What I would do about Medicaid is not what I would do about health care. In my view, because those in need of expensive care, and those who do not want to pay for them, are free to move across state borders, health care is a national problem with a national solution (see here).
Any state that attempts to provide universal care for its residents will end up providing universal care for all Americans – until its economy collapses and it provides nothing to anyone. With regard to Medicaid, my goal is to avoid having the health care industry – with its political power and indifference to the consequences of its increasing demands – from destroying other public services and the economy of the state. Medicaid, for me, is a fiscal issue, not a health care issue, and my goal is to continue to get necessary health care without paying twice as much as everyone else. That is different from the current fiscal goal – to pay as much as possible in for as little as possible in exchange for political support. The current situation is a product of incentives – the state government gets to hand out money to its supporters, but other governments are forced to pay much of the cost and impose much of the sacrifice. My proposal is to change the incentives.
Before saying what I would do, I will to say what I would not do. I would not reduce the number of working poor people covered by Medicaid under Family Health Plus, and children covered under Child Health Plus. Nationally, the tendency has been to have fewer and fewer people gain access to more and more health care at higher and higher prices, even as the number of people who are uninsured, and get nothing, rises. The health care needs of non-elderly people who do not have severe chronic conditions are modest. To deny them basic care, while taxing them to pay for or subsidize care for others (who are often better off), is immoral and ineffective.
Also immoral is shifting the cost of the needy to those who happen to live near them, as the state has done by shifting much of the cost of Medicaid to New York City, where Medicaid recipients are concentrated. It is no accident that those for those categories of Medicaid spending that are most concentrated outside New York City – nursing home care and Family Health Plus – local governments are required to pick up just 10 percent of the cost, while for services and recipients that are concentrated inside the city that share is 25 percent or more. Not only does the city have the burden of more recipients, it also must pay a higher share of its expenditures than any of the counties elsewhere in the state. Or at least we know it did before someone decided the state would no longer provide data on the federal, state and local share of expenditures by local area.
Another thing I will not do is worry about people losing their jobs. In the private sector, one-third of all jobs at any time are in places of business that did not exist five years earlier. Therefore, not even including those hired and fired as individuals, not even including jobs lost and gained as businesses that grow and shrink rather than open and close, one-third of the workers have to find a new job every five years – in order to satisfy the shifting demands of consumers in the marketplace. Every time someone employed in the health care industry (or, for that matter, politics or a public agency) decides to purchase a different product of service, or go to a different store, they are making a decision that someone somewhere will lose their job and have to get another one. Do they feel an obligation to pay more, or accept less, or get something that doesn’t meet their needs, to keep things as they are? No. Do they assume that those on the other end of the transaction have a right to their existing job, and that they as consumers have an obligation to take what they are given? No.
As the population ages we are at the beginning of a long-term labor shortage, especially in health care, that (due to retirements) will persist even if the health care industry shrinks. Those not providing fair value in their current health care position are needed somewhere else.
While New York City has a legitimate beef with the rest of the state with regard to the local government share of its Medicaid expenditures (as New York State does with the federal government), the rest of the state has a beef with the city in that most of the excess spending happens there (though more and more of it is happening elsewhere as well). For basic, necessary care, the high local share provides a disincentive to provide it – leading to attempts to drive people off the Medicaid rolls in fiscal crises. But for wasteful, nice-but-not-necessary, and even fraudulent care, the fact that the federal and state government still pick up most of the tab provides an incentive for New York and other localities to let it happen, especially if the beneficiaries are powerful. Why not let the health care industry overcharge, if doing so subsidizes health care services for others? Why not allow the non-needy to get Medicaid services, especially politically potent seniors, and have a jobs program for the otherwise difficult to employ, if someone else will pay most of the tab via Medicaid?
What I would do is this. State government would cover the entire cost of Medicaid, at a typical price, for typical Medicaid services, for populations where there is no evidence of excess usage, with no local share. Local governments would have the option of paying more with their own and federal (but not state) money. The principle is that the state requires and pays for the basics, while local governments make the decisions and fund them on the margin. Whoever decides on the benefits, therefore, allocates the cost.
