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Is Health Reform Good for New York State?

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After a long and acrimonious summer recess, Washington has resumed its consideration of health reform legislation. President Obama welcomed Congress back by restating his case for overhauling the nation's insurance system. Some cheered, others heckled. Meanwhile, New Yorkers are asking themselves: what's in it for us?

The answer, so far, is not as much as one might think. The middle-of-the-road compromises being considered would pose myriad challenges for the State. Moreover, they do not provide as many new funds for New York as for states with historically less generous Medicaid programs.

All of the proposals on the table would increase the income levels for Medicaid eligibility, but to levels that are still below New York's current thresholds. The final bill may insist that states already using their own funds to provide coverage for people with incomes above the limits in the existing law will not receive new federal funds. Thus, generous states like New York may not financially benefit from Medicaid expansions in the bill.

The real losers in the reform movement could be New York's hospitals, which face changes to the way the federal government subsidizes them for bad debt and charity care costs, and for indirect medical education costs -- the extra costs related to training physicians at hospitals -- especially when caring for the uninsured. These large sources of funds for New York hospitals could shrink if the federal government argues that there are far fewer uninsured patients to subsidize. New York receives generous subsidies through these funding vehicles, and its hospitals are unusually vulnerable to program cuts.

A host of other issues could affect New York for better or for worse. On the plus side, it's likely that an individual mandate to have insurance will be combined with subsidies to help lower-income people afford polices. Individuals may also be able to combine their purchasing power and shop for coverage in new exchanges or connectors. While such provisions could make a sizable dent in the number of uninsured, unless the subsidies are adjusted to reflect the high costs of living in states like New York, they would not create truly affordable options. It also is possible that the Obama Administration will simplify rules that previously made it difficult for people to apply for Medicaid coverage and to meet re-enrollment requirements. Since one million or more New Yorkers currently are eligible for Medicaid but unable to enroll or stay enrolled, Medicaid enrollment simplification could reduce the number of uninsured New Yorkers more than any other aspect of the reform bill.

If a reform bill passes, there will be distinct challenges for the New York health system. First, we will face the normal hurdles of implementing a large, complex initiative at a time when the state government is dealing with hiring freezes and a scarce number of policy experts who can lead the implementation effort. We also will be entering a gubernatorial election process and a heated senate election process that will preoccupy State government during 2010. Finally, Massachusetts's experience has been that any success at expanding the number of people enrolled in health insurance puts pressure on the primary care system. Ensuring that coverage actually leads to better access to primary care will be a crucial challenge. Finally, hospitals and hospital financing will need to adjust to the federal changes. Some shrinkage of the hospital sector is probably inevitable; the challenge is to ensure it does not threaten access for vulnerable populations and leads to system-wide cost savings.

In the months ahead, the pace and intensity of the debate about federal health reform are certain to increase. Of course, we will only know the true scope New York's challenges after the President signs a final bill. However, it's clear that any reform effort will require us to address issues in our health care system, both new and old, to ensure that the legislation improves health care in New York State.