Former Medicaid attorney raises red flags over NY’s proposed medical cannabis coverage bill

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Matthew Leonardo is an attorney at Hinman Straub, where he is a member of the firm’s health law and government relations departments.

However, Leonardo’s background prior to Hinman makes him uniquely situated to weigh in on a recent bill proposed by Sen. Jeremy Cooney that seeks to provide insurance coverage for medical cannabis.

That’s because Leonardo spent four years as the lead attorney for health care financing at the Department of Health, where he was counsel for Medicaid reimbursement, the Health Care Reform Act programs, and other initiatives.

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NY Cannabis Insider asked Leonardo to dissect Senate Bill S2568, which aims to “add coverage of medical marijuana to public insurance programs and clarify that it may be covered by private insurance.”

The following interview has been lightly edited for clarity and style.

First, tell us a bit about your background and any caveats with your analysis of this bill.

Thanks for letting me comment on this legislation. As you mention, I am currently a lawyer and lobbyist at Hinman Straub. I want to note at the outset that we represent insurance plans and other stakeholders with an interest in this legislation and that I am not speaking on their behalf.

My opinions here are based on my prior experience working as the Medicaid finance counsel at the Department of Health. In that role, I was responsible for drafting budget legislation to implement Medicaid policies. I worked with the various offices of DOH, the legislature, the governor’s office and the federal government to provide legal counsel on Medicaid initiatives.

In essence, I was the lawyer for DOH that opined on whether Medicaid programs and initiatives were compliant with federal laws and rules.

What were your first impressions when reading Senate Bill S2568?

My first impression was that this bill, as written, has no chance of passing.

Why not?

For a few reasons, some technical, some substantive.

And I should clarify, when I say “passing” I don’t mean being passed by the legislature, I mean being signed into law by the governor. I have great respect for Senator Cooney and Majority Leader Peoples-Stokes (the bill sponsors), and they may prioritize passage of this bill, but I would expect a gubernatorial veto.

For context, when a bill passes both houses, the legislature does not typically send the bill immediately to the governor for signature; instead, the houses negotiate with the governor’s office on what bills will be sent and when.

This gives the governor’s office an opportunity to review the bills, solicit stakeholder input and, importantly, solicit the opinion of the appropriate agency/office. In this case, the governor’s office would consult with DOH, because the bill implicates Medicaid and other public health insurance programs run by DOH.

DOH has an institutional prerogative/mandate to protect the Medicaid program. One major red flag for DOH would be the lack of federal financial participation in the coverage of cannabis. Medicaid (and the other public insurance programs in the bill) is run as a state/federal partnership. In the case of Medicaid, the federal government picks up 50% of the cost of services (the federal “match”). Institutionally, DOH would be loath to implement a program that does not have a federal match and, as you know, cannabis is illegal on the federal level and therefore the federal government would be prohibited from sharing the cost of coverage.

I think it is important to understand that no bill is passed without context. If DOH were to support a coverage bill that did not require a federal share, that would set a very difficult precedent for DOH to follow in other contexts.

For example, why wouldn’t hospitals demand that their funding not be subject to federal funding? If you cover cannabis with state-only funds, you would be hard pressed not to acknowledge an equally compelling need for state-only hospital funding.

I don’t understand the inclusion of Child Health Plus in this bill. Child Health Plus is essentially Medicaid for kids under 18. First, would you even prescribe cannabis to a minor? There is one FDA approved cannabis prescription for epilepsy, but that is already covered, so this doesn’t really make sense.

And I understand that minors may access the medical program, but having the state pay for it is a different matter entirely.

Second, Child Health Plus (CHP) is a 90% federal match, meaning the state only pays 10%. Why would the state take on a 100% cost in a program where it only pays 10%? It wouldn’t.

The Essential Plan is another kind of head scratcher. The Essential Plan is also a 90% federal match, but the funding mechanism is quite different from Medicaid and CHP. The Essential Plan is funded through Advance Premium Tax Credits, which are paid for by the federal government, to the state, for its enrollees. That makes it incredibly difficult, as a practical matter, to include cannabis as a covered drug because the claiming mechanism is through the premium.

This means that you would have to separate out claims for cannabis coverage from every other type of drug/service reimbursed under the Essential Plan and then exclude those reimbursements from the premium calculation. Functionally, that is extremely difficult and may be impossible.

The Elderly Pharmaceutical Insurance Coverage (EPIC) is secondary coverage to Medicare Part D drug coverage. You may be able to envision a scenario where a primary payer (Medicare) doesn’t cover a service, but a secondary payer (EPIC) does, but that would be pretty unusual in the public health insurance context.

Frankly, it would be outside the scope of the EPIC program because the whole purpose of EPIC is to subsidize seniors for their out of pocket Part D drug costs. It doesn’t really fit.

