdoing that rises to fraud -- where, for

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1 example, you might -- it might be appropriate

2 to have a criminal prosecution -- we have a

3 statutory obligation to refer that case to

4 the Attorney General's office.

5 Sometimes they will look at a case and

6 give it back to us. But we work very closely

7 with them. And as I said earlier in my

8 comments, very often we'll work up a case,

9 we'll bring it to them, they'll bring an

10 indictment, and we'll continue as -- our

11 folks will be witnesses and provide sometimes

12 auditing data throughout the prosecution. So

13 we have regular meetings with them, and I

14 think it's a very good relationship.

15 CHAIRWOMAN YOUNG: Thank you for the

16 face to face. I appreciate it.

17 (Laughter.)

18 INSPECTOR GENERAL ROSEN: Yeah.

19 You're very welcome.

20 CHAIRWOMAN YOUNG: Okay. Anyone else?

21 No? Senator Rivera?

22 (Unintelligible.)

23 CHAIRWOMAN YOUNG: Okay. Well, thank

24 you. Thank you, Inspector General.

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1 INSPECTOR GENERAL ROSEN: Okay.

2 CHAIRWOMAN YOUNG: Okay, now what I

3 would ask -- I'll read off the next three

4 witnesses. So if you're the person coming

5 next, and that's Stephen Hanse, president and

6 CEO from -- oh, I'm sorry, first we have Bea

7 Grause, president of the Healthcare

8 Association of New York State, HANYS.

9 Following President Grause there will be

10 Steve Hanse and Mark Olsen. And then

11 following them, it will be Laura Haight and

12 Claudia Hammar.

13 So I'd like to welcome President

14 Grause. Thank you for being here, and thank

15 you for waiting so long.

16 MS. GRAUSE: Oh, sure.

17 Thank you, Senator Young. Thank you,

18 Chairman Farrell, and other distinguished

19 members of the joint hearing.

20 My name is Bea Grause. I am the CEO

21 of Healthcare Association of New York State.

22 We represent about 500 not-for-profit

23 hospitals, health systems, home health

24 agencies, nursing homes, and other providers.

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1 By way of background, I'm a registered nurse

2 by training and also an attorney, and I've

3 spent the last 25 years in the policy field

4 in Washington D.C., in Vermont, and now in

5 New York State.

6 On behalf of all of our members across

7 the state, we thank you for your time today

8 and thank you for your support on the many

9 healthcare issues that we have been

10 discussing today.

11 You have my written testimony, and I'm

12 just going to focus on three topics.

13 CHAIRWOMAN YOUNG: Thank you. You are

14 a great role model for the following

15 witnesses, so thank you.

16 MS. GRAUSE: Well, I am certainly

17 mindful of your long day and the 49 people

18 behind me.

19 So the first topic is ACA repeal, and

20 I think we've talked a lot about that today.

21 It is something we are laser-focused on, it

22 is something the U.S. House is considering

23 today, coming up with an ACA repeal bill that

24 would change Medicaid, so we are very

335

1 concerned about that.

2 Our top concern around that is loss of

3 coverage for the 2.8 million New Yorkers who

4 gained coverage under the Affordable Care

5 Act, the economic impact to the State of

6 New York to counties, and also to providers

7 across the spectrum. In addition, as we have

8 been talking about today, the impact on

9 healthcare reform and all the progress that

10 New York State has made prior to the

11 Affordable Care Act and during the tenure of

12 the Affordable Care Act is also at risk.

13 So turning to the budget, I'll just

14 briefly talk about the issues that we support

15 and the issues that we are watching. Again,

16 as was raised today, we are supportive of the

17 capital funding in the Governor's budget --

18 very important for that -- for healthcare

19 reform efforts. We also are supportive of

20 the concept of the regulatory modernization

21 effort, have been speaking with Deputy

22 Commissioner Shepherd about that, and also

23 the other various flexible funding --

24 including value-based payment for the next

336

1 budget year. Again, taken together, those

2 three initiatives are important for the

3 multiyear effort of improving our healthcare

4 system.

5 In addition, we urge you to consider

6 additional funding for financially distressed

7 hospitals. There are 27 on the watch list

8 for the Department of Health currently.

9 We're concerned -- and those hospitals are in

10 rural and urban areas all across the state.

11 We are concerned that that number will go up,

12 and again urge you to pay particular

13 attention to financially distressed

14 hospitals.

15 And then, in addition, we support a

16 number of other initiatives, but particularly

17 the Doctors Across New York. You can't

18 provide healthcare without healthcare

19 workers, and recruiting and retaining

20 healthcare physicians and other healthcare

21 workers is critically important.

22 Turning as our third topic to issues

23 that we are watching, again as has been

24 discussed today, we do not support the budget

337

1 superpowers that have been discussed earlier.

2 We also don't -- Senator Young, as you

3 raised, we have questions and do not support

4 the potentially preventable emergency room

5 visits for all the issues that you raised.

6 In addition to that, it may

7 disproportionately hurt areas where there is

8 a significant number of Medicaid recipients,

9 particularly in areas where there's not the

10 primary care infrastructure in that

11 community.

12 And then lastly, there are various

13 other cuts I won't mention -- but again,

14 that's in our written testimony -- that we

15 are watching and will continue to work with

16 you as you work through the details of the

17 budget.

18 With that, I'm happy to take your

19 questions and look forward to talking with

20 all of you in the weeks to come.

21 SENATOR KRUEGER: Senator Savino, did

22 you have a question?

23 CHAIRMAN FARRELL: Questions?

24 CHAIRWOMAN YOUNG: No? Okay.

338

1 CHAIRMAN FARRELL: Thank you.

2 CHAIRWOMAN YOUNG: Well, thank you

3 very much.

4 MS. GRAUSE: You're welcome.

5 CHAIRWOMAN YOUNG: We appreciate you

6 being here and everything that you do.

7 MS. GRAUSE: Thank you.

8 CHAIRWOMAN YOUNG: And we'll take your

9 suggestions under serious review and

10 consideration.

11 Our next speakers are from the

12 New York State Health Facilities Association,

13 and that's Stephen Hanse, president and CEO,

14 and Mark Olsen, administrator for the

15 Kingsway Community.

16 And following them, as I said, is

17 New York State Association of Health Care

18 Providers, and after that the Home Care

19 Association of New York State.

20 So welcome, gentlemen.

21 MR. HANSE: Thank you very much. Good

22 afternoon, Chairwoman Young, Chairman

23 Farrell, members of the committee.

24 Again, I will follow the lead and

339

1 pretty much cut to the chase and get to --

2 since you have our testimony, get to our

3 critical issues that we are facing in the

4 2017-2018 Executive Budget.

5 There are four issues that are of

6 significant concern to the skilled nursing

7 community here in the State of New York.

8 Just as an aside, I'd like to mention the

9 New York State Center for Assisted Living,

10 whose executive director is Shelley Wagar,

11 will be testifying later today about the

12 important need for an increase in the SSI

13 rate for assisted living providers.

