Zack Hutchins
Director of Communications

For Release — December 13, 1999


ALBANY—New York's Medicaid program, the nation's most costly by far, has become "a monstrous, $24.5 billion budget-buster at both the state and local levels," a new report from The Public Policy Institute of New York State says.

To ensure its economic health and the health of all New Yorkers, New York must rein in Medicaid spending, according to Medicaid: Wreaking Havoc in Health Care, the new report. The Institute is the research affiliate of The Business Council.

The report showed that in 1997, Medicaid in New York cost $24.525 billion. About half that is paid for by the federal government; another 35 percent is paid for by state taxes; about 15 percent is paid through local taxes.

The average family of four in New York pays more than $5,000 per year in taxes to support Medicaid—about what it would cost to insure that whole family. But New York's Medicaid system is so expensive that it provides health coverage to less than 20 percent of New Yorkers, the report noted.

About two-thirds of Medicaid money supports health insurance for welfare recipients, disabled persons, and other needy individuals; the rest supports nursing-home care and home care.

New York's Medicaid costs are nearly two-and-a-half times the national average, with per capita spending of $1,352, by far the highest in the nation, the report noted. Cutting New York's Medicaid costs to merely twice the national average would save taxpayers $2.7 billion a year, The Institute calculated.

Every year, it's the 800-pound gorilla of the state budget, soaking up money that could be used for tax cuts to make our economy competitive, or for expanding health-care coverage, or for improving education—or for all of those things," the report said. And "political log-rolling tilts the whole structure of New York's health-care system towards large institutions ... undermin(ing) the quality of care for all New Yorkers, whether they are Medicaid patients or not."

California and Texas, with a combined 50 million residents, spend nearly the same amount on Medicaid combined as does New York, which has a population of only 18 million persons, the report said. New York's per-patient hospital costs under Medicaid are $4,200 a year, compared to $2,391 for Texas and California. New York spends $5,463 per home-care client while California and Texas average $1,986 per client; New York spends $40,035 per nursing-home client while California and Texas average $15,781 per client.

These costs are so high that state lawmakers shifted nearly one-third of non-federal Medicaid costs to local governments—making Medicaid "the mother of all mandates," the report said. This is a major reason New York's per capita property taxes are double the national average.

The report noted that a number of ideas for trimming Medicaid costs have been advanced, including: cutting Medicaid costs for hospital, nursing-home, and home care by $2 billion a year; eliminating Medicaid subsidies for graduate medical education, which would save $950 million a year; freezing the "trend factors" that ratchet up hospital and nursing-home rates each year; and eliminating various special-purpose subsidies that have been worked into the rates over the years.

Other cost-cutting ideas include: restructuring hospital and outpatient clinic rates to encourage the use of such facilities as detoxification clinics instead of emergency rooms, which could save up to $200 million; requiring a substantial deductible on long-term care under Medicaid; and eliminating duplicate administrative bureaucracies at the state and local levels.

To read the full report, click here.