The Boston Herald
Tuesday, December 31, 2002
Budget woes greet new regime:
Deficits await Finneran, Romney
by Elisabeth J. Beardsley
House Speaker Thomas M. Finneran and Gov.-elect Mitt Romney
said yesterday they're ready to mop up a major fiscal mess that appears to be
spinning out of acting Gov. Jane M. Swift's control as she prepares to leave
office this week.
Finneran - the only Beacon Hill leader who will be left
standing after this week's transfers of power - evidenced grim satisfaction yesterday that Swift has
suddenly downgraded the state's fiscal health, after months of insisting on a
rosier revenue picture.
House leaders predicted in October that the state would face
a deficit between $500 million and $700 million by the end of the fiscal year in June - roughly
the size of the problem Swift now admits.
"Other people had more optimistic assumptions and obviously
those optimistic assumptions have not materialized," Finneran said. "I expect that '03 is going
to be a serious problem that will require joint legislative and administrative
action."
Romney spokesman Eric Fehrnstrom said the governor-elect,
who has distanced himself from Swift's lame-duck budget cuts, would outline his
ledger-balancing plan in his inaugural address Thursday.
"We've always understood there's going to be additional
corrective actions required in fiscal '03 that will require the cooperation of the Legislature,"
Fehrnstrom said.
With tax receipts from December still rolling in, the
deficit estimates are in flux, ranging from $250 million to $600 million.
Swift aides over the weekend trumpeted a worst-case scenario
of a $600 million deficit - but that was already unraveling yesterday.
Emerging from a private meeting with Swift yesterday, Senate
Ways and Means Chairman Mark C. Montigny reported that income tax withholding has
"picked up" in the few days since Swift issued her dire warning.
"It's not good news," Montigny (D-New Bedford) said. "It's
just relatively better news than we heard on Friday."
Swift, who refused to speak with reporters yesterday, had
planned to send a letter of proposed money-generating solutions to lawmakers yesterday but
backed off after the spike in December collections.
Swift spokesman Jim Borghesani said the letter would go out
today, after the final revenue figures for the month are in.
Legislative leaders reacted coolly to Swift's list, which
includes curtailing Lottery payouts and borrowing against tobacco settlement money - ideas that
have been dead on arrival in the past.
But other Swift proposals - like instituting another early
retirement program to trim the state's payroll - have potential traction.
"Some might have more appeal than others," Finneran said. "I
do think they'll all be looked at with fresh perspective."
In related news, the state scraped together a $1.1 billion
local aid payment yesterday by borrowing $700 million in short-term notes.
While the current year's books are still awash in red ink,
work is slated to start shortly on next year's budget, where the deficit is expected to balloon to as high
as $3 billion.
Finneran yesterday reiterated that new tax hikes are not an
option this year - and he put responsibility for the consequences squarely on Romney, who swept
into office on an anti-tax platform.
But the speaker expressed skepticism about Romney's ability
to balance the budget without new taxes, noting Romney has begun issuing dire warnings
since the election.
"I'm encouraging him to give it his best effort," Finneran
said. "If he can succeed in that task, he deserves our applause, and because of that, we won't
stand in his way gratuitously."
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The Boston Globe
Tuesday, December 31, 2002
Legislators to consider more cuts
Eye fast action on state deficit
By Rick Klein
Globe Staff
Legislative leaders yesterday vowed to reopen the state
budget to consider further cuts, saying that they recognize the importance of moving quickly to
close a deficit that Acting Governor Jane Swift is warning could reach $600
million this fiscal year.
House and Senate leaders said they will look to address the
budget gap aggressively in fiscal 2003, which ends June 30, and will probably authorize
further budget cuts before late February - when Governor-elect Mitt Romney
is slated to file his proposal for the next fiscal year. They said Swift is right
to sound alarms about this year's finances, and that they are looking for Romney
to offer guidance after he takes office on Thursday.
"I expect that '03 is going to be a serious problem that
will require joint legislative and administrative action," House Speaker Thomas M. Finneran
said. "We're trying to react to the realities ... You can wish the rest of us well,
because this is a huge and very, very serious task."
