New York State to receive $1.5B to improve Medicaid

HHS has agreed to pay New York $1.5 billion over five years to help stabilize the state's hospital industry in exchange for renewed efforts to shrink the industry, curb Medicaid costs and reduce Medicaid fraud, the New York Times reports.

The "logic behind the deal ... is that smart investments will allow the state to reduce the cost of New York's Medicaid program," according to state officials, the Times reports. No other state had negotiated a similar agreement with HHS. According to the Times, New York hospitals "have been in crisis for several years," with about 20 closing their doors during the last five years, several others filing for bankruptcy and many others in "precarious condition." The agreement, negotiated over 16 months, contains many specific requirements that the state must meet in order to receive the entire $1.5 billion. The requirements include:

• Meeting targets for reducing the use of hospitals and increasing the use of Medicaid managed care plans;
  
  
• Limiting access to certain drugs for Medicaid beneficiaries; and
  
  
• Substantially increasing the amount of money the state recovers from Medicaid fraud cases, from about $215 million in the second year of the agreement to $644 million in the fifth year.

The fraud targets are "much higher than the amount any state has recovered to date" -- until last year, no state had collected more than $100 million in a single year, the Times reports. Officials said that if the state does not meet the fraud recovery goals, it will forfeit up to $500 million. Failure to meet other requirements might jeopardize the entire $1.5 billion, "but those standards are likely to be easier to meet," according to the Times. A separate part of the agreement is intended to decrease use of nursing homes, although federal funding is not tied to that provision. A state commission created by New York Gov. George Pataki (R) and the state legislature plans to release a report including recommendations for reforming the hospital system on Dec. 1.

Reaction

Hospital executives and lawmakers said that "without the infusion of federal money, it would be hard to carry out the commission's recommendations," the Times reports. Michael Marr, a spokesperson for Pataki, said, "This agreement is a tremendous win for New Yorkers," adding that the deal helps ensure that the state hospital industry "remains strong, efficient and sustainable for many years to come" (Perez-Pena, New York Times, 10/3).

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This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.