Spending Watch


Bulletin #5: May 5, 1999
Health-care cuts? What health-care cuts?

Just how far out of line is New York's Medicaid program? With less than 7 percent of U.S. population, our Medicaid spending was 17.3 percent of the national total in 1997. Per-capita spending on the program totaled $1,177 - not only the highest level in the country, but more than 50 percent above the second-highest state.

A primary reason for that out-of-control spending is New York's huge, and costly, hospital system. Judging by national standards, we maintain too many hospital beds; we keep patients in them too long; and we pay too much for it. For instance, our average community hospital stay of 8.3 days is 36 percent above the 50-state average. And our per-capita spending on hospital services is roughly twice the level in states such as Illinois, Ohio and Pennsylvania.

These extreme levels of spending are after modest cost-saving reforms of recent years - reforms that the hospital lobbyists said would result in "nightmare" and "disaster."

The further, modest reforms included in the Executive Budget would still leave our Medicaid system the most generous (or, to put it another way, most costly) in the nation - by far.

Why are we paying to educate doctors for New Jersey?

Our Medicaid costs also include more than $1 billion a year for graduate medical education and other "public goods." And those who pay for private health insurance - employers, primarily, but also individuals who have to buy their own coverage - spend even more on these extra costs. The cost is especially high for purchasers of private health coverage in New York City, Nassau County and Monroe County. Much of that money goes to educate doctors who then practice in New Jersey, California and other states.

Just a few years ago, New York could boast that the proportion of our residents without health insurance was lower than the national average. Rising costs imposed by government - including health-care taxes and coverage mandates - have helped add thousands of New Yorkers to the ranks of the uninsured. Now, we're above average on another undesirable indicator.

In the world of health-care finance, there's a notion of certain costs being "reasonable and customary." Out-of-control spending may be customary in New York. That doesn't make it reasonable.