Medicaid Budget Brings Scalpel But Needs Ax

With about a week remaining until Governor Andrew Cuomo’s Medicaid Redesign Team must submit its recommendations to the public, the time for serious proposals to reform this nearly $54 billion-a-year entitlement program is now.

The governor’s task force is currently reviewing 49 key changes winnowed down from 274 recommendations gathered through public hearings, policy briefs, and submissions from state agencies like the Health Department.

The point must be to reform Medicaid not simply for one-off budgetary considerations, but to make the serious redesigns and reforms necessary to prevent long-term economic stagnation and bankruptcy. We can do it. But first lawmakers need a clear-eyed view of the significant challenges we face with Medicaid's current funding model.

Our state faces both a short- and long-term Medicaid-funding threat. New York’s unique place among states administering heath-related entitlement programs is to blame for a portion of the current staggering $10 billion budget deficit. In the Empire State this comes down to three programs: Family Health Plus, Child Health Plus, and Medicaid. Medicaid alone accounts for approximately 45 percent of our state’s budget.

By the governor's own projections that figure will rise past 50 percent by 2020 if nothing is down to curb its ivy-like growth. Medicaid here is by far the most generous in the country at a time when we can least afford it; currently one in four New Yorkers is receiving Medicaid services, including free transportation, cooking, and shopping provided at taxpayer expense.

 The Empire State spends twice that of notoriously profligate California despite covering 55 percent fewer patients, and costs our taxpayers 79 percent above the the national average for every Medicaid recipient. New York also requires comparable Medicaid contribution levels between the counties and the state – a pricey funding model with great political consequences for those taking a serious stab at reform.

It works like this: Washington pays 50 percent, New York State covers approximately 25 percent of total costs, and local taxpayers get stuck with the remaining 25 percent. This cost shift is a leading driver of high property taxes in Suffolk County, but, thanks to its federal reimbursement, it's politically vexing for leaders to tackle. That's because, as a joint federal-state program, Medicaid lavishes New York with funding from Washington but erases it once statewide cuts have to be made.

A dollar's worth of Medicaid reductions actually means two dollars lost under the current system. Our county and state officials therefore stand to suffer politically for their wise economic choices, not the unaccountable federal bureaucrats who created these perverse incentives in the first place.

Now, with New York experiencing high unemployment levels and slow economic growth following the longest recession since the Great Depression, Medicaid is set to add even more patients to its pricey caseload. Unemployment is typically a leading indicator of Medicaid growth.

For example, a study conducted in 2009 for the Kaiser Family Foundation projected that every increase of 1 percentage point in the jobless rate would generate 1.1 million more uninsured and 1 million more recipients of Medicaid and the State Children’s Health Insurance Program nationwide.

Today, with state unemployment still hovering around 8 percent (7.3 percent of Suffolk County’s residents are out of work), Medicaid caseload growth is increasing precisely when our state’s taxpayers can least afford to fund it. After public-sector pension and health-insurance costs, Medicaid is the second-largest source of New York's long-term unfunded liabilities. Our accumulated debt – state-agency bonds, interest, capital projects, everything – currently stands at more than $120 billion, according to the Citizens Budget Commission. We are headed over a fiscal cliff if state leaders do not act fast.

I hope the recommendations provided to Governor Cuomo and his staff on March 1 do at least two things: take steps to reform Medicaid's blinkered incentives, and provide our state with more flexibility to fund our health-care safety net without breaking the bank.

This means taking a hard look at the fee-for-service model that rewards the number of procedures instead of the effectiveness or quality of provider care. We also need more cost-effective high-risk insurance pools combined with medical savings accounts and fixed-credit offerings (like a non-refundable health-care tax credit) to offer patients both health security and choice without breaking the bank. New Yorkers need relief from Medicaid's unsustainable funding.

In about a week we'll know if the governor's Medicaid Redesign Team has a real prescription for change.