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Reconciliation Bill Tosses New York a Fiscal Hand Grenade

Posted By Edmund Haislmaier On March 20, 2010 @ 12:33 pm In Obamacare | Comments Disabled

The pending health care legislation would cover the uninsured mainly by dumping most of them into the federal/state Medicaid program. Not surprisingly, many states have objected to the additional costs that such a Medicaid expansion would impose on their taxpayers. Indeed, that was the motivation behind the infamous “Cornhusker Kickback” in the Senate bill, under which the Federal government would pick up all of Nebraska’s Medicaid expansion costs in perpetuity.

In response to complaints from governors and state lawmakers, coupled with public outrage over the “Cornhusker Kickback,” section 1201 of Speaker Pelosi’s reconciliation bill amends the Senate bill to have the federal government cover all of the extra Medicaid benefit costs for all states in the first three years (2014-2016) with the federal share then declining so that from 2020 onward the Federal government would pay 90 percent of the costs with state taxpayers covering the remaining 10 percent.

New York Governor David Paterson, for one, has pronounced himself pleased [1] with Speaker Pelosi’s solution and Democrats in New York’s congressional delegation are patting themselves on the back for securing this promised “improvement” to the Senate bill.

However, New York’s taxpayers and state legislators — as well as those in a some other states, most notably California — might be interested to learn that the Speaker’s bill also tosses them a Medicaid fiscal hand grenade with a five-year fuse attached.

Specifically, section 1202 of the reconciliation bill requires state Medicaid programs to pay primary care doctors rates for Medicaid patients that are equal to Medicare rates for two years in 2013 and 2014. This mandated physician pay hike would apply to services provided to all Medicaid patients, not just the “expansion population.” The federal government would also pick up 100 percent of the extra costs for this provision as well.

So what is the problem? Well, for a lot of states section 1202 will not be a problem, but for some — especially New York — it triggers a countdown to a state budget fight in five years.

To understand how and why that is so, one first needs to recognize a dirty little secret about Medicaid. Namely, the states that have expanded Medicaid eligibility to more of their populations have limited the cost of those expansions by slashing Medicaid physician payment rates. Of course, physicians in those states risk going broke if they see too many patients whose Medicaid reimbursement is less than the doctor’s costs, so most of them refuse to participate in Medicaid. The result is that those states have both the largest Medicaid rolls (as a percentage of the state’s total population) and the worst access to care and quality of care for Medicaid patients.

Put another way, some states like New York have already implemented in their Medicaid programs the classic leftist health care con job of offering more people government health insurance coverage that not only doesn’t increase, but actually decreases, their access to medical care.

The most recent available data from 2006 show that over one-quarter of New York’s population (27 percent), or more than 5.1 million individuals, are covered by Medicaid, but New York’s Medicaid program pays primary care doctors only 36 percent of the rates that they get for providing the same services to Medicare patients.

So, when section 1202 takes effect in 2013, primary care physicians in New York will suddenly get paid nearly three times as much as they previously did for treating Medicaid patients. That will certainly be good for doctors. It will also be good news for Medicaid patients, as it will make it more likely for them to actually get medical care.

But then what happens twenty-four months later on January 1, 2015 when the federal funding to cover the extra cost of that pay hike, goes away? Will New York physicians simply accept a return to the status quo ante with an effective 64 percent cut in their Medicaid rates, and will Medicaid enrollees simply accept the reduced access to care that such a physician payment cut will entail? Not likely.

New York’s normal federal match rate for Medicaid spending is 50 percent. So if New York lawmakers are to keep in place after 2014 the physician payment increase imposed by section 1202, they are going to have to get their own — already overtaxed — state taxpayers to cough up half the extra cost.

Of course, New York could try to get the Federal government to keep bailing it out, but how likely is it that U.S. Senators from states that got little or nothing in extra payments under section 1202 will vote to approve the “Empire State Bailout” of 2014?

Six states already pay their primary care physicians Medicaid rates that are equal to — or in the case of Alaska, Wyoming, Idaho and North Dakota — greater than Medicare rates. Another nine states pay Medicaid rates that are between 90 and 98 percent of Medicare rates, and a further 10 states pay Medicaid rates that are between 80 and 89 percent of Medicare rates. So, collectively exactly half of the states — including some of the poorest ones such as Mississippi, Louisiana and New Mexico — will get little or no benefit from section 1202. Why would their Senators be willing to keep bailing out New York at the expense of their own constituents?

The same holds true for some other states that will also be tripped up by section 1202, most notably, California. According to the same data, 29 percent of California’s population (over 10.5 million individuals) are in Medicaid, California’s Medicaid program pays its primary care doctors 47 percent of Medicare rates, and the state has a normal federal match rate for Medicaid spending of 50 percent. So, California primary care physicians will see their Medicaid payment rates more than double for two years, but then what happens?

Other states that will face the same problem, though to varying and generally somewhat lesser degrees than New York and California, are New Jersey, Rhode Island, Florida, Minnesota, Michigan, and Illinois. All of those states pay their primary care physicians Medicaid rates that are less than 60 percent of Medicare rates and all have federal Medicaid matching rates of between 50 and 58 percent.

If Speaker Pelosi gets her way reporters covering those states’ governments, particularly ones in Albany and Sacramento, should pencil in on their 2014 calendars a note to “cover state doc-fix battle.”


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URL to article: http://blog.heritage.org/2010/03/20/reconciliation-bill-tosses-new-york-a-fiscal-hand-grenade/

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[1] pleased: http://www.state.ny.us/governor/press/031810HealthCareStmt.html

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