Press Release: Governor Paterson’s Executive Budget Reins In Unaffordable Medicaid Spending

Below is yesterday’s  press release from Governor Paterson regarding his plan to reform state Medicaid spending through his proposed budget…



Actions Provide Necessary Savings, While Investing in Primary and Preventative Care

Governor David A. Paterson today announced that his Executive Budget includes a comprehensive $3.5 billion health care savings package that will help rein in unaffordable growth in the New York’s Medicaid program. Additionally, these proposals will continue the process of reforming our State’s reimbursement system to invest in more effective and cost-efficient primary care settings and incentivize higher quality care.

If no actions were taken to control costs, State Funds Medicaid spending would grow 12 percent to $17.3 billion. The Executive Budget proposes actions to limit State Funds Medicaid spending to $16.0 billion, an increase of 3.8 percent from 2008-09. The recommendations focus on reforming ineffective hospital, nursing home and home care reimbursement systems to direct spending to more appropriate primary and community based settings. Even after these actions, total federal, state and local Medicaid spending would still increase by $432 million or 1 percent compared to 2008-09 to a total of $45.4 billion, and New York’s program would still be the most expensive in the nation.

“Especially in times of fiscal difficulty, we must continue our efforts to reform health care and create a more rational reimbursement system, which targets our resources to those investments that will produce real results for patients,” said Governor Paterson. “Additionally, it is clear that even after these reductions, New York would continue to make a substantial financial commitment to health care.”

According to the most recent federal data, New York spends a greater amount on Medicaid per capita ($2,283) than any state in the nation and more than twice the national average ($1,026). Additionally, projected 2009-10 All Funds Medicaid spending ($45.4 billion) would still represent an increase of $15.3 billion or 51 percent compared to 1999-00.

The Executive Budget will produce health care savings across every sector, totaling $3.5 billion in 2009-10. None of these reductions will impact benefits currently given to individuals. A full, itemized list of individual health care savings actions is available at

Hospitals (2009-10 savings: $699.7 million). Continues the second year of a four-year plan to reform New York’s health care reimbursement by shifting funding from inpatient services to more appropriate and cost-efficient primary and community-based care settings, updating reimbursements to current costs, and calibrating inpatient rates to reflect patient severity. Additional savings are achieved through across-the-board rate reductions, eliminating the 2008 and 2009 trend (inflation) factors, reducing unspent funding for selected HCRA programs, and other actions.

Nursing Homes (2009-10 savings: $420.2 million). New York spends $7 billion annually on nursing homes, about the same as California and Pennsylvania combined. The Executive Budget creates a more rational reimbursement system that is simple, transparent and uses an average regional price adjusted for the needs of the residents, not the individual facility’s costs. These proposals will improve quality and efficiency and help control rising nursing home costs, making New York’s payments more consistent with other states over time. Additional savings are achieved for the 2008-09 fiscal year through across-the-board rate reductions, eliminating the 2008 and 2009 trend factors, reducing recruitment and retention grants for public facilities, and other actions. The budget invests a portion of the savings described above to phase-in 6,000 new assisted living beds over five years; support financially disadvantaged homes; and recognize the costs of hard to serve patients

Home Care (2009-10 savings: $189.4 million). Home care is the fastest growing area in Medicaid. From 2003 to 2006, home care spending increased by more than 43 percent while the number of people served declined by 3.6 percent during the same period. New York spends far more on home care than any other state in the nation, and will continue to do so after these proposals are implemented. These proposals create a more rational reimbursement system that, that, similar to Medicare, uses a pricing methodology based on patient condition to help control the growth of home care costs.

Pharmacy (2009-10 savings: $111.4 million). Recommendations reduce State spending and maximize non-state revenues by directly negotiating with manufacturers for drug rebates and accessing Federal Medicare Part D coverage for New York’s seniors. Common sense utilization control measures employed by commercial drug plans to ensure patients receive cost-effective high quality care are also proposed, among other actions.