The speaker's remarks underscored a growing realization
among Beacon Hill leaders that this year's budget problems can no longer be ignored. Under
normal circumstances, the Legislature's role in crafting the budget ends when
House and Senate members approve it and it is signed into law by the governor, as occurred in July. Since then, House and Senate
leaders have been content to let the governor address budget problems through the use of
emergency budget-cutting powers.
But after repeated bad news on tax collections and the
economy, they now say they realize they must take action and more broadly reexamine this year's
planned expenditures, and that the governor, whose power to restrain spending is limited,
cannot do it alone. Legislative approval is needed to reduce any of the $5.5 billion the state sends annually in local aid,
and virtually all actions to generate revenue must be approved by the Legislature.
One key Senate leader said yesterday that the state should
pursue sales taxes on online shopping to help address the budget gap. It's not widely known or
enforced, but Massachusetts residents are legally required to pay the state's
5 percent sales taxes on purchases made over the Internet. But because such
taxes aren't collected by online retailers, that requirement is almost universally
ignored by consumers.
Senate Ways and Means chairman Mark C. Montigny said that
while it would be difficult to collect such a tax, it must be done, given the gaping hole in this
year's budget. Several states are considering similar plans.
"That's revenue we're losing," said Montigny, a New Bedford
Democrat. "You shouldn't get a tax benefit simply because you go online."
Montigny, who has only begun examining the issue, could not
say how much money the state could generate from online sales taxes. While Congress has
imposed a moratorium on states' taxing Internet-only sales until November
2003, some states are moving to tax sales from online companies that also
have stores within their borders, which is legal.
Romney has vowed to balance the budget without new taxes,
and a Romney spokesman declined comment on whether stepped-up collection or expanded
taxing of Internet sales would be considered a new tax.
Swift yesterday warned legislative leaders during their
weekly meeting that this year's $23 billion budget could be as much as $600 million out of balance.
But for months she had been saying she would leave office with a balanced
budget. Swift had previously said that the $260 million in budget cuts
that she ordered would be sufficient to balance the budget.
Because Swift leaves office on Thursday, she is telling
Romney and legislative leaders that there is nothing more she can do as governor to bring the budget
into balance. Instead, she is offering them a list of options that she says would
help balance the budget.
According to a list obtained by the Globe, she is recommending that Romney
use emergency spending powers to cut the budget by $80 million, that the
state tap a variety of reserve funds, and that new revenues be freed from
increased fees at the Registry of Motor Vehicles and by borrowing against
long-term tobacco settlement payments.
She has come up with about $1.6 billion in options and
identified $952 million in various reserve funds the state could tap.
Swift had intended to deliver her list in a letter to state
leaders yesterday but decided to wait until today so she could include final revenue numbers for
December. That's the source of a rare bit of better-than-expected fiscal news:
While the administration had been warning of a shortfall of as much as
$100 million this month, they now believe that figure will be somewhere between
$10 million and $60 million, since collections have been heavier than expected
in recent days.
Still, that shortfall, which the administration believes is
the result of a drop-off in holiday bonuses, is significant enough to prompt serious concern, said
Stephen P. Crosby, Swift's chief of staff. When that is combined with the risk
that the expected economic turnaround is still six months or more off, and the
possibility that capital gains revenue will be wiped out by capital losses, a
budget hole of $600 million could remain.
"You base your projections on hard data, and all the hard
data there is suggests the risks are getting bigger, not smaller," Crosby said.
Eric Fehrnstrom, a Romney spokesman, said Romney and his top
fiscal aides have been warning for weeks that this year's budget could remain out of
balance by several hundred million dollars. Romney has not yet committed to
specific actions, but he will use his inaugural address to ask for the Legislature's
help in solving this year's budget problems, Fehrnstrom said.
"We're going to be asking for the Legislature's cooperation
in dealing with the budget challenges," Fehrnstrom said. "We welcome the suggestions [from
Swift]. "
Finneran said that while some of Swift's ideas have been
rejected in the past - including the up-front use of some of the tobacco settlement money and caps
on Lottery prizes - everything must be on the table for consideration.
"Some might have more appeal than others," he said. "Some of
them have been proposed. I do think they'll all be looked at with fresh perspectives."
Montigny said he thinks state leaders should look at the
problem as an 18-month budget shortfall, since a gap of $2 billion or more is expected in fiscal
2004. Many ideas that the Legislature pursues for the current fiscal year could
help the state next year, he said.
