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August 22, 2005

New York raised taxes more, cut Medicaid less than other states during budget crises, study finds

New York responded to recent budget crises very differently than other big states, raising taxes more and doing less to restrain Medicaid costs, a study by a national think tank has found.

As a result of the recession that started in 2001, states across the country suffered "some of the largest budget shortfalls since World War II," says the study by the Kaiser Commission on Medicaid and the Uninsured. States closed budget gaps with various combinations of one-shot revenue sources, spending restraint, and increases in taxes and fees.

In most of the eight states the Kaiser Commission examined in depth, "policymakers did not actively consider raising broad-based taxes, reflecting the country's persistent antitax sentiment."

"An important exception was New York, which enacted a temporary three-year increase in the personal income tax as well as an increase in its sales tax," the commission reported. Massachusetts also increased its income tax, while Michigan increased its sales tax. New York was the only state included in the study to raise both.

In 2004, states such as Massachusetts, Colorado, Washington and Texas "adopted fairly substantial Medicaid cuts," the report said. California increased efforts to move individuals off the Medicaid rolls more quickly when they lose eligibility, a step that was expected to reduce enrollment by 300,000. Massachusetts also implemented eligibility reductions and other major cost-saving moves in fiscal 2003, the study said.

The state of Washington reduced the amount of assets that the spouse of a nursing-home resident could retain while receiving Medicaid. Michigan and Alabama also took steps to reduce the number of individuals whose long-term care was paid for by Medicaid.

"Beyond eligibility changes, several states cut benefits in 2004" for clients who retained Medicaid coverage, according to the Kaiser Commission. Michigan and Texas eliminated chiropractic and podiatry services, for example. Washington and California scaled back adult dental care. Massachusetts, Colorado, Texas and Washington increased copayments for recipients.

By contrast, "Medicaid weathered New York's (fiscal year) 2003-05 budget problems without sustaining significant cuts," the commission found.

"Despite facing a bleak financial situation, New York's 2002-03 budget debate was described by study interviewees as relatively painless with limited policy action," it said. "Governor Pataki and leading state legislators negotiated a budget that used a broad array of revenue measures -- rather than service cuts -- to close the state's $6.8 billion general fund gap."

The following year, "in distinct contrast to most other states," New York's Legislature again avoided major Medicaid changes by imposing increases in income and sales taxes, the commission reported.

In fiscal 2004-05, Albany enacted some modest reductions in Medicaid and related programs. For instance, Family Health Plus recipients are required to make co-payments for doctor visits and inpatient care. The program, which covers families who are not eligible for Medicaid, does not exist in most states.

"Reflecting its large network of public health programs, New York's Medicaid program covered about 25.7 percent of children and 10 percent of adults in the state in 2003 whereas national Medicaid coverage rates for children and adults were 21.5 and 6.1 percent, respectively," the Kaiser Commission said.