State plan straps agencies for disabled

Gov. Andrew Cuomo believes his proposed $120 million cut to agencies serving people with developmental disabilities can be accomplished by slashing their administrative and overhead costs. But the agencies say some of their costs are a direct result of a New York state service delivery system that is fraught with inefficiencies and excessive regulatory oversight.

With the number of days dwindling if the state is to adopt a 2013-14 spending plan on time, Cuomo and leaders of the Senate and Assembly are locked in negotiations to agree on a spending plan. A major sticking point is the governor’s insistence on a $120 million cut in Medicaid funding from the budget for the Office for People With Developmental Disabilities. Agency Commissioner Courtney Burke has said the $120 million would come from funding to so-called voluntary providers of services to people with disabilities, leaving state-operated facilities untouched. And because state Medicaid dollars are matched by federal funding, the cut in state Medicaid funding would trigger an additional $120 million cut in federal Medicaid money, meaning a $240 million loss for voluntary providers. This equates to a 6 percent across-the-board cut.

The governor’s proposal has galvanized voluntary providers, people with disabilities and their families to mount a statewide grass-roots protest, and in response the Legislature told Cuomo that it wants the $120 million restored to next year’s budget. But Cuomo has dug in his heels and, in recent days, has changed the dialogue to focus on his contention that by cutting administrative and overhead costs as well as executive salaries and compensation, agencies can achieve the 6 percent reduction without disrupting services to people with developmental disabilities.

Providers counter that New York state employs an antiquated and unreasonable method of reimbursing agencies for the costs they incur in delivering services to people with developmental disabilities. Additionally, providers say they are being suffocated by increased regulatory oversight that is driving up administrative costs while stretching thin the ability of direct support workers to provide safe, quality care to a class of people who are among the most vulnerable in society.

It is because people with developmental disabilities are so vulnerable that careful regulatory oversight is necessary. But voluntary providers lament that the Cuomo administration has overburdened them with excessively stringent regulations. They say it has gotten to the point that every incident resulting in a bump or a bruise – as well as incidents in which no harm occurred – requires an extensive investigation to be conducted by the provider. This results in massive amounts of time and staff to investigate incidents, fill out paperwork and review an investigation’s findings.

With a high level of regulatory oversight, it is not surprising that costs associated with quality assurance eat up a large portion of an agency’s administrative costs. A study of the expenses at seven providers in Western New York showed that they spent a combined $1.75 million – and employed 42 people – in activities associated with quality assurance (including incident management, corporate compliance and the development and administration of plans of corrective action when agencies are cited for any level of finding associated with a myriad of state regulations).

And with the scheduled opening later this year of New York State’s Justice Center for the Protection of People with Special Needs (which is proposed to have a $37.4 million operating budget in 2013-14), voluntary providers are wary that the level of state regulatory oversight is only going to increase, as will the providers’ quality assurance costs.

But quality assurance costs are only the second-largest administrative drain on the budgets of the seven WNY voluntary providers that were studied. The biggest hit to their budgets is in the area of necessary financial services. The seven agencies combined spent $2.94 million on financial services and needed 75 employees to do the work. Of the 17.5 full-time equivalencies employed by one agency, 11.5 were tasked to chase Medicaid and Medicare reimbursement – trying to get Medicaid managed are organizations to pay the provider the money it was owed for services provided.

Another facet of the administrative cost burden faced by voluntary providers is in the area of work force support – recruiting staff, training new employees and providing assistance to help workers be successful in their demanding jobs. These costs amounted to $766,000 among the seven agencies and required the efforts of 25 full-time people.

Work force support costs are high because of the difficulty voluntary providers experience in recruiting and maintaining quality employees. Lack of sufficient financial support from the state means voluntary providers are unable to offer competitive wages to entry-level direct support workers. And while voluntary providers attempt to pay workers a starting salary that exceeds the minimum wage, many potential workers would rather take a job at a fast-food restaurant than face the pressure and challenges that come with providing care to people with developmental disabilities. The intense regulatory scrutiny demanded by the state only makes attracting and retaining new workers more difficult. It is typical for most organizations to see turnover of half of its new employees within the first three to six months of employment.

And while voluntary providers rack up millions of dollars in administrative costs each year, New York state fails to reimburse providers for the entire costs they incur. One agency noted that the state expects the agency to carry unfunded administrative costs in excess of $800,000 annually.

While New York state continues to talk about moving the system from fee for services to capitated managed care, the providers note that the current system has gone unchanged and is still subject to a burdensome, fragmented set of regulations and funding that require adherence to often confusing and irrational demands by the state that can only be satisfied through extensive and costly administrative supports and services.

Steve Waterson is the community relations director at The Resource Center