Albany — Here’s the dilemma:

New York has one of the most generous Medicaid programs in the country. If you’re poor and sick there are few places you’re better off.

And it spends vast sums on its program: $45 billion. $2,213 for every man, woman and child in New York. Hundreds of dollars more than any other state and more than twice the national average.

That money has made New York a leader in providing health care to children, the elderly and the working poor. It props up some of the finest teaching facilities in the nation and major community institutions like Orange County’s hospitals. It helps provide thousands of well-paying jobs in places that need them, like the mid-Hudson. And it is fiercely defended by one of Albany’s mightiest forces: the health-care lobby.

So in this state, Medicaid has become a sprawling, spiraling sacred cow, touched at the peril of any governor who wants to keep his job.

And this is where Gov. Eliot Spitzer has chosen to fight his first big budget battle.

Last month, Spitzer proposed a $1.2 billion cut to Medicaid, mostly to hospitals and nursing homes. By freezing reimbursement rates, he hopes to slow Medicaid’s growth from 8 percent a year to 1.7 percent. It’s part of a bigger plan, he said, to shift from an “institution-centered” health-care system to one that puts patients first.

“The problem,” he said, “is a system co-opted by entrenched interests that resists making hard choices to change the status quo.”

As you might imagine, the institutions don’t take that sort of talk kindly. And they’re arming for a fight.

The Greater New York Hospital Association and the Service Employees International Union Local 1199, which represents a quarter-million health care workers, issued a scathing point-by-point rebuttal calling the cuts “unwarranted, unwise and dangerous.”

Since then, they’ve tabulated what it would cost individual facilities — $15 million a year to 27 hospitals and nursing homes in the mid-Hudson — and trumpeted the impact on communities across New York.

And 1199 has begun hiring campaign workers and is planning to hit the airwaves, though executive vice president Jennifer Cunningham said it’ll give Spitzer some time to change his mind first.

“The budget is a process that involves not just the governor,” she said. “We want very much to have a constructive dialogue.”

It’s a fight they’ve won before.

Under Gov. George Pataki, hospitals and 1199 repeatedly beat back efforts to cut Medicaid. And year in and year out, they’re among the biggest-spending lobbyists in Albany.

But since 2000, the program has ballooned, growing about 50 percent. That’s unsustainable, said Tarren Bragdon, a health care policy analyst for the Manhattan Institute. He calls Spitzer’s trim just that, a trim, one that should be a no-brainer.

“If the Legislature can’t swallow this very small pill, then it speaks to a lack of appetite to confront the Medicaid problem,” he said.

Leaders in both houses are skeptical. Medicaid shouldn’t be for patients over institutions, it should be for patients and institutions, said Richard Gottfried, D-Manhattan, chair of the Assembly’s Health Committee.

“Many patients need to be cared for by institutions,” he said. “The doctors and hospitals don’t take care of each other. They take care of us.”

Hospitals make that argument, too, and say Spitzer’s focusing unfairly on them, not insurers and other middlemen.

But not everyone in the health-care industry opposes the governor’s plan. Doug Hovey, executive director of Newburgh-based Independent Living, said it could help people stay in their homes, instead of going to nursing homes.

“That’s where we need to support people,” he said. “Let’s stop maintaining these mega, mega structures, these big buildings.”

No one denies those big buildings do a lot of good. The people who run them will use that argument, and they have a lot of clout.

If it turns out they have more than the new governor, New York’s Medicaid dilemma could go on a long time.

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