Today, the State of New York decides how much to pay for services, and local governments are forced to pay a share of it. In the future, the state should cover the entire non-federal share of services up to the average price of services in surrounding states. In higher cost Downstate, the Medicaid payment rate should be higher, based on the difference between average private sector pay in the downstate area (excluding the high-paid and not-typical Finance and Insurance sector) and the average for surrounding states, and the state government should cover all of that as well. Therefore, Upstate New York counties could, in most cases, have Medicaid services with typical Northeastern Medicaid prices and no local contribution. New York City and surrounding suburbs could have Medicaid services with at somewhat higher prices, also with no local contribution.
New York City, while complaining about the cost of Medicaid, has also often sought higher Medicaid prices to shore up the finances of its public and non-profit hospitals. Under this plan, New York City (and counties elsewhere) would be free to pay up to 25 percent more that the state rate – picking up the entire non-federal cost of the higher price. If the local hospital industry or other health care providers convince the local government that circumstances require it to pay more, and to cut other services or raise taxes to make up the difference, then fine. Just don’t ask other parts of the state to pay. Above 25 percent in excess of the state rate, I’d still let counties and New York City pay more, but with penalty. The state share would go down one dollar for every dollar of cost over 25 percent. But bear in mind, in New York City we are talking about more than 25 percent more than a price that is already adjusted above the average of surrounding states, which in many cases is more generous than the national average.
What if more reasonable reimbursement rates force some hospitals and other health care providers to close? Many of those hospitals have received a tax exemption for decades, the total value of which exceeds the value of their property many times over. The buildings should be turned over to the city for another public use – like new high schools, something the city desperately needs. At the least the city would have some high schools with decent labs. The employees should move to health care institutions and organizations that meet today’s needs. Both the buildings and people are too valuable to be wasted. The union dues and administrative jobs? They’ve trumped everything else for too long, thanks to Local 1199 and the Greater New York Hospital Association. If emergency rooms and clinics are required to be geographically dispersed to meet basic needs, they could be subsidized directly by the city or state. We don’t need to pay for a whole hospital, with high overhead, to keep them.
The state should do even more about health care prices, which are set using practices long since banned in other industries such as funeral homes. Prior to the Pataki Administration, the state set health care prices, leading to an industry capture in which lobbyists colluded with politicians to keep prices high (and quality and efficiency low). Subsequent legislation permitted health care providers to set their own prices, but botched deregulation by permitting price discrimination, bill padding with additional non-included services, and other abuses. The health care industry has, it appears, used higher prices for Medicaid and the uninsured to subsidize services for health insurance companies providing health care for executives and others. And it has priced its services in such a way as to make price comparisons impossible. Because so much of the industry is public or “non-profit” it has been given a pass, whereas any for other industry these practices would generate outrage among consumer advocates.
Aside from Medicaid and Medicare, which set prices by fiat, the state should require non-profit and public health care providers – and for-profit providers who want to accept Medicaid patients – to have just one price for everyone for each service or the treatment of each condition. That price should be all-inclusive, with no hidden and undisclosed extras, and comparable. And, it should be available, at all times, on a state health care database that permits consumers to check (for any service or condition) the prices for all the providers in their part of the state, along with those providers’ experience and success rate for that service or condition. Providers would be permitted to add a paragraph indicating any extras that justify their price if it is higher. In a table for, for example, a bypass operation, a record for each hospital or other provider would show the Medicare price, the Medicaid price, the price for everyone else, the number of procedures in the most recent 12 months, the success rate, and any note the provider wanted to add.
No discounts or forgiveness for the needy uninsured? Sure, but let’s make sure they are if fact the needy, by having collection forgiveness decided on a case by case basis, with the total amount of charity care reported by service, and (in a summary sense) the characteristics of the beneficiaries reported as well. Only discounts off the one price given to individuals who are in some ways needier than average should count as charity care.
Health care is expensive enough without having a program originally intended for the poor over-charged to make up for excess capacity, excess pay, bad business decisions, or under-the-table cross subsidies for the better off. By aligning reimbursement rates with those of nearby states (not Mississippi), giving marginal decisionmakers (in this case local governments) an incentive to question prices, and forcing those prices to be standardized and revealed to the world, Medicaid price abuse (and perhaps price abuse in health care in general) could be gradually reduced. Let’s pay what other states pay, and otherwise see who is paying what.