Westchester County Business Journal (NY)
February 19, 2018
Faced with potential cuts to federal funding of major
health programs, Gov. Andrew M. Cuomo in his budget address this month proposed
a new state fund aimed at keeping the programs afloat.
Speaking in Albany on Jan. 16, Cuomo said it's health care
"where the real potential shortfall is."
The state is facing a potential loss of federal funding
through a number of avenues outlined in the governor's budget, including cuts
to Medicaid; the loss of the cost-share reduction payments that fund the
state's popular Essential Plan coverage option; and cuts to the Medicaid
Disproportionate Share Hospital program, which provides federal dollars to
hospitals that serve a high percentage of Medicaid or uninsured patients.
Cuomo also said federal funding for the Child Health
Insurance Program was at risk in his budget outline, but the program
subsequently has been funded through the next six years when Congress passed a
short-term spending bill on Jan. 22 that included funding for the popular CHIP
program.
In his speech, Cuomo acknowledged the budget difficulty
and uncertainty ahead. He proposed setting up a $1 billion reserve fund to
offset any loss in federal funding.
"Depending on who you talk to, they say they're going
to be restored, they're not going to be restored," Cuomo said of federal
health care program cuts. "If they're not restored, they are in the
billions of dollars and affect millions of New Yorkers. So, it's something
that's going to change over time and that we have to watch, but we would set up
the reserve fund now."
To help launch that Healthcare Shortfall Fund, Cuomo proposed
new taxes targeting the state's health insurance industry. The state is facing
an overall budget shortfall estimated at more than $4 billion.
"It's just too big a deficit and the choice of
cutting education or cutting health care, I don't think is a place anyone wants
to go this year," Cuomo said. "So we have to raise revenue."
INSURER CONVERSIONS
The shortfall fund could be kick-started initially by a
new source of revenue the Cuomo administration estimates will be $500 million
annually for the next three years. That money would come from nonprofit health
insurers that convert to for-profit ventures.
While not a new tax, the state is counting on there being
more of this type of transactions from which to draw revenue in the next few
years.
"This is about not-for- profit health care companies
that we financed through Medicaid primarily," Cuomo said in his address.
"They want to sell to a for-profit or convert. The state already has a
statute where we get the majority of the revenues."
The most prominent example is the pending deal that would
have Centene Corp., a Fortune 500 company and the largest Medicaid managed care
organization in the country, take over the assets of Fidelis Care, a nonprofit
Catholic health plan.
In the $3.75 billion deal, Centene will acquire the
largest provider of qualified health plans on New York's Affordable Care Act
health exchange.
The New York Catholic bishops that run Fidelis pledged to
use the sale proceeds to launch one of the largest charitable foundations in
the state. As described by Cardinal Timothy Dolan when the transaction was
announced in September, the charity would be "dedicated to serving
vulnerable and at-risk populations regardless of their faith."
A blog post from the Albany think tank Empire Center for
Public Policy said the state would be pulling money away from that charitable
endeavor. The blog's author post also argued that because Fidelis is a health
maintenance organization, the state will need new statutory language to collect
on the sale of Fidelis to Centene that was not included in initial budget
legislation.
The governor's budget outline estimates the state can reap
$500 million annually over the next four years from conversions of nonprofit
health insurers to for-profit ventures, based on current market conditions.
The decision to count on the conversion revenue was
criticized, however, by Citizens Budget Commission President Carol Kellermann,
who noted that the "conversions may not occur and the method for
estimating the revenue they would generate is not specified," leaving the
possibility the budget could be left short more than a billion dollars.
TAXING THE'WINDFALL'
Cuomo would also like to see New York adopt a 14 percent
tax on the profits of the state's health care insurers.
Called the Healthcare Insurance Windfall Profit Fee,
Cuomo's 2018-19 budget outline estimated the new tax could raise $140 million
in revenue in the next state fiscal year that starts April 1. That money would
be reinvested in state health care services, Cuomo said.
The governor in his budget address said the tax would
attempt to capture some of the money health insurers are expected to save with
the new federal tax bill that lowers the corporate tax rate from 35 percent to
21 percent.
"There are health insurance companies that just got a
40 percent windfall profit from this federal plan," Cuomo said. "They
weren't expecting it. The health care costs wind up getting shifted to us. I
think it's totally justifiable to have a tax to recoup part of their windfall
benefit."
But the state's insurers have warned the tax will only
raise costs for New Yorkers. Eric Linzer, president and CEO of the New York
Health Plan Association, a trade organization promoting managed health care
plans, said the windfall tax "treats health insurers differently than
other insurers in New York and creates an uneven playing field in the
state."
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