Among the Medicaid budget cuts Governor Spitzer has proposed, and the hospital and nursing home industries are gearing up to fight, is a rate freeze for 2007 in place of the automatic inflation adjustment these industries would otherwise be entitled to. In the past, whenever the state budget has been tight, these industries have received more money automatically, while other needs and concerns, whose increases (or even avoidance of decreases) must be approved each year, have been forced to fight over whatever money is left. Medicaid also has gotten the first bite of the apple at the local government level, as payments to the state are mandatory. By taking away the automatic increase, Governor Spitzer would not disadvantage hospitals and nursing homes in the future, when the state might be facing fiscal problems. He would merely put them in the same position that public schools, transportation, and other public services have always been in — with no guarantees, and thus forced to compete equally in surplus or shortage.
It occurs to me given a political process in which the general tendency is for existing rules and priorities to remain in place (because near universal agreement is required to change them with several entities — in this case Governor, State Senate and Assembly having a veto), the presence or absence of an automatic inflation adjustment is a fair measure of political power. Interests that have it get ahead if nothing changes; those without have to beg and plead to keep up. The following is a brief overview.
Hospitals and nursing homes have had an automatic adjustment for inflation. I’ve been told, however, that under existing rules New York City’s share of state school aid would be even lower were it not for provisions that have to be re-adopted each year.
Social Security is adjusted for inflation automatically. New York City and State pensions now have an automatic partial adjustment for inflation; private pensions do not. The pay of top executives is automatically adjusted upward based on what other executives are paid; that pay is determined by (guess who) other top executives sitting on boards.
The minimum wage, on the other hand, is not automatically adjusted. It is periodically increased after years of falling behind to inflation, and each time it is presented to the wage earner as a great gift. Most wages, in fact, do not automatically rise with prices, and for the bottom three-quarters of the workforce they have been lagging. This helps to keep prices down for the retired and top executives. Public assistance payments haven’t gone up for years.
They may have to wait for years, but existing public employees are pretty much guaranteed that an arbitrator will eventually award an inflation adjustment. On the other hand, wages and benefits for new hires tend to go down as fast as wages and benefits for others go up, or so it seems.
Property taxes automatically rise with the value of property unless tax rates are cut, except for New York City homeowners whose assessments are held back. Income taxes rise automatically with people’s incomes. Sales and use taxes rise automatically with the cost of goods sold.
On the other hand, gasoline taxes remain at the same cents per gallon no matter what gasoline costs, and transit fares do not increase automatically no matter what transit service costs. No wonder, then, that the MTA and the state’s transportation trust fund are about to go broke.
The standard deduction rises automatically with inflation while the income subject to the Alternative Minimum Tax does not. Eventually they will meet in the middle, and all deductions, exemptions and credits will disappear.
The automatic inflation adjustments for Medicaid has exempted the hospital and nursing home industries from belt tightening in difficult times in the past, shifting the burden to less powerful interests. The next time the state has a shortage of money, all priorities ought to be considered equally. And in addition to increasing the minimum wage one time, the Democrats should promise to have it adjusted upward for inflation. If it’s good enough for the retired, it’s good enough for those they hire to provide them with services, and who are taxed to pay for that retirement.