14 From NYSHFA's position, NYSHFA

15 strongly opposes the Executive's proposal to

16 eliminate bed-hold payments for skilled

17 nursing providers. NYSHFA would advocate for

18 establishing a separate managed

19 long-term-care rate cell for nursing home

20 care within the 2017-'18 Executive Budget.

21 We also support the extension of the

22 nursing home benchmark rate within the budget

23 and the importance of funding healthcare

24 infrastructure investments for skilled

340

1 nursing providers within the Health Care

2 Facility Transformation Program proposed in

3 the 2017-2018 Executive Budget.

4 The Governor's budget, as you heard

5 earlier, proposes to eliminate Medicaid

6 payments to skilled nursing providers to hold

7 beds for residents who are temporarily

8 hospitalized. Presently New York reimburses

9 skilled nursing providers with at least

10 95 percent occupancy at 50 percent of their

11 Medicaid daily rate for up to 14 days in a

12 calendar year for residents who are admitted

13 to a hospital.

14 A nursing home's costs do not decrease

15 when a bed is vacant. Moreover, as a

16 consequence of the 2011 MRT cuts to skilled

17 nursing providers, Medicaid pays only half of

18 the daily rate to reserve a bed for a

19 resident who is hospitalized. The Executive

20 Budget proposal would eliminate bed-hold

21 reimbursement and would further reduce

22 funding for nursing home providers in

23 New York State by $22 million, all the while

24 arguably extending resident hospital stays

341

1 and potentially disrupting the residents'

2 ability to return to their same room or, even

3 worse, the same healthcare facility.

4 While the state's current 50 percent

5 reimbursement is insufficient -- and as

6 Commissioner Zucker acknowledged earlier

7 today, it's really not that much money --

8 New York's bed-hold requirements do provide

9 an essential source of revenue to skilled

10 nursing providers. These payments help

11 offset fixed costs while ensuring a nursing

12 home resident is able to come back from the

13 hospital to their original room with their

14 original clinical staff, so as to ensure both

15 the continuity of their care and the normalcy

16 of their life and living environment.

17 Second, we would respectfully request

18 the Legislature to establish a separate

19 nursing home rate cell within the budget.

20 Medicaid beneficiaries aged 21 or older who

21 enter a nursing home for long-term care and

22 are also Medicare-eligible are required to

23 join a managed long-term-care plan. New York

24 currently utilizes a blended-rate methodology

342

1 to calculate premium payments to managed

2 long-term-care plans to pay for care for

3 these beneficiaries. This blended rate

4 combines the generally lower cost of

5 community care with the higher cost of

6 nursing home care.

7 Faced with inadequate payments for the

8 Medicaid nursing home benefit under this

9 blended rate, coupled with growing numbers of

10 nursing home enrollees, many managed

11 long-term-care plans have reduced their

12 provider networks and are under pressure to

13 select network providers simply on price,

14 rather than on quality or consumer

15 preference. This is adversely affecting

16 enrollee choice, limiting access, and is

17 impairing the financial ability of nursing

18 homes to provide needed care.

19 To ensure that there is sufficient

20 funding to cover the cost of nursing home

21 care, NYSHFA respectfully requests that the

22 enacted 2017-2018 State Budget establish a

23 structure whereby managed long-term-care

24 plans receive funding based on a separate

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1 single rate cell for individuals who are

2 receiving nursing home care.

3 Turning now to the benchmark rate. In

4 2015, the state established a benchmark rate

5 that would be paid by managed long-term-care

6 plans to contracted skilled nursing

7 facilities for each day of care provided for

8 a three-year period.

9 Generally speaking, the benchmark rate

10 is a provider's fee-for-service rate and is

11 set to sunset in 2018. In establishing the

12 benchmark rate, the state acknowledged that

13 it will assess the impact of its long-term

14 managed care policies and consider extending

15 the benchmark rate beyond the three-year

16 requirement.

17 The benchmark rate provides skilled

18 nursing facilities with vital rate

19 stabilization and has secured the capital

20 rate component necessary to help fund needed

21 facility renovations in order to optimize

22 resident care. As such, the benchmark rate

23 has served to provide a level of certainty to

24 providers that will be necessary for the

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1 state's managed long-term-care program to

2 continue beyond the rate's sunset date. This

3 certainty is essential, especially as many

4 providers face delays in timely payments for

5 care from long-term managed care companies.

6 Without an extension of this important

7 rate protection in the 2017-2018 budget,

8 nursing homes will face reductions to already

9 inadequate Medicaid payment levels.

10 Finally, we would respectfully

11 request -- and I'll just really cut to the

12 end -- that the state include, within the

13 Governor's proposed Health Care Facility

14 Transformation Program, dedicating

15 $200 million in funds for capital

16 improvements for skilled nursing and

17 assisted-living providers.

18 In conclusion, it is vital that the

19 2017-'18 enacted budget establish a separate

20 single rate cell for nursing home care and

21 extend the nursing home benchmark rate.

22 Moreover, it is essential for the

23 state to dedicate funding for skilled nursing

24 and assisted living infrastructure

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1 investments within the Healthcare Facility

2 Transformation program.

3 I would like to note NYSHFA's support

4 for the Governor's 2017-'18 budget proposal

5 to establish a multi-stakeholder Health Care

6 Regulation Modernization Team. As stated, it

7 would provide the state guidance on

8 restructuring and streamlining statutes,

9 regulations, and policies affecting

10 healthcare providers and facilities.

11 In closing, I am certain that we'd all

12 agree that to care for those who once cared

13 for us is one of life's highest honors. And

14 as such, the New York State Health Facilities

15 Association will continue to work together

16 with the Governor, the Legislature, and all

17 affected constituencies to ensure the

18 continued delivery of high-quality,

19 cost-effective long-term healthcare services

20 throughout New York.

21 Thank you.

22 CHAIRWOMAN YOUNG: Thank you.

23 Any questions?

24 CHAIRMAN FARRELL: Thank you.

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1 MR. OLSEN: I'd like to just add a

2 comment.

3 CHAIRWOMAN YOUNG: Oh, sure. Of

4 course.

5 MR. OLSEN: Earlier this morning the

6 Medicaid director made a comment relative to

7 the bed-hold issue in nursing homes, in that

8 we would be able to make simple operational

9 adjustments to our operations when a nursing

10 home resident may be in the hospital when

11 we're churning our residents, so to speak, as

12 the medical director put it.

13 That's simply not the case. In the

14 28 years I've been in this profession, we

15 have never been able to make any operational

16 adjustments relative to a few residents being

17 in the hospital at any given point in time.

18 Case in point, if I have two residents

19 on a certified nurse assistant's caseload

20 that may be in the hospital, out of the eight

21 residents that she may be taking care of, I

22 can't simply send 25 percent of that

23 caregiver home or decrease her pay by

24 25 percent. That person needs to stay, care

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1 for the other residents. And that's just a

2 simple example of the ways that simple

3 operational adjustments cannot be made in our

4 environment to deal with adjustments in a few

5 folks being in the hospital. And that's

6 generally what we're talking about.

