On July 22 the PA Department of Public Welfare (DPW) Deputy Secretary for Medical Assistance Mike Nardone presented an overview of the final FY 11 budget to the Medical Assistance Advisory Committee (MAAC). Nardone said that the reductions in the DPW budget were modest given the size of the revenue gaps. He said that there are still major concerns resulting from the lack of Congressional approval of the FMAP extension and the general economy in which revenues are flat or declining. However, he said, there were no benefit or eligibility reductions; funds are included to support the anticipated increase in eligibility; there are funds for an average four percent physical health MCO rate increase; and, funding was included for the physical health pay-for-performance payments which were due in FY 09-10. Nardone said that the hospital assessment will modernize the fee-for-service payment system; restore DSH payments; and save $121 million in FY 11 and $246.5 million over three years. Major initiatives for FY 2011 include the following: obtaining federal approval for the hospital assessment, obtaining federal drug rebates (savings of $102.5 million in FY2011), developing health information technology, implementing health care reform, and enhancing program integrity efforts under health care reform. He said that the challenges that still remain include: Impact of the potential lack of the FMAP extension, obtaining CMS approval of the hospital assessment, the still struggling economy, and increases in eligibility. FMI: Contact PARF at firstname.lastname@example.org. See also www.dpw.state.pa.us for MAAC meeting minutes.