The state-funded share of Medicaid costs will escalate rapidly over the next few years as Albany assumes responsibility for a greater share of county and New York Medicaid costs, according to projections explained in a new report from the Empire Center for New York State.

Over 40 percent of the $5.6 billion projected increase in state Medicaid through fiscal year 2009-10 will consist of Medicaid and Family Health Plus costs formerly borne by local taxpayers, said the report's author, Tarren Bragdon, a health policy analyst for the Empire Center. The steep spending projection assumes enactment of cost-containment provisions in Governor Pataki's 2006-07 budget proposal. With no change in current law, costs will rise by even more -- $8.3 billion during the same period, he said.

"Albany's chronic Medicaid headache could soon turn into a migraine, unless state lawmakers do much more to rein the program's costs," Bragdon said.

"Incremental cost-containment won't be enough to ensure an affordable future for New York's Medicaid program," he said. "States such as Florida and South Carolina have adopted more sweeping reforms that encourage Medicaid recipients to take more responsibility for their own coverage in partnership with private insurers. Recent federal changes encourage such approaches."

Bragdon also shows that up to 25 counties--including nearly all the major urban upstate counties--may soon want to take advantage of a little-noticed provision in the Medicaid takeover law allowing them to swap their entire Medicaid burden in exchange for giving up a portion of their sales tax receipts to the state.

Bragdon's findings are presented in the first issue of Health Points, a new research bulletin series from the Empire Center. The Albany-based Center is a project of the Manhattan Institute for Policy Research.