The world has changed since Governor Cuomo tasked his Medicaid Redesign Team with finding $2.5 billion in savings to help balance the state budget. Yet even in light of the coronavirus pandemic, many of the panel’s recommendations still make sense – and are arguably more necessary than ever.
At the governor’s instruction, the MRT focused on strategies that save money without diminishing benefits for the program’s 6 million enrollees.
This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.
A few examples among its 41 proposals:
- Reducing a state subsidy for doctors’ malpractice insurance premiums.
- Overhauling Medicaid’s “health homes” program, which is meant to coordinate care for patients with complex needs, but spends a lot of its money unsuccessfully trying to enroll people by telephone.
- Reforming the Indigent Care Pool, which in some cases has provided “charity care” funding for financially strong hospitals that provide little or no charity care.
The largest amount of savings would come from long-term care, and particularly the non-medical “personal assistance” provided to elderly and disabled recipients in their homes. This is an area in which New York’s program is an outlier. It accounted for 40 percent nationwide spending on personal assistance as of 2016, and costs have doubled since then.
The MRT’s proposals would seek to slow rapidly rising enrollment by tightening medical and financial screening practices. For applicants seeking nursing home care, the state currently reviews five years’ worth of financial transactions to make sure no assets are being hidden or improperly transferred; the MRT would extend that same standard to people seeking Medicaid coverage for in-home care.
Another chunk of savings would come from an additional across-the-board rate reduction for providers and health plans of 0.875 percent, on top of a 1 percent reduction ordered on Jan. 1. This would save $219 million, but it harms the lower-paid and efficient providers just as much as the higher-paid and inefficient ones. A fairer approach would be to rescind the rate hikes ordered for hospitals and nursing homes in 2018, which in retrospect were not affordable.
Not all the MRT’s proposals are necessarily good ideas. One calls for the state to “carve out” the drug benefit from Medicaid managed care, so that the state rather than private health plans would be directly responsible for filling prescriptions.
This would reverse a reform implemented by Cuomo’s first Medicaid Redesign Team in 2011 – one that appeared to produce significant savings. Lawmakers should be cautious about undoing that progress.
Overall, the MRT at least partially addressed seven out of 11 changes on my own checklist of Medicaid reforms.
Some advocates and lawmakers have argued that the state should not consider any cuts to health-care funding in the midst of the coronavirus crisis – and should hike taxes instead. This is misguided on two levels: First, raising taxes would further damage an economy that’s already reeling from widespread business shutdowns. Second, a tax hike is unlikely to fully make up for the state’s revenue loss, which Budget Director Robert Mujica has estimated at up to $15 billion. Lawmakers effectively have no choice but to reduce spending from currently projected levels – and Medicaid and school aid are by far the budget’s two biggest line items.
Refusing to touch Medicaid’s budget – even to make it more efficient – would require the governor and Legislature to cut more deeply somewhere else.
A potential mitigating factor is extra federal Medicaid funding that was provided in an earlier coronavirus response package – worth about $4 billion on an annualized basis for New York (or as much as $6 billion by some estimates).
However, Cuomo has said New York will not qualify for this funding because it is contingent on states not tightening eligibility standards or shifting costs to local government – both of which Cuomo says are necessary for the state to balance its budget.
He further points out that the funding is temporary, and that it will end as soon as the president declares an end to the public health emergency – meaning it could amount to $2 billion or less.
Cuomo is likely exaggerating how tightly the state’s hands would be tied, but he has a point: Permanent reforms to Medicaid would do more good for the state’s bottom line – and the long-term stability of the program – than a temporary shot of revenue from Washington.
Some further points lawmakers should keep in mind:
The MRT recommended only about $1.9 billion in new savings. It counted $900 million in cost-cutting actions already taken by the governor to nominally achieve its $2.5 billion target.
The proposed “cuts” are about slowing the growth of Medicaid spending, not reducing it from year to year. Even if lawmakers approve $2.5 billion in savings, the state’s projected outlays will still exceed the current year’s originally budgeted amount by $1.5 billion, or 6 percent.
Medicaid is not the sole source of funding for health care. Many of the pandemic-related costs incurred by hospitals and others will be reimbursed by Medicaid, regardless of any budgetary changes, as well as private insurers, Medicare and other health plans. The $2 trillion response bill approved in Washington last week allocates $100 billion for direct grants to hospitals. That’s roughly 8 percent of total hospital spending from all sources in the U.S. New York should draw down several billion of that amount, which will help offset lost revenue from elsewhere.
Procedurally, the MRT has left a lot to be desired. The governor appointed it less than two months before the March 31 budget deadline, giving it little time to overhaul a huge and complex program. Most of its crucial deliberations – including the votes on individual recommendations – were conducted out of public sight.
A final word of caution: The governor seems to expect the Legislature to approve some version of the MRT’s recommendations over the next day or two, even though no legislative language has been published as of this writing.
Although many of the recommendations are sound when taken at face value, things could easily deteriorate in the course of rushed, closed-door negotiations. The difficulties of the pandemic notwithstanding, lawmakers should not give their final approval until the public has had a fair chance to review and comment upon the details.