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DELAWARE HEALTHCARE INDUSTRY UPDATE - JULY 2017
Budget Impasse Leads to Health Cuts & “Sin” Taxes
By 1:30 a.m. on July 3rd, the Governor had signed a budget. It included litany of cuts, including several in healthcare. Public health programs were cut 10%, including funding for prescription drug abuse prevention, needle exchange, immunizations, infant mortality, cancer counseling, and nurse-family partnerships. Also included was $5 million in unspecified “savings” from Medicaid, to be determined by Secretary Walker. However, the DIMER/DIDER/DIVME program, which reserves slots for medical training for Delawareans in neighboring states’ schools, was restored after being cut two years ago.
The budget process this year took historic detours. For the first time in nearly fifty years, the Delaware General Assembly missed its constitutional June 30th deadline to pass a balanced budget.
Months prior to the deadline, the Governor released his proposed budget, including a 50-50 “shared sacrifice” mix of cuts and revenues to close the nearly $400 million structural budget gap Delaware faced. However, the General Assembly had other ideas about closing the gap, leading to an impasse. Although Democrats control the Governor’s office and both legislative chambers, including a supermajority in the House (25 of 41 members), the simple majority (11 of 21) in the Senate meant that any revenue bills, which require 3/5 votes, demanded at least two Republican senators get on board.
Along with a menu of cuts, Governor Carney proposed increases to the personal income tax, doing away with itemized deductions, increasing tobacco taxes, and increases to the corporate franchise tax to raise revenue. Midway through the spring, a deal was struck to raise corporate franchise taxes to bring in over $100 million in exchange for doing away with the estate tax, a Republican priority. That swap was the end of the collegial bargaining. In exchange for increases to the personal income tax, the Republicans wanted a moratorium on prevailing wage and held that line firmly despite Democrats’ early refusal to bargain on that issue.
Typically the “Delaware Way” rules the day, whereby differences are set aside to meet the deadline. Not so for 2017, when just after 5 a.m. on July 1st, legislators passed a continuing resolution to avoid shutting down the government. Even with a supermajority in the House, the Democrats failed to pass a personal income tax bill. Citing constituent opposition to a cap on itemized deductions, Representative Andria Bennett broke ranks and the bill failed to meet its constitutional 3/5ths requirement. Then, Governor Carney issued a proclamation calling the legislators back to work for extraordinary session on Sunday afternoon to finish the budget. With a wide divide, it was unclear at best when budget negotiations would conclude.
Defying expectations, by Sunday evening a deal was struck. Personal income tax increases came off the table and with it the logjam. Taking a new path, legislators balanced the bulk of the budget on an additional across-the-board .75% cut to all agency non-personnel budgets, a 20% cut to grant-in-aid funding to nonprofits, a tobacco tax at half the suggested increase ($.50/pack as opposed to $1.00/pack), an alcohol tax, and an additional 1% tax on realty transfers, from 3% to 4%. While leadership from neither party was pleased with the outcome, it did prevent a government shutdown.
Not all legislative action last season produced so much drama. Below we unpack both the budgeting impact on Delaware healthcare as well as some of the more routine bills that passed. We also provide a bit of prognostication for next session.
Legislation Passed This Session:
Buy Buy, Sell Sell, Now Now (HB279)
The one-percent transfer tax bump impacts any healthcare provider considering or in the process of a bricks and mortar transaction, including a long-term lease subject to the tax. Assuming Governor Carney signs the bill, transactions resulting from contracts signed before August 1, 2017 will be exempt, so call your Morris James real estate attorney and get your transaction moving!
Addressing the Cost of Care Head-On
Healthcare costs, along with education, are a major budget driver both nationally and locally. Addressing these costs became a major point of negotiation between the various budget factions. Ideas on exactly how to address the issue were many, as shown by competing task force resolutions: HCR49 (Wilson) and SCR36 (Townsend) and House Joint Resolution 7 (Longhurst). Rather than move forward on a delineated task force, the legislature opted to instead to pass HJR 7 which empowers the Department of Health and Social Services to undergo a process of benchmarking the cost of care in consultation with the many health stakeholders in the state. Such a process has been undertaken by several states, including Massachusetts, which was cited often by the Department during the process. The process begins with a planning year which assesses the cost of care in totality.
Opiates Remain Front-and-Center
Several pieces of legislation were passed this year which seek to further bring the opiate crisis into check. The issue made an appearance in the budget process on both the cuts and revenue side. Notably, HB250 (Keeley) proposed a 10% tax on opiates, but the bill failed to come out of revenue committee to be considered as a revenue source for balancing the budget. However, there were many other bills addressing the issue that did pass or may in the future, a selection of which can be broken up generally by their proponents:
Attorney General Denn Bills:
- HB91 (Mulrooney) – PMP Advisory Committee
The Prescription Monitoring Program is a state-funded tracking system for all opiate prescriptions. Anyone with a Controlled Substance Registration is required to sign up (expanded this year under Senator Townsend’s SB 44) and enter all prescriptions. HB 91 creates an oversight committee which will look to the aggregated data for prescriber outliers which may be in “breach of professional standards.”
- SB41 (Hansen) – Treatment Payment
This legislation expanded the requirements for commercial insurers in Delaware to pay for emergency intervention for substance abuse and up to two weeks of in-patient treatment. It also removed potential impediments such as concurrent utilization review and prior authorization. Senator Hansen also drafted, but did not yet file, legislation that would mandate insurance payment for non-opiate pain treatments. She is working with the Addiction Action Committee (see below) over the fall to refine the requirements.
- HB100 (Keeley) – DOJ Insurance Assistance
This legislation targets payment denials for substance abuse treatment by insurance companies. It provides for a notification process and also allows the Consumer Protection Bureau of the Attorney General’s office and Consumer Protection Fund to come to the aid of those denied to provide the expertise and funding to appeal those denials.
