Ten New York City Hospitals May Close Over Governor Cuomo's Proposed Medicaid Cuts; Need for a New Approach

New York Governor Andrew Cuomo has a $10 billion budget gap to fill. Unlike Illinois Governor Pat Quinn, Cuomo does not seek tax hikes. Instead he want to cut graft and untenable spending, especially state agencies and Medicaid spending.

Please consider a few snips from Cuomo's State of the State Address.

My friends I believe this state is at a crossroads and I believe there are two very different paths this state may down. Certain factors are pushing us down one path - the national economic pressure; the costs of state government that we’re currently expending; the dysfunction that the state government has been manifesting and the fact that the people have lost trust in our government.

What is the state of the state? This is a time of crisis for our state, a time when we must transform our government to once again become the progressive capital of our nation, and to seize the moment of opportunity that is before us.

The State of the State begins with an honest analysis of the crisis that we face. In government, as in life, you can never solve a problem if you refuse to acknowledge it. The economic recession has taken an especially hard hit on the State of New York. In 2009, we had a twenty-six year high in unemployment, roughly 800,000 New Yorkers are now unemployed, hundreds of thousands more are under-employed. We have the worst business tax climate in the nation, period. Our taxes are 66% higher than the national average. Upstate is truly an economic crisis.

The State of New York spends too much money, it is that blunt and it is that simple. Our spending has far exceeded the rate of inflation. From 1994-2009, inflation was about 2.7% per year; medicaid when up over 5% per year and education went up over 6% per year. We just can’t afford those rates of increase. State spending actually outpaced income growth. State spending increased just under 6%, personal income growth was only 3.8%.

And most damaging, our expenses in this state far exceed revenue. We’ve been focusing on this year and the deficit this year, which is a very large deficit about $10 billion, and that is a problem and it is a major problem; what’s worse, is it’s not just about this year. Next year, the problem goes to $14 billion. The year after, the deficit goes to $17 billion. This is not a one year problem my friends. This is a fundamental economic realignment for the State of New York. You look at the chart, you look at the arrows and this is an unsustainable rate of growth and it has been for a long time.

Not only to we spend too much, but we get too little in return. We spend more money on education than any state in the nation and we are number 34 in terms of results. We spend more money on Medicaid than any other state in the nation and we are number 21 in results. We spend about $1.6 billion per year in economic development and we are number 50 in terms of results.

We are spending more, and government is growing more. We now have more than 600 Executive branch agencies.

We are going to have to confront the tax situation in our State. The property taxes in New York are killing New Yorkers. Thirteen of the sixteen highest tax counties are in New York when asset by home value. In absolute dollars, Westchester County the highest property taxes in the United States of America. Nassau County the second highest property taxes in the United State of America. It has to end, it has to end this year. We have to hold the line on taxes for now and reduce taxes in the future. New York has no future as the tax capital of the nation. Our young people will not stay. Our business will not come. This has to change.

We must transform our state government. The last time the state government was reorganized was 1927 under Gov. Al Smith. 1938 a reform was passed, a constitutional amendment, that said there could be only 20 executive departments – 20 - so what has happened since then. Well we couldn’t create any more departments but the law didn’t say anything about creating councils, advisory panels, working groups, facilities, offices, task forces, institutes, boards and committees. So what do we now have? The Department of Health, only one department in compliance with the law, however there are 87 other organizations that have been added to the Department of Health, 46 councils, 6 committees, 17 boards, 6 institutes, 2 task forces, 5 facilities.

We need to try a different approach. And think of it this way, there are basically three flashpoints when it comes to the budget: it’s the education funding, medicaid and state and local mandates. We want to try a new approach. The State of Wisconsin actually used an interesting model. The governor had announced across the board cuts on the medicaid program, the industry said they couldn’t live with the cuts, and what Wisconsin actually did was basically brought everyone in. It was a hybrid alternative dispute resolution meets binding arbitration process and it actually worked fairly well in Wisconsin. The industry came in, they worked with the government, they accepted the budget target and then redesigned the program to meet those targets. Remember, this is not going to be a budget cutting or trimming exercise. We need to redesign the medicaid program. I can also tell you this. As the Attorney General, I audited the medicaid program for four years, even without this budget problem, the medicaid program needs a desperate overhaul. It is dysfunctional on many levels, so this process has to be done anyway. Our suggestion is to take a crisis management approach and put together a Medicaid Redesign team.

Let this legislature be the legislature that stands up and says yes we’re democrats but we’re New Yorkers first, yes we’re republicans but we’re New Yorkers first, yes we’re from downstate but we’re New Yorkers first, yes we’re from upstate but we’re New Yorkers first, and that matters most. And we’re here as New Yorkers not as democrats not as republicans not as independents we’re here as New Yorkers to serve the people of the state of New York and help this state through this crisis.

Let this 234th legislature stand up and write a new page in the history book of New York State government. Let this 234th legislature solve these problems at a time of crisis and bring this state to a place that it’s never been. We’re not just going to build back we’re going to build back bigger stronger than ever before. That’s what we’re going to do together. Thank you and God bless you.

Need for a New Approach

That is a welcome speech, especially from a Democrat who won the endorsement of unions. I certainly applaud the Cuomo's reference to 600 state agencies, most of which I am sure are totally useless, if not counterproductive.

I also applaud reference to education funding, medicaid and state and local mandates.

"We want to try a new approach" said Cuomo. What he should have said is "We need to try a new approach, and we will."

Of course the unions did not like the his speech one bit. Public unions always want to raise taxes. It is their number two mission, just after expanding membership.