7 CHAIRWOMAN YOUNG: Thank you for that.

8 Anyone else?

9 CHAIRMAN FARRELL: Thank you.

10 Mr. Raia.

11 ASSEMBLYMAN RAIA: Thank you.

12 Actually, I was one of the people that

13 asked that question this morning.

14 What's the impact on a patient with

15 dementia or Alzheimer's if they're forced to

16 go to the hospital and come back to a

17 different room that they don't know?

18 MR. OLSEN: It is dramatic, because

19 they do remember their environment that they

20 may have just been in three or four days ago.

21 They do remember their staff members, for the

22 most part. Sometimes they may not remember

23 their own family members, but they do

24 remember the staff member that cared for them

348

1 the day before.

2 Them not being able to return to the

3 same bed, or even potentially the same

4 facility, would have a dramatic effect on

5 their well-being moving forward.

6 ASSEMBLYMAN RAIA: Thank you.

7 MR. HANSE: And just to follow up on

8 that. As the statute and regulation read, it

9 really comes down to an $11 million state

10 savings for taking an individual who does go

11 to a hospital and may or may not be able to

12 go back to their room. You're going to end

13 up with an individual who's going to actually

14 stay -- potentially stay at a hospital longer

15 and then be displaced.

16 CHAIRWOMAN YOUNG: Okay.

17 MR. OLSEN: Thank you very much,

18 Senator.

19 CHAIRWOMAN YOUNG: Thank you so much.

20 MR. HANSE: Thank you.

21 CHAIRWOMAN YOUNG: Next we have Vice

22 President for Public Policy Laura Haight and

23 President Claudia Hammar, from the New York

24 State Association of Health Care Providers.

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1 Following them, we will have the

2 Home Care Association of New York State. And

3 following them, we'll have LeadingAge

4 New York.

5 Welcome.

6 MS. HAMMAR: Good afternoon. Thank

7 you.

8 CHAIRWOMAN YOUNG: Good afternoon.

9 MS. HAMMAR: Good afternoon, Senator

10 Young, Assemblymember Farrell, distinguished

11 members of the Senate Finance, Assembly Ways

12 and Means, and Senate and Assembly Health and

13 Aging Committees.

14 HCP is a trade association

15 representing approximately 350 offices of

16 licensed home care services agencies,

17 certified home health agencies, and

18 health-related organizations. On behalf of

19 HCP's board of directors and our members,

20 thank you for your continued support for home

21 care and the industry.

22 Home and community-based care has been

23 widely recognized as an important component

24 for new models of healthcare delivery aimed

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1 at achieving New York State's goals of

2 improving care, improving health, and

3 reducing costs within the Medicaid system.

4 Home care is the patient-preferred option

5 that allows individuals to receive essential

6 healthcare and personal care services so that

7 they can continue to live independently in

8 their communities.

9 Aging baby boomers are reaching age 65

10 in record numbers, so the demand for home

11 care services in New York is expected to

12 grow. Fortunately, New York has a broad

13 network of home care providers that can

14 deliver a wide range of healthcare and

15 personal care services.

16 Most of HCP's members are licensed

17 agencies that provide long-term care services

18 for the disabled, chronically ill, and

19 elderly New Yorkers. Many serve as fiscal

20 intermediaries for the state's Consumer

21 Directed Personal Assistance Services

22 program.

23 Long-term care provides value to the

24 state's Medicaid system by helping people

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1 remain in their homes and communities for as

2 long as possible, instead of in more costly

3 settings. Home care workers are often the

4 first to identify changes in a patient's

5 condition that can be quickly addressed to

6 keep the patient stabilized and at home.

7 Home care has already played a major role in

8 achieving cost savings in the state's

9 Medicaid program, and has the potential to

10 provide even greater value with an

11 appropriate investment in healthcare

12 information technology and workforce

13 development.

14 Over the past few years, home care

15 providers have faced unprecedented

16 challenges, with mounting labor costs,

17 reimbursements that do not begin to cover

18 agencies' real costs, and a rapidly changing

19 regulatory environment. New York's minimum

20 wage increase and recent changes to the

21 federal overtime payment requirements for

22 home care workers have added more than

23 $1 million in labor costs just in the past

24 year -- $100 million in labor costs just in

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1 the past year, and these numbers will go up

2 significantly as the minimum wage is

3 continued to be phased in.

4 The Governor and Legislature

5 recognized the financial impact of these

6 changes and included funding last year in the

7 state budget to support these costs.

8 However, home care providers have had

9 tremendous difficulty getting these funds

10 from Medicaid managed care plans. Stronger

11 mechanisms are needed to ensure these funds

12 are actually passed through to the home care

13 providers to support their workforce.

14 The implementation of HCP's

15 recommendations will help ensure that

16 New York's elderly and frail citizens will

17 continue to have access to high-quality home

18 care services.

19 Thank you.

20 MS. HAIGHT: I'm Laura Haight. Thank

21 you for this opportunity today.

22 As with previous years, HCP's

23 priorities for this year's budget are

24 adequate reimbursement for home care

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1 providers for performing reimbursed services,

2 funding for recruitment and retention of a

3 qualified home care workforce, and grants to

4 support investment in healthcare information

5 technology and other needs.

6 The Governor's budget proposal

7 contains funding to address all of these

8 needs. However, unless certain changes are

9 made, it is unlikely that this funding will

10 flow through to home care agencies as needed.

11 On the minimum wage funding, HCP

12 greatly appreciates the continued commitment

13 of the State Legislature and Governor Cuomo

14 to include additional Medicaid funding in the

15 state budget to support the minimum wage

16 increase for healthcare workers.

17 The home care industry is by far the

18 largest healthcare sector impacted by this

19 increase. Home care agencies in New York

20 employ more than 300,000 full and part-time

21 home care workers across the state, most of

22 whom are paid base wages at or near the

23 minimum wage. Consequently, of the

24 $44 million in state Medicaid funding

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1 appropriated for the minimum wage increase

2 this year, $41.2 million went to home care

3 workers. And in the Governor's proposed 2018

4 budget, that includes $255.4 million for this

5 purpose, of which $242.7 million is earmarked

6 for home care. So we're a large section of

7 the minimum wage cost.

8 While HCP continues to work with DOB

9 and DOH to refine the state's cost

10 projections, this amount does appear adequate

11 in this year's state budget to meet the bare

12 minimum cost of compliance with the state

13 minimum wage mandates.

14 However, HCP has three important

15 caveats. First, the money needs to come

16 through to home care workers, home care

17 providers, to pay our workers. And we

18 discuss this in more detail in our written

19 testimony -- we had enormous challenges

20 getting managed care plans to commit to

21 reimbursing us for these services even though

22 the state went through a great deal of

23 effort, great lengths, to ensure that this

24 funding was in hand in advance of

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1 December 31st.

2 Second, overall home care provider

3 reimbursements continue to be inadequate, and

4 even if we fix the minimum wage, that's not

5 enough to achieve sustainability.

