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NY Governor Cuomo Sets His Sights on Cutting Medicaid

Source: WSJ

Posted on 04 Jan 2011

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According to sources with knowledge of the budget, New York Governor Andrew Cuomo is aiming to reduce the state's Medicaid spending by billions of dollars, exceeding the size of cuts to the program proposed in past years.

In the upcoming fiscal year the Cuomo administration is considering a cut of about $2.1 billion out of the state's projected spending on Medicaid. With federal matching funds, the cut comes to more than $4 billion. That's close to twice the reduction in spending proposed by Gov. Eliot Spitzer in 2007.

Such a cut would effectively freeze Medicaid spending at the current year's level. But because the state is set to receive far less in federal funds, as the stimulus expires, its share of Medicaid costs would still grow by more than $3 billion, a 30% increase.

To further alleviate the burden, the Cuomo administration is likely to lobby for more federal aid, possibly through a waiver agreement, according to an individual familiar with the governor's health-care agenda.

Mr. Cuomo is expected to release his first budget by Feb. 1 and to release some details in his State of the State speech Wednesday.

As he drafts a plan to close a $10 billion gap, Mr. Cuomo has sought to insulate himself from the fallout. On Monday, he said he and his senior staff are voluntarily reducing their salary by 5%. By statute, the governor is paid an annual salary of $179,000. Mr. Cuomo says he plans to return to the state 5% of that, or $8,950, leaving him with $170,050 before taxes.

In a statement, the governor, who is seeking to freeze state workers' pay, said he wanted to "lead by example." He isn't the first major elected official to opt for lower pay, but the practice tends to be more common among wealthier politicians.

Efforts by past governors to limit growth in Medicaid spending, a politically charged budget area, have rarely yielded success.

Past budget plans have slashed inflationary increases to reimbursement rates to providers, and have imposed higher taxes on hospitals and insurance companies. But the changes have had little bearing on the largest factors driving up costs, involving eligibility, benefits and the basic rate-setting formulas.

In recent years, the state's major health-care union and hospital groups have spent millions of dollars on lobbying and advertising campaigns opposing cuts, encouraging lawmakers to restore funding.

The state over the last five years has sought to ramp up fraud and waste recoveries, but the dollars recouped—about $500 million a year split with the federal government—have been overwhelmed by rising costs, fueled by higher enrollment.
Mr. Cuomo has said he intends to overhaul the Medicaid program but has revealed few specifics of his plan.

A state official familiar with the draft proposals said the Cuomo administration, among other things, wants to revamp coverage of one of the highest-cost categories of Medicaid patients—beneficiaries suffering from severe mental illnesses such as schizophrenia and bi-polar disorders, chronic drug problems or both.

The state has struggled to coordinate the care of these types of patients, many of whom often cycle in and out of emergency rooms and clinics and run up annual costs of more than $100,000.

The state's Medicaid managed-care model, which started in the 1990s, covers about 65% of the enrolled population. But 17% of the spending passes through managed-care plans, the United Hospital Fund said.

Because the state doesn't mandate managed care for certain populations, such as nursing-home residents, many of the most costly beneficiaries aren't enrolled in the plans. Those who are enrolled often rely on benefits, such as mental-health treatment and prescription drugs, that are excluded by regulation from managed-care packages.

To better deal with these patients, some Medicaid experts have recommended that the state assign managed-care companies more responsibilities over their care. Other researchers have suggested that the state contract out services to so-called behavioral-health organizations, which are more geared toward handling cases of mental illness.