New York Lieut. Gov. Richard Ravitch on Monday called for an overhaul of the state Medicaid system, which he said was on an unsustainable growth path.
“The current state budget crisis is threatening New York’s ability to handle the growth of this program without dramatically raising taxes or cutting other essential government services,” Ravitch said in a press release accompanying a Medicaid report.
Ravitch called for rate-setting authority for Medicaid reimbursement to be moved from the Legislature, where it is done by statute, to the state Department of Health, where it would be set by an expert panel under the state Medicaid director.
The report recommended the state consolidate Medicaid administration, from an approach Ravitch characterized as fragmented, and take over the counties’ share of costs.
Medicaid costs were responsible for more than a third of the state’s all-funds budget in fiscal 2010, the report said. Including federal funds, the program costs more than $50 billion in a $130.94 billion budget. The program is expected to cost $63.5 billion by fiscal 2014.
“It’s a significant part of their budget,” said Standard & Poor’s analyst Robin Prunty. “They provide, on a relative basis compared to other states, a pretty high level of benefits. So it has been a costly program.”
Medicaid budgeting is difficult for states in times of economic hardship because caseloads tend to rise at the same time fiscal challenges are hurting revenue, according to Prunty.
Counties in New York pay for a share of state Medicaid funding.
“County property taxpayers should never have been in the business of paying for the state’s Medicaid program in the first place,” said Mark LaVigne, deputy director of the New York State Association of Counties. “This is a perfect opportunity to begin to transition county property tax payers out of paying for the state’s Medicaid program.”
New York capped county contributions to the state Medicaid budget in 2005 at a time when they covered about 50% of the state’s share of the program. Today, counties cover about 20%, LaVigne said.
The proposal to have rates set by the Department of Health, rather than the Legislature, would better incorporate cost changes due to new technology, the report said. The Legislature adjusts rates with formulas indexed to inflation.
The potential for lower reimbursement rates under a new cost control system doesn’t sit well with the Healthcare Association of New York State, which advocates on behalf of state health care providers.
“Lowering reimbursement rates is not the solution,” said HANYS spokesman William Van Slyke. “Providers are already paid well-under what their costs are for Medicaid and for Medicare.”
Ravitch also proposed that the state seek a change in federal formulas for Medicaid reimbursement, which is based on average per capital income relative to the national average.
New York has unusually large populations of both needy and affluent residents, who skew the average. New York gets the minimum Medicaid reimbursement of 50% under this formula. Ravitch prefers a formula that would take into account poverty rates or care for elderly, which tends to cost more.