6 And third, as other groups have

7 expressed in previous hearings, the minimum

8 wage is not enough to support recruitment and

9 retention of direct care workers.

10 Therefore, HCP is offering three main

11 budget recommendations, and I'll keep my

12 comments short.

13 One is we're recommending that the

14 state has to include budget language to

15 address this issue of reimbursing home care

16 providers for the base costs of compliance

17 with state and federal and local laws.

18 Between 2015 and 2016, home care agencies saw

19 their labor costs increase dramatically

20 across the state due to a wide range of

21 increases. Yet despite these escalating

22 costs, our reimbursements in Medicaid managed

23 care stayed static or went down in that year.

24 And prevailing managed care

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1 reimbursement rates in New York City for that

2 year, 2016, were between $18.50 and $19 an

3 hour. And this is well below what either DOH

4 or HCP calculates to be the actual cost of

5 providing such services when you factor in

6 all of the taxes and benefits that are

7 required to be paid.

8 The state has recognized the

9 precarious financial condition of the home

10 care industry and included additional funding

11 to support these increased costs, including

12 not just the minimum wage but also the new

13 federal Fair Labor Standard Act overtime

14 rule, which significantly increased our

15 overtime costs and other expenses. However,

16 much of this funding has been delayed or

17 never been passed through to home care

18 agencies to pay their workers.

19 For example, when this FLSA rule

20 change went into effect, the state and

21 federal government approved $45 million in

22 emergency pass-through funds and later

23 amended the MLTC plan rates to support this

24 compliance moving forward. Our providers

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1 still have not received all the emergency

2 payments. Those payments arrived, you know,

3 starting six months after the new rule went

4 into effect. And overwhelmingly, the plans

5 have refused to pass on increased

6 reimbursements to home care providers, even

7 though the plans have been getting this money

8 in their rates since April 1, 2016.

9 So while HCP really appreciates the

10 significant effort undertaken over the past

11 year by DOH and the Cuomo administration to

12 help make these resources available to home

13 care providers to meet these increased labor

14 costs, there needs to be a better way.

15 Ultimately, this piecemeal approach

16 taken by the state is not a sustainable

17 solution, and we recommend that language be

18 included in the budget requiring that managed

19 care plans reimburse home care providers for

20 the cost of compliance with these mandates.

21 And we believe the state has an obligation to

22 ensure this, that you can't just walk away

23 and say, Let them negotiate with the managed

24 care plans. We have to have our base

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1 obligations met.

2 Secondly, there is money in the budget

3 that could help us with this. There is the

4 home care workforce recruitment and retention

5 funding. Close to $300 million a year is put

6 into the budget for workforce recruitment and

7 retention in the home care sector. But in

8 Medicaid managed care, we're not seeing where

9 this money goes any longer. It used to be,

10 you know, a separate item listed on your

11 remittance under fee-for-service. Now

12 providers don't know what they're receiving

13 or if they're receiving it, and when they

14 contact plans, they might be told it's in

15 your -- it's embedded in your rates.

16 Well, our rates are too low, so it

17 appears that this money is being used to

18 backfill compensation. And it's not

19 additive, as it's intended, to support

20 recruitment training and retention of

21 non-supervisory home care services workers.

22 So we have recommended some language

23 regarding transparency and oversight of this

24 funding.

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1 And lastly, we too really see an

2 opportunity with the Health Care Facility

3 Transformation Program funding. Billions of

4 dollars have gone out in capital funds as

5 well as all the money from DSRIP -- very

6 little of that if any has gone to home care,

7 and in fact last year was only the first year

8 we could apply for the transformation program

9 funds, which we appreciated. But even then,

10 the constraints were very limiting.

11 This year's program is designed to

12 address a broader range of purposes,

13 including what's most important to us, is

14 healthcare IT. This is essential for us to

15 be able to participate in the new integrated

16 models of healthcare delivery that the state

17 is working on, and we've been sort of on the

18 sidelines with this because we've lacked the

19 resources to really invest and present the

20 full value, as Claudia described, that we can

21 to the system. We are in the homes of our

22 clients, we can do a lot to help keep them

23 well and prevent them from injury and

24 entering into more expensive care settings.

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1 So thank you very much. We believe

2 that these are -- this is the time to invest

3 in home care, to meet the growing demands,

4 and we look forward to continuing to work

5 with you.

6 Thank you very much.

7 CHAIRMAN FARRELL: Thank you.

8 CHAIRWOMAN YOUNG: Any questions?

9 Okay, I think we're all set. So thank

10 you for your testimony.

11 MS. HAIGHT: Thank you.

12 CHAIRWOMAN YOUNG: Our next speaker is

13 Al Cardillo, executive vice president of the

14 Home Care Association of New York State.

15 Following him will be LeadingAge

16 New York, and following them will be Hospice

17 and Palliative Care Association of New York.

18 Hi, Al.

19 MR. CARDILLO: Thank you, Senator.

20 Thank you, chairs, and all the members of the

21 committee.

22 One of the main aspects of the

23 Hippocratic oath is to do no harm. So today

24 in my testimony I will forgo reading my

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1 testimony to you, and the variety of our

2 attachments, and mainly we'll focus on the

3 four critical points that we really want to

4 emphasize.

5 CHAIRWOMAN YOUNG: Great.

6 MR. CARDILLO: They are actually

7 attached in a one-pager to the testimony.

8 And my colleagues Claudia and Laura really, I

9 think, set the table very well, presenting

10 the breadth of the home care picture in the

11 state and of course really reflecting the

12 urgency of the needs.

13 So within the four areas -- let me

14 tell you just a bit, certainly, about the

15 Home Care Association. So the Home Care

16 Association represents home health providers

17 of all types across the state. We also have

18 within our membership long-term-care plans,

19 which you've heard a lot about during the

20 testimony today, hospice providers, providers

21 of waivered services, and other allied

22 providers.

23 So the areas that I want to focus on

24 are rate adequacy and payment adequacy for

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1 both managed long-term-care plans and home

2 care agencies, the home care and state

3 regulatory structure, and the need for

4 capacity support within the home care system

5 and the home care infrastructure.

6 So starting on the issue with rates,

7 you heard in the prior presentation and

8 well-documented in the attachments is data

9 from the certified cost reports of the plans

10 and home care agencies that really paint a

11 very concerning picture of the financial

12 status of plans and providers. It was

13 discussed earlier when the Commissioner of

14 Health and the State Medicaid Director was

15 here that the managed long-term-care home

16 care partnership solution is a very critical

17 one for the state. It's virtually where the

18 state has invested all of its energies and

19 currently its policies in providing care for

20 individuals who are very, very needy in the

21 long-term-care system.

22 In addition, separately in terms of

23 home care, home care really crosses the

24 entire expanse of the system, from maternal

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1 and child health services to pediatric

2 services to postsurgical services to public

3 health services to palliative care. So home

4 care on its own accord is really providing

5 services across the continuum in partnership

6 with physicians who write the orders for the

7 services.

