On July 4, 2008, the state legislature approved, and the Governor signed a $28.2 billion state general fund spending package (
Senate Bill 1389
) for fiscal year 2008-2009, a 3.8 percent total spending increase over 2008 (see attached HAP press release). The final budget package restored all of the Medical Assistance (MA) hospital payment cuts proposed by the Governor, and included new funds for critical access hospitals.
This year’s budget process was impacted by a smaller-than-expected surplus because of declining state revenues, resulting in $341 million in budget cuts to many programs and state agencies, as well as the use of one-time funds to balance the budget. Legislators in both chambers have suggested that as state revenues continue to decline as a result of the nation’s economic downturn, that the state may face a deficit of at least $800 million to $1.2 billion by the end of the 2008-2009 budget year.
In addition, the budget was impacted by the Governor’s agenda on energy, education, transportation, health care, and economic development. The final budget did not include funding for a program to extend health care coverage to the uninsured, and the Governor and House Democratic leadership have conveyed the need to address this issue in the legislature’s fall schedule. Because the Governor and House Democrats had linked action on Mcare to coverage for the uninsured, they were unwilling to support passage of House Bill 2648and
Senate Bill 1372
(both passed by the Senate 48 to 2, and 50 to 0 respectively), which both reauthorized PHC4 and extended Mcare abatement for two years.
Budget and Legislative Summary: The following summary highlights the issues of importance to hospitals in the state’s fiscal year 2008-2009 budget and other related legislation.
Medical Assistance
Hospital Payments
The budget includes funds to improve the hospital-fee-for-service payment system by addressing inadequacies and inequities of Medicaid payments to hospitals.
The budget includes funds at current levels for inpatient and outpatient disproportionate share, community access, and medical education payments for hospitals.
The budget increased funding for burn centers—$5.5 million in state funds with $6.4 million in federal matching funds.
The budget increased funding for obstetrics and neonatal services—$6.96 million in state funds with $7.9 million in federal matching funds.
The budget includes $5.2 million in new state funding (with $6.1 million in federal matching funds) to modify payments to the state’s critical access hospitals in a manner similar to how Medicare pays critical access hospitals.
The trauma stabilization fund was reduced slightly to $12.3 million in state funds with $14.9 million in federal matching payments.
Welfare Code Amendments
Philadelphia County was given authority to tax certain general acute care hospitals in Philadelphia for purposes of developing new payments for hospitals in that county for emergency department services. Federal approval for this tax would be required.
The seven-day hospital readmission policy will be changed to 14 days. The estimated value of this change is to be $0.5 million.
Limits on physician payments during an inpatient hospitalization can be modified by the Department of Public Welfare through notice in the Pennsylvania Bulletin. Previously the limit was specified in the Welfare Code. This change allows the department more flexibility in raising the limit. Removing this cap will provide $4.3 million in state and federal funds for physician care.
Long-Term Care
Payments to nursing homes are increased by 1 percent.
The nursing home tax was extended.
Managed Care
For fiscal year 2008-2009, the Department of Public Welfare (DPW) will not carve out the pharmaceutical services as a covered benefit from the HealthChoices program or the voluntary managed care program.
The managed care tax was extended.
Other Budget Components
The state budget did not change the parameters of the tobacco uncompensated care or extraordinary expense monies.
The budget provides funds for increasing the enrollment in the state’s Children’s Health Insurance Program by 11 percent over current enrollment so that a total of 186,000 children receive health care coverage.
