NY Times

Bush's Proposals Could Lead to Overhaul in State Medicaid

By RAYMOND HERNANDEZ and AL BAKER

Published: January 9, 2005

Gov. George E. Pataki struggles to confront New York's skyrocketing

Medicaid costs, his advisers are arguing that he should embrace the Bush

administration's efforts to establish new limits on the federal Medicaid

program as a means of revamping the state's program.

The president is considering widespread changes to the Medicaid system,

including giving states fixed sums of money, or block grants, instead of

basing Medicaid payments on actual health costs and enrollment. It is a prospect that

has alarmed governors throughout the nation.

Should Mr. Pataki embrace such changes, it could provide a huge boost to the

president's efforts. But such an overhaul could transform the health care

landscape in New York, where hospitals, nursing homes and other medical

providers rely heavily on Medicaid dollars.

In the state budget Mr. Pataki is set to propose later this month, he is

expected to seek cuts and other significant changes to the state's Medicaid

program, officials familiar with the plan say. The program provides health

care coverage to three million poor New Yorkers at a cost of $44 billion a year. In

previous years, Mr. Pataki's proposals could have been nearly impossible to

achieve in New York, where Medicaid is extremely popular among both

Democratic and Republican lawmakers in the State Legislature. The program consumes 44 percent of the state's $100 billion annual budget.

But now, some officials in the Pataki administration are arguing internally,

to the objection of others, that a federal overhaul of Medicaid may very well

help Mr. Pataki's efforts to curb the state's own soaring Medicaid costs,

according to one adviser who described the discussions with the condition

that he not be named. Mr. Pataki championed major cuts in Medicaid when he first took

office in 1995 but he ultimately abandoned that goal in the face of

overwhelming political pressures.

Top aides suggest that Mr. Pataki, an ally of President Bush's, may be

willing to embrace an overhaul if it enables him, both politically and

substantively, to force the State Legislature to put the brakes on the

rapid growth of the state's Medicaid program, which depends heavily on federal money.

Kevin Quinn, a Pataki spokesman, said the administration has not decided how

it will respond to the changes being discussed in Washington, partly because

President Bush has yet to release a detailed proposal outlining his plans.

But one administration official, speaking on condition of anonymity, said

that the governor would welcome any changes in Washington that end up

aiding the Pataki administration's case for restraining the growth of the New York

program.

People in and out of the Pataki administration say Mr. Pataki may have

another reason to embrace a Medicaid overhaul by Washington.

Budget experts in Albany say a federal overhaul may not necessarily translate

into huge federal financing cuts, at least not initially. In making that

case, these experts cite a 1996 law that President Bill Clinton and Congress

approved to revamp the federal welfare program and restrain its costs.

In that case, the federal government switched to a system of lump payments to

states, instead of providing payments based on caseload size. While that

approach kept federal financing flat, New York and other states actually

wound up with an unexpected windfall of federal cash: even though welfare rolls were

shrinking, the block grants were calculated when welfare caseloads were at

historic highs.

In some ways, the situation now parallels the situation in 1996. Then, Mr.

Pataki called for a far-reaching overhaul of the state's welfare program,

warning the Legislature that it would have little choice but to accept it

because Washington was planning to do the same thing with the federal program. In the

end, the Legislature adopted many of Mr. Pataki's proposals, including New

York's first time limits on welfare benefits, though only after President

Clinton and Congress approved similar changes on the federal level.

The current debate over Medicaid in Albany comes as the nation's Republican

and Democratic governors say they are preparing to mount a fierce lobbying

effort to stave off new limits on Medicaid that the president and Congress are

contemplating. Many governors are concerned that President Bush plans to shift

more Medicaid costs to the states.

But in New York State, politicians have been increasingly grumbling about the

growing Medicaid burden. Mr. Pataki's advisers say confronting Medicaid's

escalating costs will be one of the governor's main objectives this year,

particularly given the outcry among county officials, who are increasingly

frustrated that the program's costs are also placing a strain on their budgets.

Mr. Pataki addressed the issue himself in his annual address to the

Legislature on Wednesday, placing lawmakers on notice that he planned to seek

significant changes in the program this year.

"I will propose Medicaid reforms that will reduce costs and also protect

county property taxpayers, while ensuring the quality of health care we all

deserve," he said. "Let this be the year we get it done."

The cost of New York's Medicaid program has risen $14 billion, or about 46

percent, in the last five years, making it the most expensive in the country,

state officials say.

But Medicaid cuts have long proved unpopular with state legislators - and not

just with Democrats. Medicaid dollars are a major part of the operating

budgets for hospitals, nursing homes and home care providers that serve

middle-class communities, many of them in Republican districts.

But state legislators on both sides of the political aisle acknowledge that

Mr. Pataki's hand may well be strengthened if Washington imposes significant

restrictions on the federal Medicaid program.

"It may well turn out to be the case that the governor uses this as an

opportunity to have real changes in the Medicaid system," said Senator

Kemp Hannon, a Republican from Long Island who is the chairman of the Health Committee. "We

will have no other choice but to do a real reform."

Thomas R. Suozzi, the Democratic Nassau County executive, agreed. "It makes

it clear that we have to do something," he said. "Anyone who does not

recognize that is totally out of touch with reality and everyone who is involved in the

program should get on board now." But Mr. Suozzi said block grants would be

devastating for New York.

Mr. Pataki is already coming under pressure from Democrats, as well as

lobbyists for the health care industry, to use his political clout with

Republicans in Washington to fend off any radical changes to the Medicaid program.

Assemblyman Richard N. Gottfried, a Democrat from Manhattan who is chairman

of the Health Committee, expressed frustrations over what he said was Mr.

Pataki's relative silence as the debate over Medicaid heats up in Washington.

"The Pataki administration has been strangely and noticeably silent on this

issue, while governors from both parties in other states have been very

outspoken and aggressive," he said.

"If there are cuts in the federal funding, I am sure Governor Pataki would

cite that as an argument for cutting back on health funding in New York," Mr.

Gottfried continued. "But I think that would be an outrageous position to

take. And I think he would face enormous resistance in both houses of the

Legislature."