8 So as I say, the data -- that data

9 that we have that speaks from the certified

10 cost information really paints a very

11 concerning picture with the majority of plans

12 and providers struggling to meet margin, most

13 below margin.

14 The last two years, the Legislature

15 has incrementally improved the language in

16 the statute that directs the department on

17 the methodology that it uses to reimburse

18 plans and providers. HCA is requesting that

19 this year you further strengthen that

20 language to ensure that the methodologies are

21 actually on point with the real costs that

22 are experienced by plans and providers in

23 trying to care for New York's most vulnerable

24 citizens.

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1 We have provided language to the

2 Legislature for your consideration that would

3 strengthen that component of the statute and

4 hopefully ensure a truer methodology in terms

5 of payment.

6 The Governor's budget includes funding

7 for minimum wage. There's $242 million in

8 state year funding. There's certainly a

9 great deal of concern that those funds be

10 able to be made available sufficiently to

11 managed care plans and to home care agencies

12 to truly meet the wage needs associated with

13 minimum wage and in fact decent wages for all

14 workers statewide. The process that has been

15 implemented thus far has been a very

16 difficult one for both plans and providers,

17 and it's really not been clear how those

18 funds ultimately go from the state and then

19 ultimately to the provider in order to ensure

20 payment of the worker. And that really needs

21 redress in this budget.

22 The other aspect about the funds is

23 that those funds just cover the Medicaid side

24 of the equation, and they also do not cover

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1 costs for individuals that are compensated

2 above the minimum wage and have long been

3 compensated just above the minimum wage but

4 now really are deserving of an adjustment as

5 well.

6 So that's something we just want to

7 make sure the Legislature and Governor are

8 mindful of when determining your final number

9 for an adjustment under this system.

10 And the last item I'd like to mention

11 with respect to the wage -- the rate issue is

12 related to managed long-term care

13 specifically. The Governor's budget proposes

14 a series of cuts in adverse financial actions

15 that are pointed at managed long-term-care

16 plans: A carve-out of the transportation

17 reimbursement, a cut in the quality

18 innovation fund for managed long-term-care

19 plans, a change in eligibility, and a

20 restriction on marketing.

21 All those were discussed earlier with

22 this panel and the Medicaid director. I

23 don't need to go into the details. But HCA

24 would encourage you to revisit, reject, and

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1 restore the funding associated with those

2 adverse proposals. The system in its fragile

3 state really can't take anything more.

4 On the regulatory side, with the state

5 moving to new models of care -- ACOs,

6 advanced primary care, DSRIP, managed Care --

7 there is a tremendous opportunity for home

8 care's contribution to really maximize the

9 benefit to patients and the cost

10 effectiveness to the system. The regulatory

11 structure for home care was created and

12 largely functions around home care as a

13 separate, sole-serving, independent, fully

14 responsible model for the patient.

15 But in these new models, the state

16 envisions a shared partnership between a

17 diversity of providers -- behavioral health,

18 physicians, hospitals, and other providers.

19 And so within that model, your roles are

20 distinctly different, and there's a capacity

21 for a very nimble level of involvement that

22 yields very, very significant returns in

23 terms of the patients and the system.

24 Just one quick example. In New York

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1 City, it's projected that something like

2 50 percent of asthma cases are

3 environmentally related. If a physician had

4 the ability to -- say, you know, a child has

5 presented with exacerbating symptoms on

6 asthma. I could send a home care agency to

7 evaluate that patient, report to me on the

8 environmental conditions, and then on that

9 basis I could then determine next steps for

10 treatment.

11 But whenever home care gets involved,

12 it gets involved under the current rule of

13 regulation which has a very, very broad set

14 of requirements, again presuming that the

15 home care agency is going to be fully

16 responsible assessing and managing that case.

17 It's really a case of the doctor --

18 and it's a case where the doctor, if they

19 partner with the home care agency, can

20 achieve immeasurable results in terms of

21 public health advancement, public health

22 protection, and mitigating that disease

23 situation for the patient.

24 So that's just one of many examples.

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1 HCA has provided the Legislature with

2 legislative language for Article VII that

3 would create a separate section within

4 Article 36 that would allow you to facilitate

5 the regulatory environment for home care's

6 participation in these new models. And we

7 ask your careful review and consideration of

8 that language.

9 At the same time, the Governor has a

10 major regulatory modernization team in the

11 budget. There were comments made today by

12 the members of the committee with respect to

13 concerns about the breadth of the model and

14 perhaps the Legislature's prerogative in

15 terms of deciding exactly how statutes and

16 regulations would be changed.

17 We are in sync with the Legislature on

18 those concerns. We support those concerns.

19 We wholeheartedly support regulatory relief,

20 but it's very, very important as we are --

21 what we are seeing under DSRIP already is

22 that providers who are not licensed home care

23 agencies, who are not licensed hospices, are

24 actively moving into the licensed protected

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1 sphere of those agencies.

2 So you have entities that are out

3 there providing services and seeking to

4 provide services in the home that really go

5 beyond the scope of their current licensure

6 and go straight into the licensure category

7 of Article 36 and Article 40s.

8 We would have grave concerns that --

9 certainly that there be safeguards in any

10 regulatory reform process that does not

11 further escalate that activity within the

12 system.

13 I'll talk to you about my last two

14 items quickly. In terms of home care

15 capacity, there is a tremendous need for

16 there to be a comprehensive review of the

17 needs of the home care system and really of

18 communities and patients for home care in

19 this state. It's a long overdue process. If

20 you talk to hospitals in the North Country,

21 if you talk to the Statewide Senior Action

22 Council, if you look at areas whether they're

23 urban or especially rural, what you see is

24 that the shortage of capacity is impairing

370

1 the functioning of the system and really

2 affecting the ability of patients to be able

3 to access services quickly and nimbly.

4 We recommend that the Legislature --

5 we've provided language for the Legislature

6 to really require a comprehensive policy for

7 meeting the home care capacity needs across

8 this state and especially in the rural areas.

9 And Assemblyman Gottfried, thank you

10 for hosting the upcoming hearings that will

11 really focus very, very closely on that

12 issue.

13 And finally on the infrastructure.

14 The Home Care Association applauds the

15 proposal of $500 million in the state budget

16 for infrastructure health facility

17 transformation. We also applaud the fact

18 that within the proposal last year the

19 Legislature, when it was funded at

20 $200 million, actually set aside a minimum

21 level that should go for community-based

22 care. In a situation where the state as a

23 policy is looking to move 25 percent of the

24 acute care system into the community, we

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1 would urge that at least that proportional

2 amount be considered on the $500 million

3 program -- so at least a proportional amount

4 of $125 million.

5 And I say that in the context of the

6 fact that of the billions, the 7 to 8 billion

7 dollars that have gone to DSRIP, less than

8 4 percent of those monies go into another

9 category which applies to community

10 providers. And in recent years --

11 CHAIRWOMAN YOUNG: Al -- excuse me,

12 Al.

13 MR. CARDILLO: Yes.

14 CHAIRWOMAN YOUNG: Al, I'm sorry, but

15 you're over your time.

