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NY Daily News Op-Ed: A Hit to Safety-Net Health-Care Providers We Must Prevent

New York Daily News, December 14, 2020

By Richard N. Gottfried, Brad Hoylman, Gustavo Rivera and Linda B. Rosenthal

Many of New York’s health-care providers are in crisis. COVID-19 has increased the cost of providing care and cut their income because people are postponing care. This is on top of the fact that many health-care providers that rely on Medicaid have been on painful austerity budgets for years due to government cuts. Then, in April, Gov. Cuomo’s state budget slashed Medicaid even more.

As if that was not enough, one little-noticed action in the budget changes how Medicaid pays for prescription drugs. It will financially cripple our most vulnerable safety net providers and leave their patients without care.

Here’s the story. The vast majority of Medicaid recipients are required to get their coverage, including prescription drugs, from a Medicaid managed care plan. Each managed care plan does its own price negotiating with drug manufacturers. A small number get their Medicaid coverage directly from the state, without a managed care plan, and the state pays directly for their drugs, through its “preferred drug program.”

This year’s state budget “carves out” all prescription drugs from Medicaid managed care coverage and requires all Medicaid patients to get their prescription drugs directly through the state.

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In many ways, this is a good idea. The state will be negotiating drug prices for a much bigger group of patients than any one managed care plan. This will mean lower prices. And the preferred drug program gives patients and their doctors more choice of drugs than managed care plans do. For years, we’ve advocated getting Medicaid managed care plans out of the picture for drugs. (The NY Health Act, our single-payer bill, would get all insurance companies out of the whole picture for all of us, but that’s for another article.)

However, there is a serious problem in this plan. Community health centers, HIV providers, sexual health clinics, many rural hospitals and other safety net providers currently participate in a federal program called 340B, which allows them to purchase prescription drugs at a significantly reduced price. These providers rely on their 340B savings to “stretch” their Medicaid funding to pay for health care for the people they serve. The catch is, under federal law, this only works for drugs purchased under Medicaid managed care.

340B was created in 1992 by Congress “to stretch scarce…resources as far as possible, reaching more eligible patients and providing more comprehensive services.” It guarantees dramatically lower drug prices for the providers that are covered. In New York, these providers are all non-profit groups.

The money trail is complicated (like almost everything involving prescription drugs), but the bottom line is: If New York State shifts Medicaid drug coverage away from managed care, the way it was done in the budget, these non-profit safety-net providers will lose hundreds of millions of dollars they now use for patient care.

If this change goes ahead, the state and the federal government will pocket the savings. The benefit will no longer help the safety net providers the 340B program was created to help. How the Cuomo administration will use the money is anybody’s guess.

We believe it’s possible to change the new carve-out law to protect the 340B providers and HIV health plans. But it will take time for the Health Department, legislators, health-care providers and HIV plans to develop, evaluate and implement a successful carve-out that does not diminish access and quality for programs and the vulnerable people they serve.

That is why we’ve introduced a bill to have the carve-out go ahead for the bulk of Medicaid, but to delay it for three years specifically for 340B providers. The Legislature and the governor have to pass this bill before the full carve-out goes into effect on April 1, 2021. Otherwise, vulnerable health-care providers that serve vulnerable New Yorkers will suffer serious financial harm, and many will not survive.

Gottfried, chair of the Assembly Health Committee, represents parts of the West Side and Midtown Manhattan. Rivera, chair of the state Senate Committee on Health, represents parts of the Northwest Bronx. Hoylman represents parts of Manhattan in the state Senate. Rosenthal, chair of the Assembly Committee on Alcoholism and Drug Abuse, represents the Upper West Side and parts of Hell’s Kitchen.