"Whatever you do today, it helps us with our situation next
year," Montigny said. "We need to begin immediately."
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The MetroWest Daily News
Tuesday, December 31, 2002
$1.30 more to pick up your meds
By Michelle Hillman
Starting tomorrow, anyone picking up prescriptions not
covered by Medicaid or Medicare will have to pay an additional $1.30 if they want to take home their
medication.
Under a new law set to be implemented this week, pharmacies
must pay the state Division of Health Care Finance and Policy an "assessment" on every
non-Medicaid and non-Medicare prescription dispensed.
Although the fees are being collected at the beginning of
2003, payment by the pharmacies do not have to be made to the state for four months.
A public hearing was held yesterday to discuss implementation of the law.
Phillippe Bouvier, co-owner of Bouvier Pharmacy in Marlborough, attended the
hearing and was confused why, after a law has already been passed, are officials
trying to figure out the best way to implement it.
"The way the state does things is very unusual to me," he
said.
The Legislature approved the regulation last summer as a way
to generate $36 million in revenue to apply toward burgeoning prescription drug costs in the
state Medicaid or MassHealth budget, which is the state's Medicaid program.
Heather Shannon, spokesperson for the Division of Health
Care Finance and Policy, said the agency has been charged with collecting the assessment and
said it's up to the pharmacies to determine how to do that.
"We've been directed to do something," she said. "The state
budget language had nothing in it as to whether the pharmacies could pass it on."
Shannon said there will be no decisions made about the
regulations and how they should be implemented before the end of January. She said the public
record will remain open for comment until Jan. 9.
Owners and spokespeople of many community pharmacists and
chain stores said they can't afford to absorb the "assessment," which they refer to as a tax
and will be forced to pass it on to customers.
Bouvier said he can't afford to eat the cost. He said the
elderly are going to be hit the hardest with the fee along with the state's poor, who will have to pay $2
co-payments for Medicaid prescriptions instead of 50 cents.
He said he expects customers to be upset, but said he will
have literature available with phone numbers of local legislators to call with questions.
"They're going to hit the ceiling," he said. "They'll be
upset. They're going to hit the roof."
The first payment from pharmacies is not due until May 1,
2003. But Bouvier said pharmacists were instructed to begin collecting the assessment regardless
of the fact that many of the questions raised yesterday will not be answered by
tomorrow.
Carmelo Cinqueonce, executive vice president of the
Massachusetts Pharmacists Association in Waltham, testified yesterday that his organization is
against taxing prescriptions and has "serious concerns" about how the money
should be collected.
"Certainly taxing prescriptions is not the way to go in
recouping this money," said Cinqueonce, whose group represents 1,000 pharmacists in the state.
Cinqueonce said after yesterday's hearing it was unclear how
to determine who pays and who doesn't because the Medicaid identification cards are identical to
some insurance cards.
Also, Cinqueonce said it's unclear if vitamins should be
taxed, as well as prescriptions for over-the-counter medication.
Shannon said issues raised yesterday will be considered
before a final decision is made.
"These are the ... issues that need to be worked out before
this regulation is implemented," she said.
Only prescriptions covered by Medicare and Medicaid are
exempt from the tax. People who are covered under private insurance and HMOs will have to
pay the $1.30 per prescription unless their insurance company agrees to cover
the cost.
Michael Polzin, spokesperson for the Walgreen's drugstore
chain, said even though the $1.30 is referred to as an assessment, customers will think of it as a
tax.
He said the chain can't afford to lose money to pay for the
added cost of prescriptions.
"Walgreen's operates on a 2 percent profit margin," he said.
"It's a tax we'll have to pass on to the customer. We anticipate a lot of questions. We want to
emphasize to them that none of this money goes to Walgreen's."
Polzin said there will be signs in all Walgreen's stores by
tomorrow explaining the reasons for the additional cost. He wasn't sure if the $1.30 would be added
to the total cost for each prescription or collected separately.
"I think it could cause a lot of questions," he said. "I
think it's going to create a burden for our staff."
Regardless of changes made to the regulation before it is
officially adopted, anything short of rescinding it will hurt people in need of prescriptions,
Cinqueonce said.
