Pataki's Plan Looks to Spread Medicaid Cuts Without a Major Overhaul

January 20, 2005

By MICHAEL COOPER and AL BAKER

ALBANY, Jan. 19 - The big idea guiding Gov. George E. Pataki's plan this week

to rein in Medicaid spending was his desire to steer the state's poor away

from costly long-term care in hospitals and nursing homes and into home

health care. Over the long term, his administration says, such a move could

save huge

amounts of money.

So his budget calls for squeezing hospitals and nursing homes by cutting the

reimbursement rates they receive, raising their taxes and creating a

commission to recommend closing underused hospitals. At the same time, it

calls for spending more on home health aides and other programs to help the

elderly stay in their homes longer.

But the governor's plan to cut $1.1 billion in Medicaid spending is not the

radical revision of the state's biggest and fastest-growing spending

category that some legislators had hoped for and many health care providers

had feared. While some governors around the nation are retooling their

Medicaid programs by cutting their rolls by hundreds of thousands, imposing

severe spending caps and drastically reducing benefits, Mr. Pataki's plan

consists of a series of more pragmatic measures that his aides say would

spread the pain and trim the $44.5 billion program without nearing the bone.

While Mr. Pataki is proposing a preferred drug program that would limit the

kinds of prescription drugs the program covers, along the lines of most

private health insurance plans, he is not planning to have the state buy its

drugs in bulk, for example. Even if these cuts go through, New York will

still have the most expensive Medicaid program in the nation. And even if

they are adopted after what will probably be the main legislative battle

this year, they are only cuts in planned growth: New York will still spend

more on Medicaid next year than this year.

Some of the governor's cost-cutting proposals would sharply reduce the

benefits for poor and working-class New Yorkers. The state's insurance

program for the working poor, Family Health Plus, would no longer pay for

mental health services for adults, and its eligibility rules would be

tightened. The 340,000 people in the program would be required to pay $250

for each hospital visit. Adults on Medicaid would no longer be able to visit

dentists outside dental clinics, and they would lose their podiatry,

clinical psychology and private nurse benefits. Co-payments for drugs would

rise.

But the broad outlines of the state's Medicaid program would remain intact,

and the tentative nature of some of the governor's proposals may be a

recognition of the difficulty Mr. Pataki faces in getting his plan through a

skeptical Legislature that has deep political investments in the Medicaid

status quo, one that has thwarted his proposed cuts to the program in the

past.

The governor himself said that he recognized the need to keep the health

care industry, which is one of the state's biggest employers, strong in New

York. Already, health care lobbies are gearing up for an effort to beat back

the proposed cuts.

Edmund J. McMahon, a fiscal analyst with the Manhattan Institute, a

conservative policy group, noted that Mr. Pataki's proposal still calls for

overall Medicaid spending in New York - which is divided among the federal,

state and local governments - to jump next year to $44.8 billion from $44.5

billion, a $353 million increase.

"What Pataki did not do here is push the envelope," Mr. McMahon said. "He's

making incremental changes in the existing model. The question is: If you

were going to start all over, is this the type of Medicaid program you would

really want to have?"

Still, health care advocates are already lining up against the proposals,

which they say would have an impact of roughly $3 billion on the health care

industry once the loss of matching federal and local Medicaid spending was

factored in. The biggest lobbyist in the state in recent years - a

partnership of the hospital and health care workers' union and the Greater

New York Hospital Association - said in a statement that the cuts would have

a "catastrophic effect on the quality of health care."

Kenneth E. Raske, the head of the hospital association, said in the

statement that "the magnitude of these proposed cuts is unbearable, and if

these cutbacks actually took place, the care of all hospital and nursing

home patients would suffer."

Dennis Rivera, the president of 1199/S.E.I.U., the politically potent health

care workers' union, made an argument that has carried the day in Albany

before. "Polls have shown time and time again that the overwhelming majority

of New Yorkers are strongly opposed to cutting funding for health care

workers," he said in a statement.

The last time the governor proposed large cuts to Medicaid, in 2003, the

Republicans in the State Senate joined the Democrats in the Assembly to pass

their own budget, over Mr. Pataki's vetoes, to restore the spending.

This year Mr. Pataki is trying to enlist the help of county officials, who

have been complaining loudly of the strain of paying their share of rising

Medicaid costs, which have forced them to raise local property taxes. The

governor's budget calls for capping local Medicaid spending at the current

levels, and allowing for a 3 to 3.5 percent increase each year for

inflation. He made it clear in his budget presentation that there can be no

local cap without significant cost reductions.

But while some county officials were pleased by the proposed cap, they were

noncommittal on the cuts, which could prove unpopular locally. The New York

Association of Counties said it was "cautiously pleased" by the governor's

budget. New York City officials noted that any savings it realized would be

partly offset by the loss of revenue to the public hospitals that it

operates.

One of the more politically sensitive aspects of the plan is Governor

Pataki's decision to name a commission to identify hospitals to close. "We

cannot afford to invest more in underutilized facilities," the governor said

in his budget address, and if he avoided words like "close" and "downsize,"

he spoke several times at a budget news conference of the need to

"right-size" the state's health care system.

And he made a proposal that could end Medicaid's emergence as a middle-class

entitlement, calling for the closing of a loophole that allows elderly

people to give their assets to their relatives to qualify for Medicaid to

pay for nursing home care. New York's Medicaid program spends $7.1 billion

on nursing homes, which the Pataki administration notes is more than the

combined spending of the next two highest states, California and

Pennsylvania.

But hospital closings and a proposal that could impoverish middle-class

families are not hugely popular in the Legislature.

Senator Kemp Hannon, a Republican from Long Island who is the chairman of

the Health Committee, said: "They are trying to make less hospitals

stronger. I think it is up to the Legislature to review that kind of

conclusion and see whether or not that is a viable course to take."

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