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October 20, 2003

Council: Medicaid policy should emphasize quality and cost containment, not spending

Medicaid policy in New York focuses too much on how high spending can go and not enough on quality and cost containment, The Business Council has told the state Senate's Medicaid task force.

"Our Medicaid discussion should focus on making patient care more effective and more affordable," Business Council President Daniel B. Walsh said in an Oct. 15 letter to Sen. Betty Little (R-Glens Falls), chairwoman of a task-force section focusing on local government and administrative processes. "Traditionally, the dialogue has instead emphasized which level of government should pay, and how much heavier that burden can be."

Senate Majority Leader Joseph Bruno created the Senate task force earlier this year to seek ways to reform and improve New York's costly Medicaid system. It will focus on four categories of Medicaid spending: long-term care, acute care, local government and administrative processes, and pharmaceuticals. Business Council President Daniel B. Walsh has been appointed to a 40-person advisory panel charged with working with the Senate task force and its section on government and administrative processes.

Medicaid is a key reason why New York's property taxes are $8.4 billion higher than the national average, Walsh wrote.

"Unless Medicaid is seriously overhauled, those taxes will become an even greater obstacle to job growth," he said.

The letter outlined a number of specific ideas:

New patient care and payment mechanisms. Relatively few Medicaid recipients now account for a large percentage of the state's Medicaid expenditures - and "the financing system in place today encourages more expensive treatment," the letter said. New York should instead seek a system that seeks good care coordination of the chronically ill based on measurable outcomes.

This should be within reach for New York because its influence as regulator, purchaser, and provider, Walsh wrote. New York should be able to improve coordination among hospitals, HMOS, businesses, county officials, doctors, and nurses.

The specific goal should be "new patient care and payment mechanisms that promote state-of-the-art care and case-management programs for high-cost or high-risk patients," the letter said.

Better use of available health-care data. New York can and should make better use of extensive available data about New York's health-care system and health-care outcomes, Walsh added.

"The state, hospitals, and plan administrators collect extensive data about the health-care system," the letter said. "Better use of the data could bring significant improvements in patient health care, outcomes, and safety." The state should encourage efforts to make better use of these data and powerful information systems.

Emphasize work-related health insurance. Rising health insurance costs make health insurance less affordable for employers, especially small businesses, he noted. This produces "a vicious cycle - health insurance costs spike, small businesses drop coverage, and some of their workers apply for governmental programs, driving up Medicaid costs."

The legislature should accept The Business Council's challenge of a "10 percent solution" - that is, a government-wide effort to reduce costs of both health care and health insurance by 10 percent, the letter said. Two keys to this effort should be development of a more affordable health insurance policy for small businesses and creation of a special small business tax credit for health insurance costs.

Eliminate the local share of costs. The state should take over the entire local share of Medicaid costs - "with an ironclad requirement that counties and New York City use the savings to reduce local taxes," the letter said.

In 1992, then state Comptroller Edward V. Regan said New York should save up to $1.9 billion a year "by eliminating the duplication of Medicaid administrative bureaucracies at the state and local levels.

"What was true then is true today - and with more significant fiscal implications," Walsh wrote.

Reexamine benefits. New York's system of Medicaid benefits has actually become "much richer than what most New Yorkers get at their workplace," the letter said. "It creates perverse incentives where it is more beneficial for a worker to apply for Family Health Plus than it is to pay part of the premium at work and join a commercial health insurance plan."

The Council recommends Medicaid benefits that more closely mirror typical private insurance, the letter said.

The Business Council has long supported Medicaid reform to contain costs, which are by far the nation's highest on a per-capita basis. For example, in November 2002, The Business Council' research affiliate, The Public Policy Institute of New York State, noted that New York's Medicaid spending last year would be $36 billion - more than 40 other states would spend in their entire budgets that year.