Baker Files FY20 Budget Proposal; Eyes Tax on Opioids

Governor Charlie Baker last Wednesday released a $42.7 billion FY2020 state budget proposal that among other things, maintains level MassHealth provider reimbursement rates, attempts to give the state more bargaining power with pharmaceutical companies, taxes opioid manufacturers, and appropriates more funding for substance use disorder services.

According to the Executive Office of Health & Human Services (EOHHS), which provided an overview of its budget priorities, reimbursement rates for most providers are assumed to be held flat in FY2020. For hospitals, this means that while EOHHS assumes no growth in spending on a per-member basis, there will likely still be modest updates to the inpatient and outpatient rates.

Similar to its FY2019 budget request, EOHHS seeks the ability to negotiate outside of state procurement rules when dealing with pharmaceutical manufacturers for MassHealth-reimbursed drugs. If EOHHS cannot obtain a satisfactory Medicaid drug rebate, EOHHS could establish its own value of the higher cost drugs through a public process and publish those amounts on its website. And if further efforts to negotiate fail, a manufacturer can be referred to the Health Policy Commission (HPC), which can request drug pricing information and hold public hearings. The HPC could then, in turn, refer the manufacturer to the Attorney General.

Funding for the Department of Mental Health (DMH) and DPH increases 1% and 1.2%, respectively, over FY19. The governor’s “House 1” budget includes $266 million in funding across several state agencies for substance use disorder treatment services. This is a $48 million increase (22%) above estimated FY19 spending. The total funding includes $16.7 million to fulfill the requirements of Chapter 208, last year’s opioid law, including medication for addiction treatment within correctional facilities.

Baker’s budget would impose a gross receipts tax of 15% on the revenues of opioid manufacturers from the sale of their opioid products that are dispensed in the commonwealth. Revenues associated with drugs used for medication for addiction treatment and those used in inpatient settings are exempted from the tax. As reported by the State House News Service, Governor Baker said of the opioid tax, “The manufacturers have a lot to do with creating the crisis that we all are paying for every day and creating a mechanism in which they put something in to help pay for the carnage they've created, I think, is important.”
The House Ways & Means Committee will release its proposed budget during the second week of April.