New York State Governor-Elect Eliot Spitzer believes that Medicaid reform is an essential part of a much-needed change in New York States health care, as it is the largest and fastest-growing part of the state budget.

Spitzer will have to work with the Legislature as governor to bring about the reforms that he deems necessary to improving Medicaid. Though many problems have been listed by all parties, the future of reform depends on his ability to orchestrate agreements, continue investigations, and pass new legislation.

For Spitzer, the biggest issue in Medicaid spending is long-term care, which now accounts for over 40 percent of the Medicaid budget.

We must develop a better and less- costly long-term care system by making it easier for our residents to save their long-term care, supporting better home and community-based living options, increasing the role of managed long-term care, and making it easier for our families to navigate the states complex web of long-term care programs, Spitzer said.

Spitzer also sees combating Medicaid fraud as essential to reform. As attorney general, he worked with Kimberly OConnor, the Medicaid inspector general, and his own investigation team to bring to light problems with Medicaid fraud and abuse. Most recently, he and OConnor revealed a Medicaid fraud ring of doctors and pharmacists, involving millions in fraudulent Medicaid billings and large monetary transfers to individuals in Pakistan.

Spitzer said, If we are ever going to bring meaningful health care reform, we must increase the states ability to investigate and prosecute Medicaid fraud by expanding the tools available to the state. We must also reduce Medicaids prescription drug costs through a stronger preferred drug list program.

Senate and Assembly Recommendations

The State Senate and Assembly have also shared views regarding Medicaid " highlighting the systems problems and offering proposed solutions.

The 2006 Report of the Senate Medicaid Reform Force, from Senator Kemp Hannon (R-Nassau), claims that Medicaid expenditures will exceed $41 billion in the current state fiscal year, and that local spending for Medicaid has increased in excess of 34 percent over three years, from $3.7 billion in 1999 to $4.9 billion in 2002. The report stated that the skyrocketing growth in New Yorks Medicaid program poses the single most daunting fiscal challenge to our state and local governments.

The report lists reforms to curb Medicaid spending, and to solve problems associated with access to quality care and lack of accountability. These reforms include:

Establishing disease management programs;

Insisting on greater personal financial involvement in health care;

Modifying Family Health Plus;

Establishing a preferred drug list for Medicaid and expanding the use of generic drugs;

Providing fiscal relief to local governments through a state assumption of the local share of Medicaid costs;

Reforming the long-term care system.

Senate Majority Leader Joseph L. Bruno (R/C-Rensselaer) said, We supported the creation of a Preferred Drug List to help reduce spending for prescription drugs and we will be open to cost containment proposals.

Bruno continued, Our commitment to health care access must also be balanced with our concern that the system be efficient, accountable, and affordable to taxpayers. The Senate has fought for tougher measures to stop Medicaid fraud, an effort that is only in its beginning stages and will continue to save us money.

We are already seeing reports that New York, along with other states across the country, is spending less on Medicaid this year than originally projected. At the federal level, Medicaid spending has declined for the first time in history, Bruno said.

In the Assembly, Richard N. Gottfried (D/L-Nassau) focused on creating legislation to establish the Office of the Medicaid Inspector General, and the False Claims Act, which would help regulate Medicaid fraud and abuse, said Richard Conti, spokesman for Gottfried.

David Pietruzsa, spokesman for Kimberly OConnor, who was appointed as Medicaid inspector general by Governor George E. Pataki on August 5, 2005, explained, The Medicaid inspector general focuses on the fraud fighting efforts by conducting investigations and audits. When there are discussions about the administration program, we will be at the table, but our primary focus is investigative.

Conti also tried to clear up what he feels are misconceptions regarding Medicaid in New York. He said, People always throw off issues about New York having a richer Medicaid package than others; its really not the case if you look at it. Theres not a lot of money there. The real issue in terms of where our expenditures go is hospitals. We need to decide if thats something we want to reconfigure.

In fact, recommended reconfigurations have been proposed by the New York State Commission on Health Care Facilities in the 21st Century. The recommendations included hospital closings across the state, sparking some debate amongst New York State citizens (see N.Y. Berger Commission Recommends Closure, Downsizing of 57 Hospitals, Nursing Homes on www.insurance-advocate.com).

According to a poll conducted by the advertising and public relations company, TraversCollins & Company, 91 percent of Erie County citizens said they did not think any hospitals in the region should be closed.

Joseph McDonald, chief executive officer of Catholic Health System in Erie County, said, CHS has been a regional leader in right-sizing without government provocation or financial support. In recent years, the system has been responsible for more than 90 percent of the bed reduction in the region due to closure.

Hevesi Lists Spending Problems

Comptroller Alan Hevesi conducted an audit that he said revealed other problems with Medicaid in the area of spending. Hevesi said a major problem with Medicaid is that the state paid medical providers $3.6 million for 4,277 Medicaid recipients where the claim for reimbursement had dates of service after the patients dates of death.

Hevesis audit, from April 1, 2003 to February 3, 2006, found that workers failed to perform timely updates of Medicaid eligibility files by not consistently using information on the states Welfare Management System or death records to remove individuals from the system. The audit also noted that the Department of Health did not have standard procedures to discontinue Medicaid eligibility for individuals who died, or otherwise ineligible individuals.

In addition, auditors found records for 58,402 Medicaid recipients lacking a valid Social Security Number, with 33 percent of the cases resulting from an error by local officials.

The reforms recommended by the governor-elect, the Senate, and the Assembly would look to investigate more of these types of cases, with the goal of bringing about a more transparent, regulated Medicaid system.

Medicaid spending also drew criticism from the Business Council of New York State. According to Matthew McGuire, spokesman for the Business Council, The state has launched an advertising campaign to get more people to consider buying long-term care insurance; that could help offset some of the Medicaid payments made to the elderly or disabled in nursing homes. But cost containment needs to be wider in scope.

