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New York Medicaid Changes Praised by HHS Secretary: May Be Signal to Governors

March 17, 2005 – The effort in New York to “modernize” the Medicaid program drew praise yesterday from Health and Human Services Secretary Mike Leavitt. It may signal a direction for the states to move, after appeals to President Bush by the governor’s failed to produce additional federal funding.

“Medicaid has evolved into a policy nightmare whose ever-growing costs overburden the federal treasury and threaten to swamp state budgets,” writes Pamela M. Prah in Stateline.org.

“At a February meeting of the National Governors Association in Washington, D.C., it was the dominant issue, sparking much discussion of possible budget cuts and proposed reforms. But like so many policy debates these days, many well-informed people probably found the discussion incoherent; the governors and federal officials used often-confusing, ever-changing frames of reference in talking about the program,” according to Prah.

The governors were told by President Bush to go home and come back with some new ideas.

Yesterday, Leavitt announced support for New York Governor George Pataki's efforts which HHS claims will “ensure continued medical coverage to millions of New York residents.”

Serving more than 4 million Medicaid beneficiaries, New York has the largest Medicaid budget in the country. Through Medicaid, American taxpayers help 46 million citizens. This includes people with disabilities, many poor elderly and other low-income families and children.

"Medicaid has tremendous potential to provide health care to millions of Americans. Now we need to harness that potential and shape its promise for those Americans in greatest need," Secretary Leavitt said. "I thank Governor Pataki for his leadership and innovation. I look forward to working with more governors and congressional leaders as we continue to find ways to strengthen health care in this nation."

Governor Pataki has proposed the Federal-State Health Reform Partnership (F-SHRP) to reinvest $1.5 billion of federal fund savings that were achieved under New York's section 1115 waiver, the Partnership Plan. The reform focuses on making long-term systemic improvements to the health care delivery system in New York. The Partnership Plan was expanded in June 2001 and it has led to nearly $6 billion in savings over eight years, while expanding coverage to more than 400,000 New Yorkers.

"We want to thank Secretary Leavitt and HHS for giving New York the historic opportunity to fundamentally reform the state's health care system and reinvest those savings back into New York to ensure that our health care system remains the best in the nation," Governor Pataki said.

F-SHRP is an essential part of Governor Pataki's proposal to protect Medicaid that includes cost-containment, reduce excess capacity, modernize facility infrastructure and provide additional long-term care options.

New York will focus its F-SHRP proposal to:

   > Shift emphasis for long-term care from institutionalization to community-based settings.

   > Consolidate and right-size New York's health care system by the reduction of excess capacity in the acute care system.

   > Invest in health IT, including e-prescribing, electronic medical records, and regional health information organizations.

New York will submit an amendment to their section 1115 waiver that will allow federal funds to be claimed for F-SHRP. The amendment will be subject to terms and conditions and final approval by HHS.

"The department will work with the state on measurable benchmarks and achievements," Secretary Leavitt said. "Provided that the necessary framework is in place, we are committed to working with Governor Pataki and New York State to utilize their savings to provide care to New Yorkers who depend on us."

The Medicaid Mess

“The nation's governors, the Bush administration and Congress agree that Medicaid costs are growing at an unsustainable rate, but there is considerable debate over how best to rein in the growing costs,” says Prah in her article in Stateline.org explaining Medicaid.. 

“Governors balk at President Bush's bid to save the federal government $40 billion in part by closing loopholes that states exploit to get more federal matching funds for Medicaid. Governors haven't ruled out some of the president's other ideas, such as allowing states to require co-payments with less federal red tape and restricting the ability of seniors to transfer assets to qualify for Medicaid's nursing home coverage.

“Another approach that governors believe could be promising is the president's proposals to provide $4 billion to states to help low-income people purchase private health insurance along with $74 billion for health insurance tax credits.

“But the governors and the White Houser aren't close to agreeing on a bipartisan Medicaid fix to present to Capitol Hill, where lawmakers have shown little interest in restructuring the program.

“In the meantime, states are going to try to rework their Medicaid plans using the current system. Florida and South Carolina are exploring the idea of giving Medicaid recipients a fixed amount of money in the form of a voucher or debit card to cover health care needs.

“Vermont has a proposal that it thinks could be a model for the country. Under the plan, which awaits blessing from Washington, the federal government would provide less money to the state and, in exchange, would allow the state to try to economize on long-term and mental health care without having to go through the usual federal red tape.”

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