Cinqueonce said anything that deters people from filling
prescriptions will hurt patients. He said the issue left out of discussion is the cost of the drugs
necessitating the "assessment."
"Where are the pharmaceuticals in all of this?" he asked.
"All these schemes the state comes up with will do nothing to the stem the cost unless they
address the root of the problem."
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The Boston Globe
Tuesday, December 31, 2002
Lack of rules won't delay tax on drugs
By Bruce Mohl
Globe Staff
The state's new prescription tax - and that's what the
federal government is calling it - came under heavy fire yesterday from pharmacists who said it is
unfair, unclear, and certain to drive up the price of drugs for most Massachusetts
residents.
The tax of $1.30 per prescription, scheduled to take effect
tomorrow, was the focus of a hearing yesterday at which pharmacists asked that it be delayed
while regulations are revised to clarify which prescriptions would be subject to
the tax.
Todd Brown, executive director of the Massachusetts
Independent Pharmacists Association, said the draft regulations are unclear, "and
pharmacies will be unable to implement them as written."
Linda Ruthardt, state commissioner of health care finance
and policy, who is charged with implementing the prescription tax, said after the hearing that the
tax will take effect tomorrow, as scheduled, even though final regulations will
not take effect until February.
In the meantime, Ruthardt suggested, pharmacies should
collect the tax on all prescriptions, unless they have written documentation that the drug is being
paid for by Medicaid or Medicare. Prescriptions covered by those two programs are
exempt.
Most pharmacies plan to pass the tax along to their
customers. The lone exception so far is BJ's Wholesale Club, which operates three pharmacies in
Massachusetts.
Consumers can also avoid the tax by using a pharmacy outside
the state, including the mail-order pharmacies that serve most major health plans.
Ruthardt also advised pharmacies to keep detailed records
about who pays the tax, in case it is repealed by the Legislature or thrown out by a court.
Eric Fehrnstrom, a spokesman for Governor-elect Mitt Romney,
who has voiced opposition to new taxes, said Romney's focus right now is on
restructuring state government. He indicated Romney would not seek to repeal
the tax after he takes office on Thursday.
"I don't think the Commonwealth is in a position to forfeit
any revenue at this time," he said.
The prescription tax was enacted to help offset the rising
cost of Medicaid, the state-administered health insurance program for the poor and disabled. The
tax is supposed to raise about $36 million a year, which would be matched by
the federal government. Since half of the state's fiscal year is already
completed, the tax was set at $1.30 per prescription initially, but is scheduled
to fall to 65 cents on July 1.
Acting Governor Jane Swift, who has taken a no-new-taxes
pledge, has argued the prescription tax is not a tax but rather a "pharmacy assessment." The
federal government, however, ignored that terminology in pledging to match
state Medicaid expenditures using the new funds.
In a six-paragraph letter to the state that was released at
yesterday's hearing, Dennis G. Smith, director of the federal Centers for Medicare and Medicaid
Services, called the new fee a tax seven times.
Pharmacists yesterday highlighted a number of situations
that they want Ruthardt to address, to avoid confusion over who should be assessed the tax.
For example, pharmacists asked whether the state wants to tax prescriptions
for over-the-counter drugs, which are often issued to patients just discharged
from hospitals to make sure the pharmacist counsels them on usage.
They also said it is difficult to distinguish whether a
Medicare HMO customer's drug bill is being paid by Medicare. They demanded justification for the claim of
the Blue Cross and Blue Shield plan covering federal employees that its
members are exempt from the tax. (Ruthardt said she was not aware of any
exemption.)
Major hospitals in Boston, including Boston Medical Center
and Massachusetts General, argued that their outpatient pharmacies should not be subject to the
tax because they operate differently and are licensed differently than retail
pharmacies. Boston Medical officials said they fill 500,000 prescriptions a year,
free of charge, for the working poor. The tax would make it much harder to
provide that service, they said.
Concerns were also expressed about the size of the new tax.
Ruthardt wondered aloud whether the $1.30 tax should be
increased to offset an expected drop in prescriptions subject to the tax as more consumers buy
drugs from out-of-state pharmacies. Currently, an estimated 55 million
prescriptions will be subject to the tax.