New York spends more than twice as much per capita on Medicaid as the national average, said McGuire.

The Medicaid Institute Highlights Service Delivery

According to an October 2006 report from the Medicaid Institute at United Hospital Fund, starting this year, New York State requires disabled or elderly Medicaid beneficiaries, or Supplemental Security Income (SSI), to enroll in Medicaid managed care. This means that 125,000 SSI beneficiaries in New York City must now choose, or be assigned to, a managed care plan, according to James R. Tallon, Jr., president of the Medicaid Institute. These individuals are members of families with incomes under $8,305 for one-person families, or under $10,800 for two-person families, with less than $6,000 in assets. They are either elderly or have long-term disability, Tallon explained.

Some of the problems with Medicaid that the report cites involves the SSI beneficiaries in mandatory Medicaid managed care who must rely on both the fee-for-service delivery system for services such as behavioral health care, prescription drugs, and personal care " and their new health plans for others, including most primary care, specialty care, and hospital inpatient service. The report states that this current model is likely to pose challenges to effectively coordinating service delivery under Medicaid.

Other fee-for-service Medicaid weaknesses are listed as follows:

The program has no management structure in place to influence beneficiaries service use;

Beneficiaries often have difficulty finding providers who participate in Medicaid;

Providers face incentives to provide higher-intensity and more costly health care services;

There is limited accountability across the board.

The report calls on policymakers to reaffirm Medicaids clinical priorities and policy goals. These include patient-centered care, provider engagement, coordination of the full range of covered services, measurement of health outcomes, and incentives to reduce overall Medicaid spending.

Considering that the current mandate applies to only a small share of SSI beneficiaries who, on average, are significantly less costly than those not facing mandatory Medicaid managed care, the report claims that effectively serving all disabled and elderly Medicaid beneficiaries will be a substantial challenge.

For this reason, Tallon states New York policymakers should prioritize developing models of care for these Medicaid beneficiaries that promote effective service use by patients, coordination among providers, incentives to deliver appropriate and cost-effective care, and a clear framework for responsibility and accountability.

Looking to Other States

The goal of reforming Medicaid is not limited to New York, of course. Other states have encountered problems in their systems, and have employed various solutions to address these shortcomings. New York can, perhaps, learn about the effectiveness of some reforms by looking at how these states have addressed Medicaid.

Massachusetts

The Massachusetts Medicaid system currently spends more on per capita health care than any other state in the nation, according to Amy Lischko, director of Health Care and Finance Policy in Massachusetts. With 460,000 people uninsured and double-digit annual increases in premiums, Lischko said that the system was in desperate need of reform.

Massachusetts pays $1 billion of free-care which forces all stakeholders to deal with costs for uninsured and under-insured individuals, Lischko commented. Therefore, under new reforms, beginning on July 1, 2007, all Massachusetts residents will be required to have health insurance.

In order for this new Medicaid system to work, Lischko proposes incentives to both employers and consumers to make insurance more affordable and encourage residents to pay for it. Health care reform must be a system, not a product approach, Lischko stated. Rather than have an open access system, Medicaid will be value-driven. Small businesses, sole-proprietors, and individuals will be provided with more affordable product choices and individuals will be given assistance on paying their premiums.

According to Lischko, the $1 billion that was previously spent on uninsured and under-insured individuals will be used to create funding such as the Medicaid demonstration project monies, existing provider and payer assessments, and DSH funding. Funds not used for premium assistance will remain available for free-care services, Lischko concluded.

Kentucky

Kentucky Medicaid is currently spending $700 million on 24,000 individuals residing in nursing facilities, while only spending $30 million on a much larger group of 72,000 individuals who live in a community setting, according to Michael Bond, health center director at the James Madison Institute. Something has to change. We must build our community services to better serve our citizens.

Bonds solution for the increased spending on the elderly in nursing facilities is to encourage senior citizens to stay at home with aides or use community services instead. Bond envisions this under a new Medicaid system called, KyHealth Choice.

Under the current Medicaid system, Bond said there is very little, if any, consumer involvement. It also follows a one-size fits all approach which provides each individual with the same health care regardless of their age, health or lifestyle. The proposed new Medicaid programs will ensure people receive the right care, in the right setting, at the right time, Bond stated.

KyHealth Choices would create a partnership between Medicaid and private insurers, Bond concluded. It improves the quality of care delivered to our members and empowers them to be active participants in their own health care.

Florida

Currently, Floridas Medicaid system operates 20 different waiver programs and covers over 44 services. Gayale Harrel, member of the Florida House of Representatives and the Health Care General Services Committee, said Florida needs to move away from its traditional Medicaid system that has government controls, complex growth, and the government as the consumer, and develop a new Medicaid system with more consumer choice, consistent policies, and the patients as the consumers. We need a system that focuses on improving the health of recipients, not just paying claims when people are sick, Harrel urged.

Under Floridas new Medicaid system, there will be more Health Maintenance Organizations (HMOs), over-the-counter medications from $10-$25 per household, per month, and the option for employed Medicaid recipients to opt out of Medicaid and direct the premium paid by Medicaid on their behalf to an employer-sponsored plan towards payment for the employees share of that plans premium.

Perhaps the most drastic change that Harrel reported in Floridas new Medicaid system is the Enhanced Benefits program, which will provide incentives for Medicaid recipients to live a healthier lifestyle. The goal of the Enhanced Benefits program is to promote self-involvement in ones health care needs, Harrell said. Participation in healthy behaviors that have positive outcomes and can improve ones health status will be rewarded in the form of credit dollars that may be used to purchase health-related products and supplies.