POLICY/POLITICS: Spitzer calls a spade a spade w/UPDATE

Eliot Spitzer calls a spade a spade in his speech about reforming healthcare in New York. He goes after two of the biggest subsidized sacred cows: 1) Medicaid costs which are double the national average. In fact New York spends more on Medicaid in total than California, with a much lower population. 2) Subsidies to teaching hospitals in the form of fake graduate medical education payments.

… health care decision-making became co-opted by every interest
other than the patient’s interest.  Government abdicated its
responsibility to set standards, demand results and hold institutions
receiving billions in state tax dollars accountable to the State and to
the people those institutions serve. 

Let me give you a few examples:

Take the Berger Commission.  This was a process that should never
have been necessary in the first place.  In most industries, when the
demand for a specific service falls permanently, as has the demand for
long stays in hospitals, supply inevitably follows.  Yet because of
wasteful State subsides and the State’s failure to make strategic
choices, tax dollars have been spent on empty hospital and nursing home
beds instead of insuring our 400,000 uninsured children.  Now we face
dramatic instead of gradual change to rationalize a system in desperate
need of reform.

These changes are painful – and we will use every effort to
implement them in a way that is sensitive to patients, communities and
workers.  But because of the State’s inability to confront the status
quo, these are the kinds of hard choices we must now make to increase
health care quality and decrease health care costs. 

Another example of institutions driving the system is the way the
State pays for graduate medical education.  New York’s Medicaid program
has spent more than $8 billion over the last five years on graduate
medical education – $77,000 per graduate resident in 2005 compared to
similar states like California that spent just $21,000 per resident. 

This education is critically important, but we’re currently funding
it in an excessive and irrational way that isn’t directly correlated to
the actual students being taught – thus costing the State exorbitant
amounts of money in what amounts to general subsidies to teaching
hospitals.  In fact, when we looked closer at this broken formula, we
discovered that many of those dollars are going to pay for phantom
residents and doctors who don’t even exist.

The same lack of accountability has also been evident in the special
subsidies the State gives hospitals to underwrite labor costs.  In
January 2002, with hundreds of millions in new revenue on the table for
health care, the time was ripe for a debate on how best to invest this
money.  But instead of a public debate, the State committed billions of
dollars in new spending to underwrite a portion of the increased costs
of the hospitals’ pending labor agreement. 

As a result of this deal, well over $3 billion alone was pumped into
the health care delivery system with little to no accountability.
Don’t get me wrong: labor costs are real, and the need for training is
real.  What made this a poor choice instead of a wise investment is
that the money was not based on the number of patients served and it
didn’t create a robust system of accountability for institutions that
were growing out of control.

Good luck, Governor. Given who you’re taking on, you’re going to need it! Go read the whole thing.

UPDATE: Some just excellent discussion on this in the forums. JD writes in to comment: "I actually think Spitzer can (mostly) pull it off, though he is
directly confronting both SEIU (Local 1199 has 300,000 members in NY, I
think) and HANYS (the New York hospital association, which has massive
clout). Of these, my guess is that 1199 will be more open to compromise
for the sake of true structural reform. They are showing themselves
more and more willing to think outside the box, find win-win solutions,
and all that. HANYS, not so much. But we’ll see.
As for health plans (my area), it is still too soon to tell how
they’ll react. They won’t like the Medicaid premium freezes, though one
of Spitzer’s key cabinet members (Deborah Bachrach) was an
advocate/lobbyist for the PHSP association. PHSPs are local non-profit
Medicaid-only plans, most of which are owned by hospitals. Collectively
they have over a million members in the state. This and other
appointments mean that Spitzer’s policies are going to be informed by
people who know the ins-and-outs of both the payer and provider side,
and so we are unlikely to see misguided efforts to "bleed the bastards"
which will accomplish, exactly, nothing."

RP writes "…for every dollar we manage to cut from our Medicaid program, we will be
giving up 50 cents in federal contributions. Perhaps we should, but a
lot of that money goes to NYS residents whose health care jobs (about
10% of total jobs here in New York City, for example) might disappear
or whose wages and salaries would be cut."

Livongo’s Post Ad Banner 728*90

Leave a Reply

6 Comment threads
0 Thread replies
Most reacted comment
Hottest comment thread
4 Comment authors
AlexBarry CarolRobert Padgugjd Recent comment authors
newest oldest most voted

Barry, I’ll try a few quick answers without the benefit of doing research to back them up: #1. I believe there are several factors for higher long term care costs, none of which are demographic in nature, all institutional/structural. I believe the cost per day is higher than average, the rate of admits is higher than average, and the length of stay is higher than average. But none of this, to my knowledge, is the result of a sicker or older population. It’s all Wennberg-type variation. #3: As for fraud, there was a great series in the NYTimes on Medicaid… Read more »


Robert, You raise some important points. On the matter of the portion of Medicaid expenditures paid by the state vs. localities, I thought that the state was already in the process of taking over these expenses and would completely remove localities from funding by 2008. Looking for confirmation, I found this in a recent Pataki budget: Initiate a full State takeover of local Medicaid costs effective January 1, 2008…This State takeover of local Medicaid liability will save property taxpayers billions of dollars. I doubt Spitzer will try to rescind, though maybe dates have changed. What that means is that the… Read more »


Eliot Spitzer probably needs to have surgery to reduce the size of his massive, massive balls. Wow. I’m not syaing anything bad about him for 60 days.

Barry Carol
Barry Carol

Two very interesting and informative posts. In thinking about how New York State might shrink its Medicaid costs, I have the following questions and comments: 1. Regarding the 60% of Medicaid spending that is attributable to long term care, why is it so high? If it relates to demographics and housing patterns – more elderly living alone who can no longer care for themselves and have nowhere else to go and/or family members who might be willing to care for their relative but live in housing that is just too small (especially in NYC) to make it practical. If those… Read more »

Robert Padgug
Robert Padgug

There are several important things that tend to get forgotten in the discussion about Medicaid costs in New York State (and the New York Times and other papers seem to obfuscate these and other issues). 1. New York State Medicaid spends about 60% of its total disbursements on long-term care (nursing homes and home care), considerably more than other states, including California, and this makes total expenditures or expenditures per capita difficult to compare across states. 2. Medicaid costs the state (NYS in its entirety) about $49 billion, which is a lot of money certainly, and not all of it… Read more »


I should be careful about what I say here, since even though I’m anonymous (right, Matt?) the company I work for has a lot at stake in how Spitzer handles his reforms and it would not be cool, to say the least, to say something that (a) came back to bite me if I stopped being anonymous, or that (b) could be construed as shilling for The Man. That said, I think this is an excellent start. Without getting into the details, there are two key ideas in the speech that would usually be disregarded as boilerplate, but not here:… Read more »