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

February 17, 2017

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 2  -----------------------------------------------------


 4             In the Matter of the
            2017-2018 EXECUTIVE BUDGET
 6  -----------------------------------------------------

                             Hearing Room B
 8                           Legislative Office Building
                             Albany, New York
                             February 16, 2017
10                           9:40 a.m.

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

17           Senator Liz Krueger 
             Senate Finance Committee (RM)
             Assemblyman Robert Oaks
19           Assembly Ways & Means Committee (RM)
20           Senator Kemp Hannon
             Chair, Senate Committee on Health
             Assemblyman Richard N. Gottfried
22           Chair, Assembly Health Committee 
23           Senator David J. Valesky
             Cochair, Senate Committee on Health


 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
             Assemblyman Kevin A. Cahill
 6           Chair, Assembly Committee on Insurance
 7           Senator Diane Savino
             Vice Chair, Senate Finance Committee
             Senator Gustavo Rivera
             Assemblyman Andrew P. Raia
             Assemblyman Phil Steck
             Senator Neil Breslin
             Assemblyman Andrew Garbarino
             Assemblyman John McDonald
             Senator Martin J. Golden
             Assemblyman Edward P. Ra
             Assemblywoman Ellen C. Jaffee
             Assemblyman Kevin M. Byrne
             Assemblywoman Shelley Mayer
             Senator Leroy Comrie 
             Assemblywoman Patricia Fahy
             Assemblywoman Yuh-Line Niou


 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.
 6  NYS Department of Health               
 7  Jason Helgerson
    NYS Medicaid Director                   12       21
    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
    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
    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
    Ami J. Schnauber
 8  VP, Advocacy & Public Policy 
    LeadingAge New York                   375       382
    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
15  NYS Coalition of Public
     Health Plans and
16  NYS Coalition of Managed Long
     Term Care and PACE Plans             398       406
    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




 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
12  NYS Association of County  
     Health Officials (NYSACHO)           446
    Neal Kalish
14  Codirector
    United Ambulette Coalition            453
    John Tomassi
16  President
    Upstate Transportation 
17   Association                          463       472
18  Kathy Febraio
    Executive Director
19  Russell Gellis
20  Pharmacists Society of
     the State of New York                473       481
    Michael Duteau
22  President
    Chain Pharmacy Association
23   of New York State                    481       487


 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
14  NYS Association of Ambulatory
     Surgery Centers                      515
    Dr. Bryan Ludwig
16  Albany District Representative 
    New York Chiropractic Council         519
    Shelley J. Wagar
18  Executive Director
    NYS Center for Assisted Living        526       532
    Jim Kane
20  Treasurer
    Empire State Association of
21   Assisted Living                      534       541
22  Louise Cohen
23  Primary Care Development Corp.        543       549


 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
    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
    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
    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


 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       
 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
    Claudia Calhoon
14  Director, Health advocacy  
    New York Immigration Coalition
15      -for-
    Coverage 4 All Campaign               624









 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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.


 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.  


 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 


 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?


 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 


 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 


 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?


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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.  


 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 


 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 


 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 --


 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.  


 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 


 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, 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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.


 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 


 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 


 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, 


 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.


 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 


 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 


 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.


 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 


 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.  


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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.  


 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."


 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 


 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 


 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 


 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.


 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 


 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 


 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, 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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.


 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 


 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 


 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?


 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.


 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 


 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, 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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, 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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.


 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 


 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 


 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 


 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 


 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:  


 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 


 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 


 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 


 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, 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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?


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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, 


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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, 


 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 


 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 


 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 


 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.  


 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 


 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.  


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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.


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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, 


 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 


 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 


 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 


 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, 


 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 


 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 


 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 


 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.


 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.  


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.


 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.


 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 


 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 


 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 


 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.


 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 


 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 


 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 


 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.  


 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 


 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 


 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 


 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.


 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 


 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 


 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.


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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 


 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.  


 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 


 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 


 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.  


 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 


 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 


 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 


 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 


 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 


 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 


 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 

 9          extending HCRA for three years without some 

10          reform.  The Legislature adopted a HCRA 

11          modernization task force, some 

12          recommendations came out of them -- not 

13          startling recommendations, but they're not 

14          reflected in this extension.  Those 

15          recommendations should be built in at a 

16          minimum.  

17                 We would also agree -- I know Senator 

18          Hannon raised it earlier -- whether there's a 

19          need for perhaps a modernization task force 

20          number 2 to look at really some of what HCRA 

21          is doing today versus what it was originally 

22          intended to do.  You know, it started out, in 

23          terms of the public good funding, to fund GME 

24          and bad debt charities.  Those were the 


 1          historic roots. &nb