16 MR. CARDILLO: Yes.

17 CHAIRWOMAN YOUNG: And just to be

18 considerate of the people behind you --

19 MR. CARDILLO: Thank you, Senator.

20 CHAIRWOMAN YOUNG: -- I think you can

21 wrap it up. You gave us great testimony --

22 MR. CARDILLO: Thank you, Senator.

23 CHAIRWOMAN YOUNG: -- in writing, so

24 we really appreciate all that you do.

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1 MR. CARDILLO: Thank you very much.

2 CHAIRWOMAN YOUNG: Thank you for being

3 here today.

4 MR. CARDILLO: Thank you, Senator.

5 CHAIRWOMAN YOUNG: Thank you.

6 I remind the speakers to please stay

7 within -- oh, we do have a question.

8 So go ahead, Assemblyman.

9 ASSEMBLYMAN GOTTFRIED: Earlier, when

10 I was asking Jason Helgerson about the

11 nursing-home-eligible language relating to

12 MLTCs and I asked how would someone who needs

13 120 days of home care but isn't nursing

14 home-eligible gets it from Medicaid --

15 because I think the language as written says

16 you can't -- and he said, Well, you would

17 just get it through fee-for-service Medicaid.

18 Setting aside the fact that the

19 language doesn't say that, what is your

20 assessment of the availability of an

21 infrastructure and administrative structures

22 in many communities for fee-for-service home

23 care these days?

24 MR. CARDILLO: Well, Assemblyman, my

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1 concern about the infrastructure would span

2 whether it would be fee-for-service or under

3 managed care, because it's the same

4 infrastructure, basically. The managed care

5 plan contracts with a network of providers,

6 and that network of providers delivers the

7 services. So I would be concerned either

8 way.

9 But speaking specifically to your

10 point about eligibility, we certainly have

11 concerns with respect to the change, because

12 that change is also likely to create

13 instability in the MLTC structure, which has

14 been rated in terms of its premium and its

15 activity to service the population that's

16 120 days and longer, just as you've set the

17 eligibility today. So we would be concerned,

18 certainly, about that change.

19 In the fee-for-service structure, the

20 way it would work now -- and we'd certainly

21 take a look at the legal language, but the

22 way it would work now is until you have

23 reached a point of eligibility to go into

24 managed long-term care, agencies within the

374

1 community -- so certified agencies and

2 long-term home healthcare providers who would

3 act like a certified agency -- would be in a

4 position to or certainly would be eligible

5 for the patient to go into for services.

6 But there's been changes since the MRT

7 which have certainly changed, say, the scope

8 of services for the long-term home healthcare

9 programs so you don't have the waivered

10 services in that program anymore like you

11 used to. But the state has just gone to an

12 episodic reimbursement system for the

13 long-term home healthcare program, really

14 similar to what you proposed several years in

15 a row. But it's not for the same scope of

16 services, it's a much narrower scope. If

17 that were broadened, again, as it was, you

18 would at least have a fee-for-service

19 alternative.

20 ASSEMBLYMAN GOTTFRIED: Okay. Thank

21 you.

22 MR. CARDILLO: Thank you very much.

23 Thank you, Senator.

24 CHAIRWOMAN YOUNG: Thank you.

375

1 CHAIRMAN FARRELL: Thank you.

2 CHAIRWOMAN YOUNG: Our next speakers

3 are Ami Schnauber, vice president of advocacy

4 and public policy, and James W. Clyne, Jr.,

5 president and CEO of LeadingAge New York.

6 Following them -- oh, it's just Ami.

7 MS. SCHNAUBER: It's just me today. I

8 will try and --

9 CHAIRWOMAN YOUNG: Excuse me.

10 -- Hospice and Palliative Care of

11 New York, and following that we would have

12 the New York Health Plan Association.

13 So welcome.

14 MS. SCHNAUBER: Thank you. Thanks so

15 much.

16 I am submitting formal testimony; I'm

17 not reading that. I'm just going to provide

18 a few highlights. But I would like you to

19 open the first page, because on the first and

20 second page we've provided some charts for

21 you because we're very concerned about the

22 sweeping cuts to long-term care in this

23 budget.

24 We have a problem in this state and in

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1 this country. The baby boomer generation has

2 started reaching age 65. Ten thousand people

3 a day reach age 65. That started many years

4 ago; the first wave is now 71. We already

5 have significant service gaps. We've been

6 talking to the administration about the fact

7 that they have to invest in long-term care

8 because we're going to be unprepared.

9 And you heard from HANYS, NYSHFA, HCA,

10 HCP -- they've gone over what some of the

11 issues are, and we concur with them. But I

12 just hope that you can appreciate that -- the

13 why of why you should care. We have a big

14 problem, and we have to start addressing it.

15 The yellow line is the long-term care

16 cut. It's $168,000. And we think that the

17 elderly and the people with disabilities in

18 this state are shouldering the bulk of the

19 cut in this year's budget, and we think that

20 we need to be going in the other direction.

21 There have been some investments in

22 long-term care, and on the second page you

23 will see our pie chart that shows the DSRIP

24 investments that have gone out. I shared

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1 this chart last year; the difference here is

2 this actually -- the first pie chart I showed

3 was what was proposed to be spent. This is

4 actually first-year spending.

5 And once again, you will see that the

6 vast majority of that funding is going to

7 primary and acute care. And nursing

8 homes are the little tiny orange slice. And

9 I'm not sure if you can see hospice, because

10 that's the thread that connects the gray and

11 the orange. I think it's pretty clear this

12 is not an area that we're investing in, and

13 it's a major problem.

14 The good news is that there is a

15 capital investment proposal in the budget by

16 the Governor. It's $500 million. We would

17 suggest that $200 million of that ought to go

18 to long-term-care providers. Long-term care

19 is about 40 percent of the Medicaid budget,

20 and so we would suggest they ought to get

21 40 percent of this healthcare spending.

22 We also suggest and ask that you add

23 assisted living programs and hospice programs

24 to the providers who can be eligible for this

378

1 funding, because once again they've been left

2 out, and we think they're an important part

3 of the continuum.

4 New York State doesn't do very well in

5 terms of -- if you look at other states in

6 terms of hospital deaths, we rank 50th in the

7 states. We rank 48th for our use of hospice.

8 We know we have a major problem in assisted

9 living. We haven't had an SSI increase for

10 assisted living since 2007, and costs -- a

11 daily cost for assisted living is about $70 a

12 day, and the state reimburses $40 a day.

13 We have a huge population of aging

14 people, and if we don't start investing in

15 these areas, they are going to be in nursing

16 homes. Nursing homes, 85 percent of the cost

17 of nursing home is borne by the Medicaid

18 program. It is completely unsustainable.

19 The state has to start investing in some of

20 these areas.

21 MLTC rate adequacy. It's a big issue

22 that several of the prior speakers talked

23 about. We represent the provider-sponsored

24 MLTCs. Half of our MLTCs in the state have

379

1 negative premium margins. Unfortunately, the

2 premiums tend to be at least a year behind.