As for Workers Compensation, that might actually be doable. I say that because our Workers Compensation system is set out in our state constitution and thus is wholly a New York system, unlike the other programs discussed.

Talk about the line in the bill that says, “New York’s Medicaid and Child Health Plus programs have always covered people and services for which we do not receive federal match.”

Yeah, that’s not entirely accurate. In some cases, where New York courts have compelled DOH to cover populations without a federal match, that is true.

So, for example, we have this group of people called the Aliessa population (so named because of the court case that established them), who are non-citizens residing in New York under color of law (meaning resident aliens, visa holders, etc.), and they are covered by NYS Medicaid.

The federal government has prohibitions on using federal funds for non-citizens, but for the Aliessa population, New York courts basically said, our State constitution requires they be covered, and therefore DOH must pay for services to this population despite the fact that there is no federal financial participation.

You may find, in other statutes, provisions that allow DOH to make state-only Medicaid payments, but those statutes grant DOH the authority to do so, they don’t compel DOH to do so, like this bill.

What would it mean for the state to be on the hook for the entire amount, if the feds don’t kick in?

There are a multitude of impacts on Medicaid if this bill were to pass.

First, Medicaid, by design, is a free health insurance program that covers about seven million New Yorkers. That means that Medicaid members do not pay the cost of their treatment, but rather, the state pays those costs. That is true for Medicaid drug spending as well.

So if this bill were to be signed into law, Medicaid would be required to pay for free cannabis to its seven million members. That is not to say seven million people would start taking cannabis, but there would be an enormous fiscal impact on the program.

Medicaid operates under a “Global Cap,” which is a statute that limits total state Medicaid expenditures. When the Global Cap is pierced, that is to say, when state spending exceeds authorized amounts, there is another law that requires DOH to implement proportionate cuts across industries covered by Medicaid – so think hospitals, nursing homes, clinics.

So in a very real sense, every Medicaid dollar that would be spent on cannabis is a dollar that is not spent on hospital care, nursing home care, etc. That creates powerful constituencies that may oppose this bill.

There is another issue (constituency) at play here, as well.

Medicaid funding is complex, but at the end of the day, a portion of Medicaid is funded through local property taxes. When Medicaid spending goes up, so do local property taxes. When you do not have a federal share of Medicaid, such as here, the costs to the counties increases even more, which is something all elected officials are acutely sensitive to.

I want to address, as well, the argument made in the sponsor’s memo, that there could be Medicaid savings because of a substitution effect. The sponsors are saying, there is no cost, because people will use cannabis, instead of, say, opioids. That is a really speculative argument that doesn’t pass the smell test.

Many, if not most, of Medicaid prescriptions are for emergency medicine and chronic conditions. Can you substitute cannabis for dialysis? Of course not. Or for anesthesia? Again, of course not. Would there possibly be a substitution effect on pain management? I would concede that, but on the cost side of things, the effect would be so small as to be meaningless.

If the legislature and governor want this passed, why won’t it get passed?

Well look, if the legislature and executive agree to pass and sign the bill, it would be law. But I very much doubt the executive would sign this bill into law.

As I described earlier, the executive doesn’t act in a vacuum – the process is designed to allow for input from industry, stakeholders, and offices/agencies once a bill is passed. Institutionally, DOH would want to see the bill amended to be “subject to federal financial participation” like every other Medicaid reimbursement bill.

That obviously cannot be achieved due to federal prohibition.

Further, the counties would have a compelling case to the executive that they should not bear the burden of these state-only costs. And again, you are talking about scarce Medicaid resources; resources that are desperately needed to fund hospitals, nursing homes, home care, clinics, and prescription drugs for seniors.

Many Medicaid providers would love to see their reimbursement be guaranteed by the state, instead of being subject to federal approval. Every one of these groups has serious needs; every one of these groups has a legitimate claim to being a critical provider that needs more funding.

In essence, any argument that you can make to treat medical cannabis as distinct from other drugs or services can also be made by current Medicaid providers or currently covered Medicaid drugs or services.

There’s been a lot of excitement among the medical community for this bill. As someone who’s uniquely experienced to weigh in on this, what would you tell them?

I would say that this bill is not the vehicle to achieve their ends. There are real and significant obstacles to passing this bill, including technical and legal issues that could prevent the program from being implemented. Likewise, there are political issues and constituencies that could also prevent the coverage envisioned by this bill. I do not see any path forward for this bill that would address the concerns we discussed.

Further, on the substance, our Medicaid program is one of, if not the, best and most generous Medicaid program in the country. But Medicaid funding is not unlimited, and providers compete for these scarce resources.

Medicaid coverage bills try to address access for drugs and services that have demonstrable medical need. I think it is very challenging, in an environment where we have adult-use cannabis, to say that the needs of Medicaid cannabis users are not being addressed.

I’m not saying it’s not true, I am only saying that argument, in the face of the very pressing needs by other Medicaid providers, is not the most compelling.

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