A closer look at Gov. Wolf's consolidation plan for health and human services

Pennsylvania Budget
Gov. Tom Wolf delivers his budget address for the 2017-18 fiscal year to a joint session of the Pennsylvania House and Senate.

Gov. Wolf's proposed 2017-18 budget says the consolidation of four departments into a new Health and Human Services Department "will drive better outcomes, improve customer service, and save more than $90 million."

Yet most of the projected savings detailed last week by the administration have nothing to do with anticipated efficiencies from putting the Human Services, Health, Aging, and Drug and Alcohol Departments under the new department.

Instead, the planned cuts are from actions that the individual departments could take on their own.

Half the projected $90 million in savings, or $45 million, would come from slashing a dispensing fee paid to pharmacists under a Department of Aging program that helps certain seniors with drug expenses from $13 to $4. 

For pharmacists, the proposed cut in their dispensing fee, set by a law passed last year, came as a shock, said Pat Epple, chief executive of the Pennsylvania Pharmacists Association.

The budget proposal said the fee reduction would align the state's drug program for the elderly with fee-for-service Medicaid, but the latter pricing system has to change this year under a Centers for Medicare and Medicaid Services rule.

Pennsylvania's and many other state Medicaid programs reimburse pharmacists an amount that often has a tenuous link to the cost of the drug for the pharmacy, which means pharmacists sometimes make or lose money on individual drugs, Epple said.

Under the CMS rule, states must adopt a method that reflects the actual cost of buying the drug, and pay pharmacists a fair dispensing fee.

The 10 states that have already adopted "actual acquisition cost" or CMS's "national average drug acquisition cost" paid dispensing fees from about $10 to $15 a prescription in the quarter ended Sept. 30.

Pennsylvania's drug benefit for the elderly reimburses at the current national average drug acquisition cost, plus $13, which is in the range of what other states reimbursing actual costs pay under Medicaid fee-for-service, as opposed to managed care, where the dispensing is as little as $1.17 per prescription.

The state's human services department hired Mercer to conduct a dispensing fee survey of pharmacies. Pharmacists had to respond by Sept. 2.

"I don't know what the survey found, but I can tell you it isn't $4," Epple said. 

The next biggest chunk of savings would come from a cut in spending on 55 state health centers from $23.4 million to $10.4 million. The Wolf administration counted that as $15 million in savings, based on the costs to continue the program unchanged.

In 2013 Gov. Tom Corbett wanted to close 26 of the centers, which have operated in much the same way since 1992, but was thwarted by the state Supreme Court in a case brought by SEIU Healthcare Pennsylvania.

This time around, the union, which represents about 120 nurses in the health centers, supports the proposed changes because they help "address our state’s $3 billion budget deficit without sacrificing quality or cutting front-line nursing jobs," said Kevin Hefty, SEIU Healthcare Pennsylvania's vice president.

Wolf's proposal is to make the nurses more mobile and cut the cost of office use by the centers.

County assistance offices, where applications for supplemental nutrition assistance and other programs are processed, are another target. Wolf budgeted $7 million in savings from the closure of an unspecified number of the centers that are plagued by high workforce turnover.

The Department of Human Services already did that with the Dauphin County office, which had annual employee turnover of nearly 100 percent, announcing a year ago that it would move 50 back-office jobs to Cambria County.

Those three changes add up to $67 million, $23 million less than the $90 million projection.

The governor's office did not respond to a request for detail on the $23 million.

Wolf's 900-page proposed budget document shows $10 million in "complement savings" in 12 programs. That means workforce reductions through early retirement, the elimination of funding for empty positions, and savings from sharing services, according to a presentation by Budget Secretary Randy Albright.

An additional $9.6 million is supposed to come from unspecified "cost savings realized through agency consolidation."

Marc Stier, director of the liberal-leaning Pennsylvania Budget and Policy Center, said he was optimistic that the consolidation could be constructive. "There's something real there because it's basically four departments from one year to another which are almost flat-funded," he said. The proposal calls for $12.8 billion for a consolidated department.

Continue Reading