3 We've been adding new wage mandates, we've

4 added new populations such as nursing homes,

5 and the reality is is that the rates simply

6 have not kept up.

7 Managed long-term-care plans are

8 struggling because the number of nursing home

9 members that are moving to MLTCs has grown

10 faster than the department expected, and what

11 this has caused is some of the plans to start

12 narrowing their nursing home networks. We

13 have to figure out a way to make sure that

14 enough money is going into the rates so that

15 we can accommodate the nursing home component

16 of the benefit.

17 NYSHFA mentioned the nursing home

18 bed-hold cut. We are concerned about that.

19 We don't believe that there is a churning

20 that is happening. What our members know is

21 that if you have to transfer a frail

22 individual, there are always complications.

23 They often come back worse than they were.

24 You're not sending people to a hospital

380

1 unnecessarily. All this will mean is that

2 people are not going to be able to return to

3 the place that they call home, and we think

4 it's a big problem.

5 The other area that we would like to

6 see some investment in is in senior housing.

7 We know the Governor has already recommended

8 $125 million for senior housing. But we are

9 suggesting that some amount of money -- we

10 would suggest $10 million -- be funded for

11 service coordinators so that we can keep

12 seniors in the community longer. We know,

13 through the HUD programs, this has been

14 effective. We think it can save Medicaid

15 dollars by allowing people to be connected to

16 the services in the community.

17 We have a significant workforce

18 shortage in this state. I've testified

19 before about the fact that my younger

20 brother, who has a traumatic brain injury, is

21 in the dementia unit of a nursing home

22 because after 15 years we could not sustain

23 him in the community anymore. We would try

24 and get home care providers -- there simply

381

1 was not enough home providers. And it just

2 takes a toll on a family when parents have to

3 be caring for people as they become older

4 themselves.

5 We have to address this. The minimum

6 wage has gone up. Our members had

7 traditionally been paying people more than

8 the minimum wage; now they're competing with

9 people in retail. And recently we heard that

10 a number of our providers in the Western

11 New York region are losing staff because

12 communities are busing people to casinos. So

13 now people who are using transportation,

14 people who are providing home care, are going

15 to casinos to do work instead.

16 We're very concerned about the MLTC

17 and the adult day healthcare transportation

18 carve-out. We think using a state vendor is

19 a poor idea. We see examples in Senator

20 Young's area -- we had a member tell us that

21 they had to transport one of their residents

22 15 minutes to a doctor's appointment, and the

23 state vendor was going to send transportation

24 from Schenectady, New York. We think this

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1 should be local.

2 CHAIRWOMAN YOUNG: Could you get me

3 more information on that?

4 MS. SCHNAUBER: I will.

5 CHAIRWOMAN YOUNG: I thought it was

6 bad when they were bringing people from

7 Buffalo to Cattaraugus County to pick

8 somebody up, take them to the doctor, and

9 then drive back to Buffalo.

10 MS. SCHNAUBER: Right.

11 CHAIRWOMAN YOUNG: That's far worse.

12 MS. SCHNAUBER: It is.

13 CHAIRWOMAN YOUNG: Because that's a

14 four-and-a-half-hour drive each way.

15 MS. SCHNAUBER: Exactly. And our

16 plans are saying we want to be able to manage

17 the transportation.

18 We have one provider who was given a

19 HEAL grant in Senator Valesky's district, he

20 was given a HEAL grant to bill the

21 transportation and then, a year later, told:

22 We're going to take transportation out of

23 your MLTC rate.

24 It doesn't make sense. They all seem

383

1 to be individual suggestions and ideas and

2 proposals coming from the state that don't

3 always work together.

4 So those are the main points I'd like

5 to make. I do hope that we can continue to

6 work together and figure out how we can

7 address some of these issues and make sure

8 that our seniors and individuals with

9 disabilities are getting their fair share.

10 CHAIRWOMAN YOUNG: Thank you.

11 Any questions?

12 CHAIRMAN FARRELL: Thank you.

13 SENATOR KRUEGER: Thank you.

14 MS. SCHNAUBER: Thank you.

15 CHAIRMAN FARRELL: Any questions? No?

16 CHAIRWOMAN YOUNG: The next speaker is

17 Kathy McMahon, consultant with the Hospice

18 and Palliative Care Association of New York.

19 Following her will be Paul Macielak,

20 president and CEO of New York Health Plan

21 Association. And following him will be the

22 Coalition of Managed Long Term Care.

23 So if you're in the queue, please move

24 forward. We're not -- there's Paul -- we're

384

1 not as mean as we look. So we see all these

2 empty seats in the front; if people want to

3 fill them up, that would be great.

4 Welcome. And thank you for staying

5 within the time frame.

6 MS. McMAHON: I want to thank you

7 very, very much for giving me this

8 opportunity to provide comments on the

9 2017-2018 proposed Executive Health Budget.

10 I promise I'm going to be very, very brief

11 and I will -- with my comments, that I'm only

12 going to make one request. We have

13 additional requests, but they're in the

14 written testimony. I want to be very fast

15 here.

16 I wanted to start with that we were

17 very, very grateful when the Medicaid

18 Redesign Team called for greater access to

19 hospice and palliative care seven years ago,

20 MRT #209 for hospice and MRT #109 for

21 palliative care. And you know, here in

22 New York State, hospice utilization and

23 length of stay are extremely low. In fact, I

24 would say abysmally low.

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1 Ami had mentioned earlier that we're

2 48th nationally as far as hospice

3 utilization. Our utilization rate in

4 New York is 30.3 percent, versus 45.9

5 nationally. Our median length of stay is

6 16 days; nationally it's 23 days. And

7 regarding the 16 days, when I talk to the

8 hospice providers around the state, they're

9 all telling me that the majority of their

10 patients are two weeks or less, and within

11 that cadre it's usually a week or less. So

12 we're talking on hospice for three to five

13 days.

14 So we really need to do something

15 about that, and I would be asking for your

16 support on making sure there are not any

17 additional barriers for hospice access.

18 I think it's important to be aware of

19 the data that I just mentioned in light of

20 some of the language in the Governor's

21 proposed budget. There's a proposal intended

22 to clarify that Medicaid would not cover

23 hospice-related services otherwise covered by

24 Medicare. It's a $4.4 million reduction. It

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1 still remains unclear to us how this proposal

2 would be implemented.

3 We've been working since the budget

4 was introduced to get some clarification, and

5 we originally received two explanations. One

6 was that it has to do with ancillary

7 services, and the second was that the cut

8 would be implemented as a cut to MLTC rates,

9 based on the assumption that hospice programs

10 are billing MLTC plans for services and

11 supplies that should be properly billed to

12 Medicare. Neither of these explanations

13 makes sense.

14 First of all, room and board is fixed,

15 the only thing -- the only service for which

16 hospice bills MLTC. Room and board would be

17 for hospice patients residing in nursing

18 facilities or in a hospice residence who are

19 also members of an MLTC. The hospice benefit

20 is carved out of MLTC. For dual-eligible

21 individuals, Medicare is billed. For

22 non-duals, straight Medicaid is billed.

