Medicaid Disparities by State: Why Not Ask Why?

As we begin 2011, the vast majority of states face budget shortfalls. Legislatures across the country will spend much of the new year struggling to avert fiscal catastrophe.

One major budget buster in every state is Medicaid. That’s especially true in New York. On average, states spend around 20 percent of their budgets on Medicaid; in New York, it’s 30 percent.

As New York’s legislators ask themselves how the state is going pay for one of the largest items in the budget—at a cost of 50 billion dollars—I suggest they also ask themselves why. Why does New York spend so much on Medicaid?

It might seem obvious at first. New York is a big state with major urban centers, higher cost of living, higher labor costs and a diverse population. That’s why it spends so much more than Oklahoma, maybe, but why does it spend so much more than a large, diverse state like California?

According to the latest complete numbers from the Kaiser Family Foundation, even though California has more than twice the number of people enrolled in the program (roughly 10 million compared to New York’s 5 million), its Medicaid costs are far lower. Per enrollee, New York spends $6,910; California spends just $3,686.  And California’s Medicaid program generally is meeting the needs of its enrollees.  It works.

Why? What does California do differently—and can New York learn from its example? These are simple questions that no one seems to be asking. But if the legislature expects to lift New York from its fiscal crisis, it may have to.

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16 Responses to Medicaid Disparities by State: Why Not Ask Why?

  1. Terry Bruno says:

    The New York State Medicaid mandates appear to also drive up these costs. It appears from my experience that the Medicaid insurance coverage is rich beyond what is actually needed. Often I have seen open ended benefits. I question why should this occur when these open ended benefits-no limit, do not have research behind them to prove that this is outcome/evidence based treatment. NYS pays for too much (benefits) for this product from my perspective. NYS does not appear to monitor what it is paying for with regards to outcomes of the services-it just pays and pays.

  2. Charles says:

    What is the answer to why CA can do it but NY can’t? Maybe not THE answer, but your answer to why you think this is? Other than NYS Assembly leaders (In my opinion).

    • Dave Oliker says:

      Charles, benefits are certainly a large part of it. In New York, the State Legislature sets the benefits and they are reluctant to say no to constituents and advocates. That encourages adding benefits and it makes reducing them very difficult.

  3. beth says:

    I truly appreciate your commends. I have worked for a local non for profit agency that billed Medicaid for most of the serviced provided. I saw waste and it was disturbing that nobody was picking that up. Is it for the sake of making more money or using up the allotment for fear that they may not get as much next year? The system seems to be short sighted in many ways. Thanks Dave for your comments.

  4. Chris says:

    Could this perhaps be related to efficiencies in the Medicaid process in California vs. New York?

    It’s no secret that the uninsured are far more likely to avoid doctors’ offices when they are sick, and only visit the much more expensive urgent care facilities when the need arises. Because these are typically lower-income families, these higher-than-necessary bills are unlikely to get paid; although I have not done any research on the exact amount, it stands to reason that this would increase the cost of care for others.

    I have a friend who works for one of New York’s Social Services offices. Everything is still done by hand. Paper forms need to be entered into a computer. The process is extremely inefficient, the clerks and examiners are overworked, and especially in these difficult economic times, the lines stretch down the block long before the doors unlock in the morning. The insanity of the process coupled with the unbelievable backlog at DSS may be deterring those who are eligible for assistance from even bothering to apply.

    California is a state that is well known for its government assistance programs. It is possible in my mind that they have the process down to an extremely efficient science. I’ve never set foot in California, so I can’t be sure of this, but it seems like a more efficient application process would decrease the number of uninsured citizens, which would mean fewer unpaid bills, which in turn could lead to lower healthcare delivery costs, at least in theory.

    I suspect that we would see a lower cost-per-enrollee here in New York if we had a lower unemployment rate, thus increasing the number of citizens insured through their employers.

    I would also be interested in seeing a comparison of the health insurance utilization statistics for Medicaid recipients and those on a comparable (similar level of coverage) commercial plan. Medicaid implies a low income level, and it has been shown that low-income individuals are more likely to engage in unhealthy activities, such as smoking. Perhaps the answer to California’s lower per-enrollee cost actually lies in another social program they offer that targets a specific risk factor for an unhealthy lifestyle.

  5. Theresa Loftus says:

    Wow, you just hit upon one of our topics of conversation at Thanksgiving!!! We believe that Medicaid is higher in NY because you don’t have to be living in NY to get services and therefore, people come from far and wide. If you ask the patient why they are in NY getting services the response is because it is covered in NYS!!! Therein might lie the disparity.

    We came up with having a copay on services and to prove being a NY state resident to qualify for services.

    • Chris says:

      I believe certain services on New York’s Medicaid program already have copays – this most likely varies by county. Careful application of these minimal copays may indeed be a good way to reduce frivolous utilization.

