As Governor Spitzer plans to take on the problem of rocketing Medicaid spending on the elderly, he needs to get his focus right.

In his recent State of the State address, Mr. Spitzer spoke of shifting spending away from expensive institutional care to community and home-based alternatives “so seniors can have the care they want at a price they can afford.” The real challenge for the new governor is to provide seniors with the care they need at a price all New York tax payers can afford.

In 2004, New York’s Medicaid spending per elderly recipient was nearly two-and-a-half times the average for other states. That amounted to $5.6 billion in added Medicaid costs for New York — roughly 20 times the amount the state expects to save by implementing the Berger Commission’s recent recommendations to close and consolidate some health care facilities. In other words, if we reduced Medicaid costs, we conceivably might not have to close facilities.

At almost $43,000 per elderly nursing-home resident, the state’s Medicaid expenditures on institutional care are 74% above average. But our home-care expenditures are even higher — more than double the average. Of 39 states reporting in 2004, New York had 10% of the elderly Medicaid recipients yet accounted for roughly 57% of all Medicaid home health care and 39% of all personal-care spending in the country.

Elderly Medicaid recipients in New York use hospital inpatient services at one-and-a-half times the rate for other states and three-and-a-half-times the cost per patient. The utilization rates for personal care — assistance for daily activities such as bathing — are similarly out of line with the norm for other states.

New York’s costs aren’t just high. They also have been growing faster than average. In the other 38 states that reported, Medicaid spending per elderly recipient increased by just 9% between 1999 and 2004, less than the rate of inflation of 14%. But in New York, these costs increased by 55% — more than six times faster.

The other states had a real return on their home-health investment, but not New York. During the same five-year period, the other states added more than a half-million seniors to Medicaid rolls and increased home-health and personal-care spending in the aggregate by $1.4 billion, but reduced by an aggregate 32,000 the number of elderly in nursing homes financed by Medicaid. In contrast, in New York, home-health and personal-care Medicaid spending surged an additional $788 million, yet 8,000 more seniors in nursing homes had their care paid by Medicaid, with a net increase of 27,000 seniors in the state Medicaid program.

It’s noteworthy that New York’s pattern of health care utilization in Medicaid is not replicated in the federal Medicare program, which covers all seniors. New Yorkers on Medicare use inpatient, outpatient, nursing-home, physician, and home-health services at roughly the same, or in some cases lower, rate as the averages for other states. We need to find out why this is the case and determine if there are quality control measures in Medicare that could be applied to the Medicaid program.

The time to confront the challenge of Medicaid and the elderly is now. The Census Bureau projects that the number of New Yorkers over age 65 will increase by 454,000 by 2015. During this period, if there is no change in the current mix of Medicaid services and utilization, and assuming modest annual spending increases per recipient, the state’s Medicaid spending on the elderly will rise by a whopping $8 billion, or 82%.

As policymakers look to “right-size” Medicaid, they should focus on ensuring appropriate access to Medicaid-financed services. They should not just close programs and facilities and limit access for all elderly, as all elderly are not overusing health care services.

Medicaid, for example, should not pay for nursing-home care without an independent assessment that a substantial need for such care exists.

New York also should not invest more in home-health and personal-care spending without ensuring an appropriate level of need and proof that it is diverting or delaying institutional care. And the state should investigate why its seniors on Medicaid are going to the hospital more and more, whereas in other states, seniors are going less and less.

New York Medicaid needs reform. Seniors should receive those Medicaid services that are medically necessary and independently reviewed, not just those they “want.” It is to be hoped that Governor Spitzer’s soon-to-be-released budget will take on this challenge.

Read article at NYSun

About the Author

Tim Hoefer

Tim Hoefer is president & CEO of the Empire Center for Public Policy.

Read more by Tim Hoefer

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