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From
Assembly Member Richard N. Gottfried
Chair, Assembly Committee on Health

Medicaid: 6 Points

Debate about cutting Medicaid is dominated by myths and misimpressions. Health care is a large part of the state budget, and those myths and misimpressions make it an easy target for people who want to cut spending. Here are some key things to remember.

1. 70% of the Medicaid dollar is spent on the elderly and disabled.

   People who want to cut Medicaid don’t like to say they are mainly cutting health care for the elderly and disabled. But that is what they are doing.

   Medicaid is usually referred to as paying for health care "for the poor." But 70% of Medicaid spending goes for health care for the elderly and disabled, and most of that is for hospitals and nursing homes. It’s true that most people in Medicaid are children and their parents in low-income families, but they use about one tenth the resources of an elderly or disabled recipient, on average.

2. Medicaid is how we finance our health care system. Cutting Medicaid cuts health care for everyone.

   Dollars spent on health care pay for the system we all depend on. When you cut the income of a hospital, nursing home, home health agency, or community health center, whether from consumers’ pockets, insurance companies, or Medicaid, then staff and services get cut. Care is stretched thinner. Any patient - rich or poor - arriving with a heart attack will get poorer quality of care and be more likely to suffer a bad outcome.

3. All health care costs are growing, not just Medicaid. Irrational cuts aren’t "cost containment" - they’re health care cuts.

   People who want to cut Medicaid talk as if the program throws money around willy-nilly. They use words like "out of control" and "ballooning. The truth is the cost of health care is growing for private health plans and Medicaid alike, and Medicaid’s costs are growing at a slower rate than private insurance. The Medicaid budget is also growing because more and more low-wage working people have jobs that don’t offer health coverage, because in 1999 we expanded Medicaid by creating Family Health Plus, and because we have more elderly who are living longer.

   Through managed care, strict limits and freezes on provider reimbursement rates, and other tools, Medicaid does limit the growth of spending. (One big exception is virtually uncontrolled payment to drug companies. While private health plans have mechanisms to limit spending on drugs, the drug companies have avoided even the most reasonable controls under Medicaid.)

   Control of Medicaid spending could come from better investment in preventive care, more intelligent case management, or a health planning system that could reasonably control excess capacity in the system. But instead, Governor Pataki proposes eliminating whole categories of care for many recipients (e.g., mental health care), or refusing to reimburse hospitals and nursing homes for increased costs of labor and supplies, or shutting down programs that help eligible people apply for coverage. That’s not "cost containment." That’s just cutting health care.

4. We should ease the burden on local governments. But not by cutting health care.

   New York is one of the few states that requires counties and New York City to pay a portion of the state’s share of Medicaid. Because counties don’t pay for education and many other local costs, Medicaid looms large in their budgets. County elected officials don’t want Medicaid paid for by the taxes they impose; instead, they want it paid for by the taxes that state elected officials impose.

   There are good policy reasons for shifting the "local share" to the state budget. State taxes are more progressive than county property and sales taxes. Every Medicaid enhancement the Assembly has proposed in recent years had no local share. Family Health Plus was enacted with a local share in 1999 only because Governor Pataki insisted on it. In 2004, we enacted a state takeover of the local share of Family Health Plus, which will save local governments over $600 million a year.

   We need to pick up more of the roughly $7 billion statewide local share for the rest of Medicaid. That will cost the state budget hundreds of millions. However we finance it, it should not come from irrational cuts in health care, as Governor Pataki has proposed.

5. Almost half of New York’s uninsured are eligible for free or low-cost coverage, but red tape keeps them from getting it.

   Almost half the uninsured people in New York - 1.3 million - are working people and their families who are entitled to free or low cost coverage under Medicaid, Child Health Plus or Family Health Plus, but not getting it. We can do more than any other state to reduce the number of uninsured without creating any new program if we overcome the bureaucratic obstacles to getting this coverage.

   The Assembly has unanimously passed legislation to simplify enrollment and recertification under all three programs by reducing documentation requirements, simplifying applications, eliminating the need for personal interviews, allowing mail-in applications, and using existing government databases to confirm eligibility. That would be real health care reform.

   Our "Simplification" bill has the strong support of Attorney General Spitzer and a broad coalition of consumer advocates, health care providers, and managed care plans.

6. The "California" question.

   People often ask why New York Medicaid spends so much more than California per Medicaid recipient. There are good and important reasons.

   We’ve shifted most of our mental health spending into Medicaid, in order to draw down massive Federal matching funds. We’re smart to do that. California doesn’t. Mental health patients consume a lot of resources and increase our "per recipient" cost.

   New York provides good care for elderly and disabled patients, including much more home health care than California. This care is expensive and drives up New York’s "per recipient" Medicaid cost. But if we didn’t provide it, many elderly and disabled people would receive no care or become impoverished paying for care, or their family members would have to disrupt careers to care for them.

   Our payments to hospitals, nursing homes, home care agencies, and health centers are more closely related to the real cost of providing care than California. If we were to slash those rates, we would devastate the health care system we all depend on.

   California may call itself the Golden State, but its Medicaid program is actually one of the worst in the country - spending less per recipient than any state, including Mississippi. New York’s Medicaid spending is not much different from neighboring states like Connecticut, New Jersey, and Massachusetts.

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