      Certain services I believe are covered in all counties without copays. For example, birth control is provided to Medicaid recipients in Schenectady County free of charge; the theory is that the cost of prenatal, birth, and child care until the parent gets back on their feet far exceeds the cost of prevention. Not to mention the fact that getting back on your feet is more difficult as family size increases.

      I see it as strikingly similar to MVP’s wellness programs – by promoting a healthy lifestyle, we’re improving our members’ quality of life while at the same time reducing our utilization. This observation is why I pointed out that California’s lower Medicaid expenses per-enrollee might be partially influenced by other social programs the state offers which aim to reduce unhealthy lifestyle choices (smoking cessation programs, etc).

  6. angela says:

    This is truly a must look at topic. There are a lot of things that Medicaid pays for that should not be paid for. I remember when Medicaid announced that Viagara was not going to be paid for any more. Caused such a controversy. But really, why should it? Insured people have a hard time getting that drug covered and Medicaid was just giving it away for free!
    having used to work in an area hospital, I’ve seen a lot of wasteful spending. It is time that Medicaid is closely monitored and scrutinized.

  7. Burt Danovitz says:

    There are a few possible reasons for the disparity in Medicaid spending. Historically, NY made the decision to turn Medicaid into a verb. The State attempted to “medicaid” any and all services possible in order to get the federal share. This led to many non-medical services becoming part of the Medicaid program rather than funded through state ops. NY, similar to many northeast states, may have an older population that CA. This increases the cost of the long term care program which accounts for a significant dollar amount. Finally, there continues to be a very strong institutional bias in NY state which translates into individuals being over serviced – that is, receiving services that they neither need or want.
    Needed going forward is reform, not cross the board cuts. Reform offers the possibility of cutting nearly 10% of the Medicaid budget without harming any of the beneficiaries. The question then becomes – will the providers allow this?

  8. Great food for thought. We should discuss our SWH model and how it has saved Massachusetts ~4% of their budget.
    As you may know we have been operating in NYS for four years now. Historically, the State is their own worst enemy- they can not get out of their own way when it comes to innovative models of care. Same old- same old.

    I think we are now at an exciting time as we have not seen so much initiative regarding the topic and implementation for change in years.

    Meg Wallingford
    Ececutive Director
    Senior Whole Health of New York


  9. Matt Campbell says:

    According to this article in today’s WSJ, Gov. Cuomo plans to cut Medicaid by $2.1 billion. But it seems even if this number stands, it isn’t really “final” since matching fund and other funding source issues would need to be added into the mix. But the overall point is that our new gov. has his sites set hard on Medicaid. Excerpt:

    “ALBANY—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.

    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.

    Mr. Cuomo has said he intends to overhaul the Medicaid program but has revealed few specifics of his plan.

    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.”

  10. JA DePaolis says:


    I am in total agreement with you. Please advise me the proper people to contact and I will be glad to ask the question.



  11. Mitra Storey says:

    This is quite interesting. Having the highest Medicaid Benefits, is a huge magnet for attracting more Medicaid qulified people to New York.

    Knowing this fact, what action can we take as resident of New York to reduce the Medicaid cost and overall tax base?

  12. Jerome Culler says:

    The difference is simple – fiscal management entails more in-depth reviews of high cost items – my professional experience notes that medicaid paids for items that are not even medically necessary – percentage of those are maintenance items and items that most commercial insurances as well as medicare would not cover.

  13. Jed Constantz says:

    Dave, while there is certainly a great deal of value in learning what others are doing, I believe the most realistic first step is to better understand the needs of the populations the various Medicaid programs are attempting to help pay for. For several years now, NYS has a turn key “paid claims” resource that reveals this insight. The current disconnect, however, is those entities in the best position to use this solution and understand the insight it provides are not “engaged” to do so. If our new Governor really wants to make both meaningful and sustainable change in Medicaid spending statewide, he needs to empower each local community innovate in order to do so. For example, our initiative in Chemung County has enabled us to focus our attention on developing a never before level of understanding powered by a co-mingling of EMR data and paid claims data. We will be using this data to drive true PCMH style care coordination focused on addressing the top 3 clinical conditions for the population. The good news for us is we’re empowered by the fact that this is the right thing to do – reduce total spending by improved understanding of the population health, their needs and their behaviors as health care consumers with unique circumstances.

  14. Azalee J. Delaughter says:

    I understand the concerns of many employees that have this medicial coverage. But what I dont understand is why the employer’s of the various companies using this coverage dont offer the employee’s some kind of assistance towards there insurance. I have a serious spinal injury and this coverage that my husband has thru his employer doesnt cover nothing. He has to pay $3000.00 out of his pocket just for me to have a prescription filled. Heck, why have the coverage. Way to go America!!!

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