There are two conclusions that can be drawn from reading a new report from the Empire Center about the state taking over Medicaid costs from local counties.
One is that it’s an insanely complex endeavor that no one would want to tackle, either logistically or politically.
The other is that it must be done.
The report outlines a number of options the state could take in relieving New York’s counties of the nearly $8 billion annual expense of Medicaid.
On the surface, it sounds like a simple matter. The state is responsible for Medicaid expenses, which cover about 6 million poor and disabled citizens.
Yet it passes much of that expense, $7.6 billion a year, onto local governments, forcing them to pay for Medicaid instead of other things like fixing roads, repairing sewer lines or hiring police.
So why not just have the state take over Medicaid costs and be done with it?
The reasons rest in the complexity of the existing distribution and payment program, the nation-high cost of New York’s program, the state’s own precarious financial situation, and in the consequences that would result from each prospective solution.
First, the state doesn’t have $7.6 billion lying around in its budget to absorb the costs outright. To take on that much burden from local governments, the study’s author, Bill Hammond, explains, would require lawmakers to make significant state spending cuts, perhaps to education, economic development and infrastructure.
The state could raise state taxes, particularly on the wealthy. But can New York raise taxes any more without harming its economy further and driving more people out of the state?
The state could reduce its overly generous Medicaid benefits, cut fraud and inefficiency within the program, and shift the burden of care to other, less expensive care providers. But Hammond notes that there likely wouldn’t be the kind of savings to offset $7.6 billion.
Another solution would be for the state to absorb the burden in exchange for counties giving up some of their sales tax revenue. But that solution would simply shift taxes around and probably end up hurting the counties more.
To save money, the state could exclude New York City from the tax takeover or only take over a portion of its costs. Upstate counties would likely like that. But that would be unfair, and New York City politicians would squawk.
The state could also phase in the takeover to distribute the pain over time.
See? We told you this was complicated.
But rather than shy away from addressing it, state officials need to sit down and work out a plan to reduce Medicaid costs that might include a combination of all the solutions.
State government officials have an obligation to taxpayers to find a way.