23 Hospice is an all-inclusive service

24 billed at a per diem rate. That includes

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1 physician, nursing, home health aide, social

2 work, psychosocial support, spiritual care,

3 therapies as well as durable medical

4 equipment, and also medications that are

5 related to the terminal illness.

6 Yesterday we did receive a third

7 explanation. I was on the DOH Twitter Chat,

8 and at that time we were told that the

9 provision was for dual and FIDA fully

10 integrated dual advantage program and MAP,

11 Medicaid Advantage Program, and that Medicaid

12 would no longer pay; providers would bill

13 Medicare. I find this confusing, since this

14 is already the case, and that billing is

15 being done correctly. It simply requires

16 education and communication, not a provision

17 in the budget.

18 Therefore, we remain -- because of the

19 kind of confusion over the explanations that

20 we've received, we remain deeply concerned

21 that hospice patients would be negatively

22 impacted by the proposed $4.4 million cut.

23 Therefore, we respectfully request that this

24 section be struck from the proposed budget.

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1 Thank you for your time, for your

2 consideration. I would be very happy to

3 respond to any questions you may have.

4 CHAIRWOMAN YOUNG: No questions.

5 MS. McMAHON: Thank you.

6 CHAIRWOMAN YOUNG: Thank you very

7 much. We appreciate your participation.

8 SENATOR KRUEGER: Thank you.

9 CHAIRMAN FARRELL: Thank you.

10 CHAIRWOMAN YOUNG: The next speaker is

11 Paul Macielak, president and CEO of New York

12 Health Plan Association.

13 And as I said, following him will be

14 the Coalition of Managed Long Term Care, and

15 following them will be the Community

16 Healthcare Association of New York State.

17 So welcome.

18 MR. MACIELAK: Thank you, Senator.

19 First I'd like to say thanks to all of

20 you -- Senators, Assemblymen, chairs -- for

21 staying here this long and certainly well

22 into evening, as you'll be here quite a

23 while.

24 CHAIRWOMAN YOUNG: The fun is just

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1 beginning.

2 (Laughter.)

3 MR. MACIELAK: I'm just going to

4 summarize the testimony which is being handed

5 out to you now. I want to cover about a half

6 a dozen issues and try and keep time short.

7 First, today I just want to make the

8 point -- it got raised earlier, certainly

9 when the commissioner spoke, and

10 Superintendent Vullo as well -- that

11 government, consumers, and health plans are

12 all concerned about stability of the health

13 insurance market. Anticipated federal action

14 is fueling a lot of turmoil, as you might

15 guess -- rumors, press statements, committee

16 actions in Washington, executive orders about

17 repealing and replacing or repairing the ACA,

18 all creating that instability.

19 I point that out as a backdrop for all

20 of you and urge caution as you address some

21 of the budget as well as pieces of

22 legislation during the balance of this

23 session. Please don't add cost in terms of

24 legislation, in the budget, or in the balance

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1 of the session. Costs go to affordability,

2 and affordability is key in terms of

3 stability for the market. And that is also

4 key whether it is the Medicaid budget,

5 whether it's a consumer's checkbook in terms

6 of what they can afford or pay out-of-pocket,

7 and for health plans in terms of what they

8 can offer and what kind of losses they might

9 be able to incur in the market.

10 So with that as the backdrop, I'd just

11 like to say that HPA strongly supports the

12 Governor's effort in terms of creating a

13 pharmacy price cap and a surcharge proposal.

14 I know there's a lot of concern about it, and

15 I know there's a lot of questions, but I

16 would just urge some action be done in the

17 pharmacy arena. Something has to be done.

18 You heard statements earlier today

19 about how much the Medicaid budget has

20 increased. I know there were a couple of

21 years where it went up, in pharmacy, a

22 billion dollars a year. And that's certainly

23 when Harvoni, Sovaldi -- when those came out,

24 as well as some changes in terms of practice

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1 protocols like prescriber prevails. But by

2 our numbers, the cost of pharmacy has

3 increased over 54 percent in the last four to

4 five years. And that's net of rebates.

5 That is unsustainable. As you have

6 heard earlier, pharmacy exceeds inpatient

7 hospitalization. And for those of us who

8 have worked in healthcare, that's a

9 staggering fact.

10 Pharmacy is making for scarce dollars

11 under the global cap. So whether it's the

12 Brooklyn solution, whether it's behavioral

13 health, financial support, whether it's

14 payments for different providers throughout

15 the system, all of those are competing

16 against pharmacy for scarce dollars. And I

17 would point that out, that we have to keep

18 that in mind while we're also waiting for

19 federal action which may decrease, certainly,

20 federal support for our government programs

21 like Medicaid.

22 Second point. We oppose the

23 superintendent's discretionary powers. I

24 know there was a lot of questions -- and

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1 Assemblyman Cahill, you asked a number of

2 them. And I would just make the point that

3 there is no budget impact cited in the

4 Executive proposal regarding certainly the

5 increased fines or some of the other

6 discretionary powers. So without a budget

7 impact, I would just urge that you delete it

8 from the budget. It could be a policy

9 discussion we can have in April or May or

10 something like that, as opposed to trying to

11 do it in today's budget.

12 Our concern really has to do with the

13 superintendent's discretion. And you asked

14 some questions, Assemblyman, of the

15 superintendent about the definition of

16 unsound, unsafe, you know, whether they were

17 defined in statute or if they were really her

18 interpretation of it.

19 And we've lived with, as an example,

20 the prior approval rate process, which is

21 subject to the superintendent's discretion in

22 terms of rate-making decisions. And we've

23 experienced rate suppression, which we think

24 runs counter to actuarially sound rates in a

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1 number of occasions, and those decisions

2 contribute to that instability in the

3 marketplace that I talked about.

4 Now. We can't forget Health

5 Republic's experience, which in part tracks

6 back to rate decisions that were made under

7 that discretionary power. I'd also point out

8 in the discretionary power that the increase

9 in fines from 1,000 to 10,000 -- that's per

10 violation -- the superintendent clearly

11 framed it in terms of bad actors and clearly

12 a malfeasance and the ability just to fine

13 somebody $1,000 versus $10,000 as a key

14 factor.

15 But I would hasten to say that the

16 experience of health plans has been, today --

17 on market conduct surveys, we've had a number

18 of plans where you will have a paper

19 violation and it might have been repeated

20 over a hundred cases or a thousand cases, and

21 you're facing fines in that situation running

22 now into the hundreds of thousands of dollars

23 and up to -- even out at a million dollars,

24 for what are technical paper violations where

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1 there's not a significant consumer harm.

2 So we would say that -- take it out of

3 the budget. If you don't, at a minimum put

4 in some guardrails and safeguards. Put in a

5 framework to define, you know, repeat

6 offenders, degree of harm, types of

7 violations, number of violations, et cetera.

8 We also -- third point -- we oppose