The one thing Cuomo did not address at all regards the need to cutoff defined benefit plans for new public union workers immediately.

Sounding Mightily Republican

The Suffolk Times said Governor sounded mighty Republican in ‘State of the State Address’

Local GOP legislators sounded pretty giddy following Wednesday’s first “State of the State” address from Democrat Andrew Cuomo. That’s due to the newly sworn in governor’s liberal use of one word conservatives love to hear: cap.

“Listening to the governor today, I could have sworn he was a Republican,” said Senator Ken Lavalle (R-Port Jefferson), who began serving his 18th term in office this week, during a telephone interview Wednesday.

“Property tax and spending caps, smaller government and less regulation, these are the things everyone wants,” Mr. LaValle said. “The people have spoken loud and clear and the governor knows this.”

Senator LaValle was not the only local legislator who walked away from the speech happy with what he heard.

“I look forward to working with Governor Cuomo to enact a property tax cap and state spending cap in the months ahead,” said newly elected Assemblyman Dan Losquadro (R-Shoreham) in a statement. “By capping property taxes and state spending, lawmakers will be providing Long Island homeowners with real relief from skyrocketing property taxes while putting into place a budgetary safeguard to end the tax and spend mentality that has brought state government to the financial brink.”

Cuomo Targeting Medicaid Spending

The Wall Street Journal reports Cuomo Targeting Medicaid Spending

Gov. Andrew Cuomo is aiming to reduce the state's Medicaid spending by billions of dollars, exceeding the size of cuts to the program proposed in past years, according to individuals with knowledge of his budget.

The Cuomo administration is considering a cut of about $2.1 billion out of the state's projected spending on Medicaid in the upcoming fiscal year. With federal matching funds, the cut comes to more than $4 billion. That's close to twice the reduction in spending proposed by Gov. Eliot Spitzer in 2007.

Such a cut would effectively freeze Medicaid spending at the current year's level. But because the state is set to receive far less in federal funds, as the stimulus expires, its share of Medicaid costs would still grow by more than $3 billion, a 30% increase.

In recent years, the state's major health-care union and hospital groups have spent millions of dollars on lobbying and advertising campaigns opposing cuts, encouraging lawmakers to restore funding.

The state over the last five years has sought to ramp up fraud and waste recoveries, but the dollars recouped—about $500 million a year split with the federal government—have been overwhelmed by rising costs, fueled by higher enrollment.

A state official familiar with the draft proposals said the Cuomo administration, among other things, wants to revamp coverage of one of the highest-cost categories of Medicaid patients—beneficiaries suffering from severe mental illnesses such as schizophrenia and bi-polar disorders, chronic drug problems or both.

The state has struggled to coordinate the care of these types of patients, many of whom often cycle in and out of emergency rooms and clinics and run up annual costs of more than $100,000.

Ten NYC Hospitals May Close Over Medicaid Cuts

The New York Post reports Gov's Medicaid cuts may kill 10 city hospitals

One-third of New York City's private hospitals could lose their life support and shut down if Gov. Cuomo goes through with his vow to cut between $2 billion and $3 billion from the state's massive Medicaid program, The Post has learned.

"There are 10 to 12 hospitals that are teetering on the edge [statewide]," said Stephen Berger, a member of Cuomo's Medicaid redesign team, who previously headed a state hospital restructuring panel.

"How many of them are really necessary? How many can be saved? How many can be merged? That's what we have to ask," added Berger.

"Given the amount of money we are spending, we ought to be putting together a much more efficient health-care system with better patient care."

"It's no secret that a lot of hospitals in the New York City area are struggling financially, and the worst budget outcome for them would be straight reimbursement cuts, which has happened nine times since 2007 and contributed to several closures," said Brian Conway, spokesman for the Greater New York Hospital Association.

The closure last year of the storied St. Vincent's Medical Center in Greenwich Village as well as North General Hospital in Harlem put everyone on notice that Albany -- facing a $10 billion budget shortfall -- is unlikely to save chronically ill institutions.

"Although eight hospitals have closed since 2007, nearly one-third of the surviving voluntary nonprofits, most of them 'safety net hospitals,' are in jeopardy," the United Hospital Fund says in its semi-annual "Hospital Watch" report.

Economic Impact

Cuomo's approach is the correct one, regardless of how many complaints there are. If states do not have the money, and taxpayers do not have the money (and neither does), then something has to give.

With that in mind, ponder the number of jobs that will be lost if ten hospitals in New York City close. Factor in numerous other cities that will also be affected. Next think of 600 state agencies and how many of those should be eliminated.

However, regardless of short-term impacts, the long-term benefits of such actions will be hugely positive. Eliminating waste will put more money in the hands of taxpayers instead of the hands of bureaucrats who will squander it and public unions who certainly do not deserve it.

Unfortunately, public unions and advocates for useless pet projects will not give up their turf easily.

Addendum:

My friend "TW" responded with some interesting observations.

Cuomo failed to point out out that "Obamacare" dumped more Medicaid costs on the states. Thus the true cost of healthcare went up, even if the federal share went down (something that is alleged but certainly not proven).

Rising Medicaid cost is the biggest reason for various state lawsuits against the smoke and mirror promises of "Obamacare".

States used to have facilities that housed mental patients in dorms. Some had farms and other activities that would allow patients to spend a productive day raising their own food, or participating in activities to make clothes.

In the 60's, liberalism took over and productive people were put in facilities where there was nothing to do all day but watch TV and brood. Yet expenses skyrocketed as union activity increased. The bottom line is less care for more money with public unions feeding off forever rising taxes.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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