Insurance Industry (2009-10 savings: $855.3 million). Targeted assessments on the Insurance Industry reflect the need to receive contributions from each sector of the state’s health care system for gap-closing purposes, and are used to supplement health care spending and improve access to quality health care for low income individuals. These public health investments will help lower health care costs in the future.

Medicaid Fraud Prevention (2009-10 savings: $125.0 million). Over the last two years, the State has substantially increased resources used in identifying fraud and abuse in the Medicaid system. The number of staff targeted to fighting fraud in the Office of the Medicaid Inspector General has been significantly increased (more than 200 since 2006-07) and OMIG’s computer systems have been upgraded, utilizing state-of-the-art technology to detect fraudulent practices before payments are made. These investments are paying dividends. The state share of collections from Medicaid fraud enforcement in expected to reach a record level of $820 million in 2009-10, an increase of $125 million or 18 percent over 2008-09.

Utilization and Management of Services (2009-10 savings: $24.0 million). These proposals continue efforts commenced in recent years to manage the provision of Medicaid services to ensure that they are appropriate, meet patient need, are provided in a cost efficient manner including requiring hospitals and clinic claims to contain accurate patient-specific diagnostic and practitioner codes to prevent inappropriate billing, among other measures.

Public Health and Aging (2009-10 savings: $525.9 million). To combat obesity, the budget proposes an additional 18 percent tax on non-diet soft drinks to discourage consumption of beverages that contribute to obesity, diabetes and heart disease, with all of the revenues to be dedicated to health care programs. Additional measures will reduce funding for certain programs and senior services, raise the retail tobacco fee, eliminate a cost of living adjustment (COLA) for public health and aging providers, and other actions.

Other savings actions outside these areas would total $639.6 million, including delaying a $400 million 2009-10 Medicaid payment by one day, capping marketing expenses for Family Health Plus and Child Health Plus, limiting participating in case management services and other actions.

The health care savings plan included in the Executive Budget has enabled Governor Paterson to propose several targeted investments, including:

    – Extend HEAL NY. Extending for two years the HEAL NY program, which provides capital grants to health care institutions to improve their efficiency. Authorized appropriations for this purpose would total $650 million over the next two years.

    – Streamline Access to Coverage. To enable eligible children and adults to secure and keep coverage, face-to-face interview, finger imaging, and asset test requirements are eliminated. Also, barriers to enrollment in Family Health Plus by public employees and 19 and 20 year-olds who do not live with their parents will be removed.

    – Assist Seniors with Medicare Part D. Providing $2 million in additional funding for local Area Agencies on Aging and community-based organizations to assist Elderly Pharmaceutical Insurance Coverage (EPIC) program seniors in selecting, accessing and maximizing appropriate Medicare Part D prescription drug coverage.

    – Reduce EPIC Cost Sharing. Reducing out-of-pocket expenses for low-income seniors by eliminating EPIC fees for those with incomes below 150 percent of the Federal Poverty Level (FPL) – currently those below 135 percent of the FPL pay no fees. This will cost $10 million in 2009-10.

    – Enhance Lead Poisoning Prevention. Funding for the Childhood Lead Poisoning Primary Prevention Program is increased by $2.5 million and this pilot program is made permanent. The increased funding will allow further expansion of existing pilot projects to additional zip codes, support enhanced local activities including coordination with municipal building code departments, and add one to five more counties to the program.

    – Support Obesity Prevention Programs. New funding of $1.0 million is recommended for local organizations to work together to create environmental and policy changes that support access to sustainable, healthy, affordable food and accessible safe environments for physical activity and play.

    – Increase Cancer Screening. Additional funding of $3.2 million is recommended to support the cancer services program which funds free mammograms, ovarian cancer screenings and colorectal screenings for uninsured and underinsured people.

    – Increase Food Banks Funding. Providing $4.4 million in increased funding to food banks, food pantries, soup kitchens and emergency shelters to address growing needs in difficult economic times.

    – Finance Emergency Preparedness. Providing $1.2 million funding to help maintain pharmaceutical supplies and medical equipment in the event of an emergency.


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