The opioid epidemic is a serious crisis that deserves a serious solution.
But the Executive Budget 30-day amendment proposal, contained in Part XX of the Revenue Article VII bill, does little to address this crisis by imposing a tax on the “first sale” of certain opioid medications.
Instead, this tax creates a confusing, costly and administratively burdensome tax that raises a number of serious policy and legal concerns.
What New York really needs is a comprehensive policy approach to addressing the opioid crisis, including the prevention of overprescribing; efforts to educate patients and prescribers; expanding access to appropriate treatments for substance use disorders; and enhancing law enforcement efforts; all while ensuring appropriate patient access to needed medications.
An opioid tax doesn’t prevent abuse. It only hurts people in pain, who have a legitimate need for this medication.
There are a number of other issues with the tax that could further erode its effectiveness as a revenue raiser.
- Reduced Federal Medicaid Payments. Revenue from the tax may ultimately go toward reducing the federal government’s Medicaid payment obligations to the State of New York — rather than actually benefiting the state’s coffers. This is because, in calculating the federal share of assistance, Medicaid generally deducts revenues from health-care related taxes imposed by the state or local government unless such taxes are broad and uniform across an entire “class” of items or services and meet certain other requirements. In this case, the tax is applied to a small subset of a class, the first sale of an opioid medication in the State. Absent a special approval from CMS, revenue from the first sale tax could therefore likely be offset by reductions in how much the federal government pays New York for Medicaid assistance.
- Administrative Cost Offsets. Due to concerns about erroneous collections, there could be significant administrative cost offsets associated with this tax. It stands to reason that the higher the risk of erroneous collection, the higher the number of challenges to such collections, and the higher the costs associated with administering the tax collection and review system. This in turn suggests that revenue collected from the tax may ultimately end up being cannibalized; the tax will be used to pay for the very system required to administer the tax — and to identify all the erroneous collections that will likely ensue and repay erroneously collected taxes with the addition of interest.
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