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James R. Knickman Headshot

New Budget, Old Problems

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It is a frightful moment for New York State's health care system. Next week, Governor David Paterson will release a new 2010-11 budget that will likely include steep cuts to health care funding.

The next two years may bring even worse news for New York health providers. Health reform as it stands now will not be generous to New York--especially to our hospitals. Next on the federal health agenda? A scramble to keep Medicare from going bankrupt, which will result in reduced reimbursements. What's more, federal stimulus dollars for Medicaid--many of which went to our hospitals and other providers--are almost certain to disappear after 2011.

If this news is not scary enough, a looming $6.8 billion gap in the 2010-11 state budget likely will put another dose of payment reductions on the agenda.

The New York health sector should not be asked to make blunt, across-the-board reductions in staff and services. Cuts of this magnitude will have a significant impact on access to health care, perhaps undoing any potential positive effect of reform-supported expansions of insurance coverage. Where will the newly insured get care if there are no economically viable hospitals, physicians, and other providers of care in the State?

Providers, payers, and policymakers must engage in a fundamental rethinking of how we organize and deliver health care in the State. We need to look at how we can reengineer approaches to caring for illnesses and reducing their frequency.

Consider diabetes, the one chronic disease that continues to spread. We know that with better use of electronic health records, more organized teams of providers, and more engagement of patients in self management, we can get better outcomes with fewer resources. And, we know that improving our communities to support better eating and physical activity habits will reduce obesity and the incidence of diabetes.

But, such core changes in how we think about health promotion and medical care organization take time.

Hospitals--if permitted to think creatively--also can determine how to reduce unnecessary readmissions by linking discharge planning with community resources so patients can better manage their illnesses and maintain their day-to-day health. And, hospitals have the ability to work "up stream" to keep people healthier so they need less hospital care.

Would such changes be against hospitals' self interest? Not at all--the aging of our population will create plenty of business for our hospital sector, even if every single New Yorker begins to use less health care. The goals should be to improve efficiency so we don't need to expand hospitals or build new ones, and to provide incentives and regulatory room for hospitals and other providers to make long-term, creative changes in practices.

We are not starting from scratch. Our providers have been trying new approaches to care and learning how to improve efficiency and quality. The challenge now is to implement new thinking at a broader scale.

As the Governor and Legislative leaders work together over the coming months to finalize the budget, they should develop a plan to create incentives for providers to develop fundamental changes in approaches to services that would alleviate the burden of the State's health care costs.

The State budget crisis requires balancing the short-term problem with the long-term solution. A long-term solution requires giving providers room to improve how care is organized, and changing the incentives of providers and consumers. There is a path toward changing our cost structure, but it will only flow from cooperation and shared responsibility.