Carlos Ortiz, CVS Corp.'s vice president for government
affairs, said the tax is too large, given that the number of prescriptions is rising every year as the
population ages and uses more drugs.
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The New Bedford Standard-Times
Tuesday, December 31, 2002
Mass. launches prescription tax tomorrow
By Jennette Barnes
Standard-Times staff writer
A new $1.30 per prescription tax that takes effect tomorrow
is coming as an unpleasant New Year's surprise to many SouthCoast residents.
The charge is on each prescription not covered by Medicaid
or Medicare. It applies to pharmacists licensed in Massachusetts but will not affect mail-order
operations licensed outside the state.
"I was outraged," said Joseph Ribeiro of New Bedford, who
learned of the tax when he picked up a prescription yesterday at CVS.
"Massachusetts is getting absolutely ridiculous," he said.
"I make $800 a week. You get a 3 percent raise and that doesn't even cover you. What do they want,
the sweat off our backs this time?"
For independent pharmacists like Kenneth P. Sanasarian of
Wareham Pharmacy Inc., the tax threatens to turn more customers toward mail order.
Absorbing the cost himself and not passing it on to consumers would be
difficult, he said.
"Profitability is an issue," he said. "The insurance
companies are already grinding us to a pulp. They could burn the cash they have and heat the city."
Sen. Marc R. Pacheco, D-1st Plymouth and Bristol, Senate
vice chairman of the Joint Committee on Health Care, said the tax was never intended to affect
consumers or independent pharmacies. Insurance companies and large pharmacies could bear
the burden, he said.
"It's outrageous what's going on, how this is being
implemented," Sen. Pacheco said.
However, the law does not differentiate between large and
small pharmacies.
Douglas Lapp, a state policy analyst with the Division of
Health Care Finance and Policy, said the tax, as adopted, applies to any retail pharmacy registered
in Massachusetts.
Neither the state budget nor the division's regulation
addresses whether pharmacies may pass the charge on to customers, directly or indirectly, he said.
At CVS, the largest pharmacy chain in the state, spokesman
Michael DeAngelis said profit margins on prescriptions are "razor-thin" at about 2 percent.
"Paying it ourselves is not a possibility. We can't,
economically," he said.
However, BJ's Wholesale Club has pledged to pay the tax
without passing it along to customers. The catch is, BJ's has three pharmacies in Massachusetts --
none in SouthCoast.
Which means a lot of folks will probably end up paying the
extra $1.30 for each prescription.
The tax was enacted in the fiscal 2003 state budget in an
effort to generate $36 million annually to pay for Medicaid recipients' prescriptions under the
MassHealth program.
Mr. Ribeiro said he doesn't like the idea of taxing paid
prescriptions to fund Medicaid.
"I don't mind helping the seniors, but I resent the fact
that I have to pay for people on welfare," he said.
The $36 million will be equally matched by a federal grant.
The $1.30 tax is based on a tally of 56 million taxable
prescriptions in Massachusetts annually. After six months, the tax is scheduled to drop to 65
cents with the start of the next fiscal year.
Dennis Evora of New Bedford shook his head at the news. "I'm
just getting by," he said.
Fortunately for him, his health plan requires him to get
prescriptions by mail, so he won't face the new charge.
"It's insane," said Robert Edge of New Bedford yesterday.
"My mother's on Medicare, but it's still not right."
Although Medicaid recipients are exempt from the new tax,
their prescription co-payment goes up tomorrow, from 50 cents to $2. State law prohibits
pharmacists from denying Medicaid recipients their prescriptions, even if they
say they can't afford the co-payment.
Yesterday, Wareham's Mr. Sanasarian wasn't sure if he was
allowed to treat it as a tax, passing it directly to the customer. He usually views the big chains as
adversaries, but is grateful to see them collecting the $1.30 as a tax, putting
the burden of explanation on the state.
"We were forced into this situation by the state," said Mr.
DeAngelis, the CVS spokesman.
Representatives of CVS and Brooks Pharmacy were among 19 who
testified yesterday at a public hearing on the tax. The hearing, conducted by the
Division of Health Care Finance and Policy, dealt only with the particulars of
implementation, however, and was not meant to debate the merits of the tax.
Pharmacies that do not pay the tax can have their licenses
revoked by the Department of Public Health.
