NY must prune its bloated Medicaid program — and focus on improving low-quality care

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The coronavirus pandemic exposed a fundamental imbalance in New York’s approach to health policy: Albany spends too much money on its bloated Medicaid plan but neglects the public-health programs that used to be the Health Department’s main focus — such as controlling disease outbreaks and keeping nursing-home and hospital patients safe.

The state overregulates and excessively taxes commercial health insurance, meanwhile, saddling New Yorkers with some of the highest premiums in the continental United States — and pushing more people onto Medicaid.

Especially counterproductive is the state’s practice of financing Medicaid in part through billions in surcharges on commercial health plans, an approach that exacerbates the problem it’s meant to solve.

A strategy for resolving these interlocking problems would start with gaining better control over New York’s version of Medicaid, which has ballooned far beyond its original purpose as a safety net for the poor and disabled.

Over the past decade, enrollment has surged to cover more than a third of the state’s population and almost half of New York City’s. Its annual budget has soared above $90 billion, a 76% increase in 10 years.

The COVID-19 pandemic highlighted how many people are on Medicaid.
Medicaid spending spiked by 18% in fiscal 2023 and is on track to balloon by another 20% over the next four years.
AP

Much of this growth occurred before the pandemic, when unemployment was generally low and poverty was declining. In effect, the state stretched the safety net to cover people further up the income scale, many able-bodied and gainfully employed. As of 2019, in fact, New Yorkers above the federal poverty line accounted for more than half of Medicaid enrollment.

The state has seen especially rapid growth in Medicaid’s spending on home-based “personal care” for the elderly and disabled, which covers nonmedical services such as feeding, bathing and housekeeping. New York’s $12 billion annual expenditure in this area is almost as much as the other 49 states’ personal-care spending combined — a red flag that this benefit is being overused and abused.

An immediate priority for the year ahead is to slow the growth of the state’s share of Medicaid spending, which spiked by 18% in fiscal 2023 and is on track to balloon by another 20% over the next four years.

The state should avoid the usual solution of across-the-board cuts to provider payments because it would further widen the unhealthy gap between Medicaid reimbursements and market rates. Instead, Albany should look for systemic reforms that make the program more efficient and sustainable.

These would include tightening eligibility standards, strengthening anti-fraud enforcement and refocusing the program on the truly needy and disabled — while ushering better-off recipients into alternate coverage, either through their employers or the Affordable Care Act. 

Reducing Medicaid costs would free up resources for other public-health functions, such as preparing for the next pandemic. This would start with a far-reaching study of the state’s haphazard COVID-19 response. Although Gov. Kathy Hochul has belatedly hired a consultant for an after-action review, a task this important would be better assigned to a special commission of independent health-care and health-policy experts insulated from political interference.

Another public health challenge to tackle is low-quality care in hospitals and nursing homes. 

This fund pays for feeding, housekeeping and personal services.
The state has seen especially rapid growth in Medicaid’s spending on home-based “personal care” for the elderly and disabled.
POOL/AFP via Getty Images

Although New York is home to some of the world’s best-regarded hospitals, average quality ratings for the system as a whole consistently rank near the bottom of the 50 states. The Health Department ought to be pushing hospitals to do better by regularly publishing data on hospital performance and promoting best practices.

And a recent flurry of lawsuits by Attorney General Letitia James has exposed examples of patient neglect and profiteering in the state’s nursing-home industry. The department should be given a mandate — along with the authority and resources necessary — to clean things up.

As the state ushers less-needy Medicaid recipients into commercial insurance, it should make that coverage as affordable as possible. At a minimum, it should reduce or repeal its heavy taxes on insurance. It should roll back excessive regulations — especially coverage mandates that disregard the best evidence for what works and a “certificate of need” that inhibits consumer-friendly competition in the health-care marketplace.

The goal of state health policy should not be to protect special interests — such as deep-pocketed institutions and labor unions — but to safeguard the public health, lift the quality of medical care and minimize the burden on consumers and taxpayers. New York has a long way to go on all three fronts.

Bill Hammond is the senior fellow for health policy at the Empire Center. Adapted from “The Next New York: Renewing and Reforming the Empire State,” a project of the Empire Center at NextNewYork.net. 

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