With the election of New York’s governor just seven weeks away, Democrat Eliot Spitzer and Republican John Faso have released plans to reform Medicaid and rein in its soaring costs.

But given their timid suggestions, New Yorkers should hardly expect any significant drop in Medicaid’s skyrocketing budget or savings from lower property taxes.

Spitzer’s focus is on the politically popular but elusive goal of preventing fraud and abuse. He also wants to expand the use of generic drugs, make modest changes to the state’s long term care system and generate savings through the pending Berger Commission recommendations of hospital and nursing home closures statewide.

Faso, meanwhile, also sets his sites on fighting fraud as well as expanding the use of community health centers and reducing burdensome Medicaid regulations on providers. He also wants to increase primary physician care to reduce expensive hospital procedures and expand the use of technology to better monitor treatments and outcome.

It’s no wonder Medicaid has captured the candidates’ attention. Topping $45 billion per year, the state’s program is the country’s most expensive and growing faster than the national average. In fact, in 2003, New York spent over $7,900 per Medicaid recipient – 90 percent higher than the average or other states.

Reforming Medicaid the health care program for the poor is always politically sensitive, which helps explain the candidates’ mild plans. But if the next governor truly wants to overhaul the program and reduce its costs, he must focus on the entire health insurance system which also includes expanding access to private coverage.

Specifically, Spitzer and Faso must consider:

Maximizing the use of employer sponsored health insurance.

New York businesses even small ones offer health insurance at rates above the national average and pay a higher share of employee premiums. Even so, over half the state’s small businesses offer coverage to employees compared to just two in five nationally.

But while more low wage workers here are offered health insurance, only a small number actually enroll in their employers’ plans. And why should they when Medicaid has no premiums, nominal co pays and richer benefits?

New York Medicaid spends almost $4,000 a year per non-disabled, non elderly adult. Yet the average low wage employee can buy into his or her employer’s plan for less than $1,000 per year. For Medicaid to cover a family of four, taxpayers pay $12,000 a year where an employee’s share of family coverage is only around $2,200.

The state should require all Medicaid recipients with access to employer provided coverage to go on their employer’s plan when their share of the premium is less than the cost to taxpayers.

Allowing and expanding the availability of affordable private insurance options.

Over 900,000 of the almost 2.6 million New Yorkers without health insurance are young adults under 30. Many are in entry level jobs that may not offer coverage. Buying insurance in New York’s costly individual market with monthly premiums averaging over $400 it’s simply unaffordable.

But in California, Texas and Illinois, plans provided by Blue Cross are available to this age group with monthly premiums ranging from $70 to $120. The plans called Tonik Plans cover some drugs, inpatient hospital care, doctor visits and limited dental and vision care. To date, 70 percent of Tonik purchasers were previously uninsured.

New York’s health insurance regulations don’t allow such plans. And that short sighted policy eliminates such affordable private insurance options, leaving primarily Medicaid as the only affordable option to these young adults.

The much maligned Wal-Mart, which is governed by federal and not state law, now offers health plans costing employees as little as $11 a month. Since it redesigned its plans to offer more affordable options, some 70,000 plus Wal Mart employees who had waived coverage have enrolled with 78 percent indicating they’d been uninsured.

Is it too radical to suggest that New York individuals and small businesses also have access to affordable plans similar to those available to Wal Mart employees?

Reduce the incentives to choose Medicaid over private insurance.

Federal law allows states to make their Medicaid programs look more like private insurance. Thus, New York Medicaid should have co pays and premiums as allowed by federal law for non elderly, non disabled enrollees. Such changes could reduce Medicaid costs by a billion a year.

Just as welfare reform encouraged people to work, Medicaid reform should encourage people to have private insurance. If Spitzer and Faso are serious about reforming health care in New York, they must consider the whole pie, rather than just a slice.

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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