June 2nd, 2008

The House and Senate return this week, Monday June 2nd, to begin final preparations for the Fiscal Year 08 – 09 budget.

Both chambers are scheduled for every week this month (June 2,3,4; 9,10,11; 16,17,18; 23,24,25,26,27,28 and 30).  If the budget and the budget enabling legislation isn’t passed by June 30, the General Assembly will remain in session through July until it’s passed…making only the owners of Scott’s, Tavern on the Hill, and other local legislator-frequented restaurants happy.

In  a press release today, the Governor stated that he believes after today’s meeting with party leaders that there will be a budget compromise crafted by June 30.   Rendell’s said that, “There was a spirit of cooperation in the air,”  and that he is available to meet with legislators for negotiations “24 hours-a-day, seven-days-a-week”  Although we highly doubt that Rendell and the Senate R’s will be having any friendly pajama parties, especially not over the healthare reform plan – legislative leaders have agreed to meet with the Gov. weekly in attempt to meet deadline.

Some big news is that Gov. Rendell’s Budget Secretary, Michael Masch, is leaving the Rendell Administration to start a position on July 1 with the Philadelphia School District.  This adds yet another interesting element to this years’ negotiations considering that a. since Rendell has been in office, not a single budget has been passed by July 1st; and b. the Philadelphia School District is part of the public school system that recieves appropriations through the budget. Although Masch has publicly stated that until July 1st he will only be negotiating and working solely on behalf of the Gov’s budget plan.

General Appropriations Bill – HB 2380 (D. Evans) –

This bill, which contains appropriations for the executive, legislative and judicial departments and public schools, remains in the House Appropriations Committee.  Rep. Evans said recently on the House floor that the Committee needs to wait until the revenue numbers for May are known (which should be by the beginning of this week) and the spring update numbers are received from the Public Welfare Department (also expected by the beginning of this week). There are currently over 135 amendments posted to the bill that may be considered when the bill arrives on the House floor.  Action on the GA bill is not expected to begin this week, which makes it highly unlikely that the budget will be completed by June 30.

Certain members, such as Rep. Mario Civero (Minority Chairman of the House Appropriations Committee), have publicly expressed dismay that Rep. Evans has been bottling the bill up in his committee for so long.  In a recent op-ed in the Philadelphia Inquirer, Civero asserted that Evans - who had once touted openness in the budget process - is now  “effectively silencing every member of the state House – both Republican and Democrat – and preventing them from offering any input on the budget.”

The Supplemental Appropriations Bill – SB 1389 (LaValle) -

This bill is currently on the Senate Calendar on third consideration.  It provides for needed supplemental funding for Departments in the current fiscal year, which ends June 30 (FY 07 – 08).  The bill has the suppplemental funding proposed in the Gov’s budget.  The Appropriations committees are scheduled to recieve the spring update numbers (actual supplemental funding needed to en the current fiscal year) from all the Depts. next week and the funding levels in SB 1389 will be amended to reflect the agencies needs.

Non-Preferred Appropriations Bills -

All non-preferred bills (legislation that provides an expenditure to an institution not under the control of the state) also remains in the House Appropriations Committee –are we noticing a trend here?

Issues within the budget negotiations that would affect healthcare in PA:

The Carve-Out 

The Dept. of Public Welfare wants to take over the management of Medical Assistance Pharmacy Benefits for Pennsylvania’s Medical Assistance recipients (i.e the pharmacy carve-out).  These pharmacy benefits are currently managed by private managed care company’s.  In budget hearings ealier this year, lawmakers remained skeptical about the carve-out (DPW has unsuccessfully attempted the carve-out twice before).

The GOP is currently angered that the Dept’s budget is growing far above the rate of inflation each year.  They are also not happy that the Dept. gives flat-funding to non-medical providers; meaning that facilities such as nursing homes, mental health programs, childcare faciliites and other non-medical service providers are allocated the same flat-amount of dollars each year through the DPW’s budget, with no increase for inflation. [There is currently legislation before the Senate that would require the Gov. to include an inflation based COLA in his annual budget for non-medical providers of services that are funded by the DPW].

Both Republicans and Democrats favor giving these non-medical providers a cost of-living-adjustment (COLA).   But, the DPW claims that although a COLA is unaffordable right now, the way to make it possible in the future is through the carve-out – which officials say will save the state $95 million a year.  (These savings will come mostly from federally mandated rebates on certain prescriptions that the state can recover, but managed care companies cannot).

Senate R’s that oppose the carve-out point out that  currently the state pays a yearly per-capita rate to these companies and then any risk falls on them and not the state.  But, if DPW takes over the pharmacy benefits and mismanages the program the risk of that extra debt will be left for the taxpayers to pay.  Others are skeptical that DPW could really save the state the projected $95 million a year or could manage the program with as few employees that Secretary Estelle Richman has stated.

21 States and D.C. have done some sort of carve-out, with 11 states now having all Medical Assistance Pharmacy Benefits managed by state workers.  But currently in PA, it does not look like the carve-out has enough legislative support to not be blocked out by language in the budget, yet again.

Pennsylvania Access to Basic Care Plan:

The Governor’s plan to extend state-subsidized health insurance to 272,00 currently uninsured adults within the next five years, at a cost of $1.1 billion. The enacting legislation (SB 1137) was already passed by the House in March. 

This money will come from:

• State money currently used to fund the state’s adult Basic program (which is partly tobacco settlement dollars)

• Federal government matching funds

• Premium payments paid by employers and employees participating in the plan

 As is, the plan would also require at least $120 million in further funding to be identified and deposited into a new account to support the program. The Gov’s Budget office announced in early May that they have identified two funding sources that would raise the $120 million to fully support that account: 

1. A 10 cent-per-pack increase in the state cigarette tax.

2. A 36 cents-per-unit tax on other tobacco products, such as cigars and chewing tobacco. These products are currently not taxed at all.

 The budget office is assuming that as more uninsured Pennsylvanians enroll in the PA ABC program there will be less uninsured people at the hospital.  Therefore, the office believes that some of the “uncompensated care” payments the state currently makes to hospitals to treat the uninsured, will be gradually redirected to the ABC program.    

This is one item of the budget where it seems the Senate Republicans will never give leeway to the governor. They say while they are not opposed to the Gov’s end goal, the plan is impossible to fund over time.  They are also opposed to any new taxes on cigarettes and other tobacco products, which would be needed to fund the plan. 

The Republicans will be introducing their counter-offer healthcare reform plan in early June, which will use measures such as allowing parents to insure their children until they’re 29 years of age. It would not be surprising if the budget is passed without this plan and healthcare reform is then revisited in September.