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Writer's picturePaul Francis

Commentary #4: Week of January 8th, 2024

Updated: Aug 12

2024 State of the State

This commentary is available as a PDF here:

 

Governor Kathy Hochul delivered her 2024 State of the State address on Tuesday in Albany. From the standpoint of Health and Human Services, there was a lot to like in both the speech and the companion 2024 State of the State “book” (collectively, the “SOS”). Governor Hochul has pursued an ambitious agenda for dealing with the mental health crisis, which contributes to so many other challenges. Building on a major commitment last year to expand the supply of dedicated housing for the seriously mentally ill, the Governor this year is focusing on interventions that are designed to stave off the crises that occur too often among the seriously mentally ill who lack adequate support. The SOS also challenges the commercial health insurance sector to carry its fair share of the mental health burden by requiring insurance plans to broaden their networks of providers. The State will also enhance its enforcement of compliance with requirements for reimbursement of behavioral health services at “parity” with physical health services.


In the Health sector, the most significant announcement in the SOS was that the State has received approval from CMS of its 1115 waiver, which will provide $6 billion of incremental federal funding over the next three years to support a number of innovative strategies. As with its 2013 predecessor, the DSRIP waiver, the new 1115 waiver is designed to reduce the total cost of care and improve outcomes by providing financial support for what traditionally have been known as “social determinants of health” and which are now dubbed as “health-related social needs” – i.e., housing-related services, healthy food, and better integration of social services with health services. The underlying strategy of the 1115 waiver is that Medicaid managed-care plans will see that these interventions do, in fact, reduce the total cost of care and improve outcomes, and thus be willing to continue funding the services after the three-year 1115 waiver period expires. Unfortunately, relatively few of the DSRIP demonstration projects were continued when the temporary waiver funding ended. The State hopes it will be more successful this time around.


Once readers have digested the 180-page 2024 SOS Book, they can turn to the 239-page CMS approval package for the 1115 waiver. It will take some time to fully unpack and absorb the terms and conditions of the approval, but even at first glance, it appears to incentivize policy changes that the Step Two Policy Project has also embraced. Among these is the requirement that the State increase Medicaid rates in areas that the existing reimbursement rate methodology has not adequately supported, including primary care, behavioral health, and obstetrics care. The 1115 waiver will also provide significant funding for financially distressed hospitals on the condition that they adopt the CMS global budget model, which is designed to incentivize structural reforms intended to make safety net hospitals more financially sustainable.


The 2024 State of the State book notes that the SOS proposals are only “the first step in defining the Governor’s agenda in 2024”, with additional policies and funding details to be included in the forthcoming Executive Budget. It does not diminish from the considerable scope and excellent proposals and this year’s State of the State to point out that setting forth the Governor’s agenda for the coming year – which is the format of all State of the State addresses – does not really reflect the dictionary definition of “state”, which is “the particular condition that someone or something is in at a specific time.”


This structure of focusing on new initiatives rather than reviewing the particular condition of the State at a specific time makes it harder to recognize the strategic forest amidst all the policy trees. This creates a particular challenge in understanding incremental progress in achieving the administration’s strategy in the Health sector, which is primarily a function of continual course corrections in service of the long-term goals of access, equity, quality, affordability, and financial sustainability.


I’m not suggesting a fundamental change in the paradigm of State of the State addresses, but it is interesting to contrast State of the State addresses with the best annual letters to shareholders written by the most influential CEOs of some of our leading corporations. The most well-known of these letters, of course, is Warren Buffett’s annual letter, which is anticipated by the business world with as much eagerness as a new Harry Potter novel. More recently, Jamie Dimon’s long letter to shareholders introducing J.P. Morgan’s annual report has become a must-read. And in his day, Jeff Bezos used the annual letter to shareholders as an integral part of the Amazon business model.


All three of these letters to shareholders touch on what is new about the business, but they are more designed to reinforce the long-term strategy of the business: patience, in the case of Berkshire Hathaway. A fortress balance sheet at J.P. Morgan. Acting at Amazon every day with the urgency of a new start-up. Strategy and messaging are all about reinforcement because it takes a long time for the strategy to take hold and the message to sink in.


The structure of the SOS as a compendium of new initiatives as opposed to a progress report on realizing long-term strategic objectives is perhaps the main reason that the Health sector, which, after all, accounts for roughly 40% of all New York State spending, is rarely if ever a centerpiece of the SOS. The extensive focus and welcome proposals in the area of mental health in both this year’s and last year’s SOS may be the exception that proves the rule. In general, and in contrast to other policy areas, such as a major infrastructure project in which the initiative is the message, the focus in New York State’s Health sector is much less about new initiatives and much more about achieving incremental progress within long-term strategies. Some of those strategies are intentional, such as improving the integration of physical health and behavioral health. Other strategies, such as the employment of friends and family members as the primary vehicle to deliver personal care (i.e., through the Consumer Directed Personal Assistant Program known as “CDPAP”), are unintentional, but by default, have become the prevailing strategy for the delivery of long-term care in New York.


It is worth thinking about what a CEO’s “letter to shareholders” in the Health sector would say. Some of the strategies of the administration are clear, such as coming as close to universal health coverage as possible. Specific ongoing initiatives, such as expanding eligibility for the Essential Plan to all documented residents up to 250% of the federal poverty level, will advance that goal (and the goal of affordability) in a demonstrable way. Other important strategies, such as the objective of improving long-term care by enrolling more individuals who are eligible for both Medicare and Medicaid into so-called “integrated” plans, are finding it more difficult to gain traction. Even though this arguably is one of the most important elements of the State’s strategy for improving long-term care, progress towards that objective is not often referred to and therefore is little understood by the public.


One of the reasons we called for a new Office of Health Data, Information, and Policy Analysis is that we think that such an office would facilitate the articulation of long-term strategies and the tracking of their progress. Massachusetts does this through the Annual Report on the Performance of the Massachusetts Healthcare System.


Although the proposal for a new Office of Health Data, Information, and Policy Analysis was not included in the 2024 SOS, the SOS was replete with initiatives that dovetail with our primary areas of focus. The accompanying Issue Brief we are posting today describes many of those initiatives and our preliminary thoughts about them.


We look forward to tracking the progress of these initiatives as the administration seeks to navigate them through the shoals of legislation and the obstacles to implementation. We wish them well in their efforts and hope that our ongoing work in these areas may prove helpful.


Beyond cheering for the 2024 SOS initiatives, we are mindful that Wednesday was actually the best day – literally the best day – to get working on proposals for the 2025 State of the State. The work of governing and making policy is never done.


Paul Francis

January 12, 2024

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