Spending Watch


Bulletin #10: June 3, 1999
New York's disproportionate spending on training of MDs

New York spends more on Medicaid than any other state--by far. In fact, our Medicaid spending per capita is $1,177, a staggering 155 percent above the national average and more than Medicaid spending in Texas and California combined. New York spends 15 percent of the national total for Medicaid--but has only 7 percent of the population and 9 percent of all Medicaid recipients.

A big reason is New York's unbalanced spending on physician training. Nationally, more than $2.3 billion in state, local, and federal Medicaid taxpayer dollars are spent on graduate medical education (GME). New York spends more than a third of that national total. The figure comes from a 1998-99 survey of all states conducted by the National Conference of State Legislatures.

Put that in perspective: New York's Medicaid program spent more than four times the amount of Medicaid dollars spent on GME in the next highest state. The runner-up, Michigan, spent only $191 million in Medicaid dollars on GME. In fact, New York's Medicaid program spent more on GME than Michigan, Ohio, California, North Carolina, Florida, Georgia, and Pennsylvania combined.

There's more: New York's unique $594 million GME tax

That's not even the full picture of GME spending in New York. New York also imposes a $594 million annual tax on health care expressly to support graduate medical education. That tax was created by the Health Care Reform Act of 1996 (HCRA) as a "temporary" tax. The idea was to ease hospitals' transition to a deregulated marketplace. That tax is due to expire this year. But lobbyists for hospitals are scrambling to preserve it, using cataclysmic rhetoric about how badly New York "underfunds" its health-care system.

Why this spending benefits taxpayers--in other states

A major beneficiary of this spending is other states' taxpayers. That's because New York has 6.8 percent of the nation's population but subsidizes the training of 15.1 percent of the nation's doctors--half of whom eventually leave the state.

Medicaid support for GME should better reflect both New York's actual need for physicians and national norms in spending. New York's support for GME should be negotiated on an open market, just as 48 other states successfully support GME. Such fiscal restraint will eliminate uncompetitive business costs that hurt New York's business climate. It would also make health insurance more affordable. And that's sound medicine for all New Yorkers.