- Lieutenant Governor Hall-Long Bills:
Delaware’s Lieutenant Governor, Bethany Hall-Long is an advanced practice registered nurse and the former chair of the Senate Health Committee. As such, she has made health an active priority of her office as manifested in two bills:
- SB111 (Townsend)
Many groups and task forces have been convened over the years to address mental and behavioral health challenges and shortages as well as substance abuse treatment delivery. This new consortium is designed to overlay them all under the guidance of the Lt. Governor and report by March 1st, 2018 on a plan to address gaps.
- HB220 (Bentz)
The Prescription Drug Action Committee has been an active group that has been a partnership between the Medical Society of Delaware and the Department of Public Health. This legislation codifies the group as the “Addiction Action Committee,” which is tasked with addressing the mortality and morbidity of addictive drugs.
Human Trafficking Crackdown
Lawmakers made a concerted effort this year to crack down on human trafficking following several profiled investigations and arrests.
- HB35 (B. Short) established a regulating framework for massage and bodywork services to provide greater oversight of these establishments which have sometimes served as human trafficking fronts.
- HB164 (Keeley) established the Human Trafficking Interagency Coordinating Council.
- SB75 (Richardson) updated Delaware’s trafficking statute (11 Delcode 787) by adding to the definition of trafficking “advertising” and “soliciting” in furtherance of forced labor.
Delaware Legislature Passes Law Permitting Research and Transplantation of HIV-Positive Organs
The Delaware Legislature amended Section 2801(c) of Title 16 of the Delaware Code recently to permit research on HIV-positive organs and fluids, consistent with federal law, and to allow the transplantation of HIV-positive organs and fluids to other patients who are HIV-positive. This law, passed by the 149th Delaware General Assembly and signed into law on April 25, 2017, will now permit Delaware to join the other states in permitting both the transplantation of and research with HIV-positive organs without criminal charges.
Delaware Legislature Revises Statute Related to Board of Mental Health and Chemical Dependency Professionals
The Delaware General Assembly recently amended Sections 3031-3034, 3044, and 3051-3054 of Title 24 of the Delaware Code to address the Mental Health and Chemical Dependency Professionals. Specifically, the law clarifies the type of supervised experience that applicants need to obtain licensure and removes the requirement that reciprocal applicants be certified by a national organization. It further removes the criteria that a pending criminal case precludes licensure. The law went into effect on May 2, 2017.
Delaware Codifies Roe v. Wade
On June 8, 2017, Delaware signed into law SB5 which revoked Delaware’s prior abortion prohibitions and made Delaware’s law consistent with U.S. Supreme Court precedent. Specifically, the law allows physicians to participate in the termination of a pregnancy prior to viability and to protect the life or health of the mother, or in the event of serious fetal anomaly. The law is codified in Volume 81, Chapter 35 and amends 24 Del. C. §§ 1702, 1790, 1793 and 1794.
Marijuana Legalization Takes Another Tact
Despite a concerted push by advocates in the hall to adopt recreational marijuana as a revenue-raiser in a tough budget year, HB110 did not come to the House floor for a vote this year. However, the sponsor, Representative Keeley, was able to pass HCR52, establishing an, “Adult Use Cannabis Task Force,” which was able to pass both the House and Senate in the waning hours of July 1st. The twenty-five members of the task force are directed to study “a model for regulation and taxation for adult-use cannabis in Delaware” and to report by January 31, 2018.
The medical marijuana statute also continues to be tweaked. Since its passage, this section of law is the subject of several bills a year, including SB24 (Henry) this year which originally expanded the use of medical marijuana to “anxiety”, but was amended to instead remove the need to psychiatrist evaluation before use by a person suffering from PTSD. However, there is an underused mechanism in the law that allows for the qualifying conditions to be expanded by regulation. To encourage its use, HB210 (Ramone) opened up this petition process to also consider conditions suffered by minors, which was previously prohibited.
End of Life Legislation Re-Introduced
HB160 (Baumbach) was re-filed this year as the “End of Life Options” Act as a re-brand from “Death with Dignity.” It is similar to the previous year’s legislation which allows a terminal patient to request a life-ending drug prescription from his or her attending physician after several process checks such as independent consultation and, if necessary, a psychiatric evaluation. Unlike last year’s bill, this legislation received support from another House member and several Senators. Also unlike last year, the legislation came out of committee. However, it did not come up for a floor vote before July. The sponsor has pledged to continue to seek the advancement of the legislation and expects continued pushback from the healthcare, disability, and faith communities.
Telemedicine Gets a Tweak
Telemedicine continues to pick up speed in adoption and as such, the underlying statute is likely to continue to be tweaked as the practice finds its way into the mainstream. This year HB201 (B. Short) made some small clarifications to avoid inadvertently limiting pre-HB69 practices including follow-up calls with your physician for treatment adjustments and also to ensure that pathology and radiology, which have operated via telemedicine for many years, are unimpeded.
State-Level Cybersecurity Statute Modernized – Are you in Compliance?
While the healthcare industry has operated under HIPAA requirements for some time, this year the state-level statute, found at Title 6 of the Delaware Code, Section 12B-100 received an update. HS1 to HB180 (Baumbach) specifically carved out HIPAA-covered entities so that if a breach were to occur, the entities following HIPAA are exempt from the state law. Consulting with an attorney on the new requirements of the state law and doing a risk analysis for your practice is advised.
Most of the bills mentioned here await the Governor’s signature. We will be sure to update this post if any receive a veto. It was an eventful legislative session. Please contact any of the authors to discuss how Morris James can help you or your business adapt to newly adapted laws or navigate legislative waters.