Directs a study of rate rationalization and budget neutrality as it relates to providers of services to people with developmental disabilities funded by Medicaid

Section 2 requires DOH to submit a report detailing the recommendations set forth by this act by February 1, 2017.

Section 3 is the effective date.

Justification

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

Rate rationalization makes it unlikely the financially struggling providers can recover since reducing costs in order to operate more efficiently results in reimbursement rate cuts by the Department of Health which simply exacerbate the provider's weak financial condition. In one of many instances a financially struggling agency cut costs to produce savings. However it soon found those savings lost to rate cuts thus punishing it for being efficient further weakening it almost to the point of bankruptcy.

Additionally, programs which must increase their costs in order to manage a more difficult population with severe needs must wait for two and a half to nearly three and a half years before rates are increased by DOH. If the agency is financially marginal the potential exists to fatally weaken the agency. In one of many examples a provider in a struggling agency accepted four behaviorally challenging individuals for placement from State facilities. The extraordinary costs associated with these placements created a financial hole in excess of almost $1 million and nearly bankrupted the entire agency placing the services for hundreds of individuals and families at risk.

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

Prior legislative history

New Bill.

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately.