A Medicaid waiver that HHS approved last week for New York state will create a bigger pie for providers but leave fewer of them holding out their plates for a slice.The federal-state agreement will pump an added $1.5 billion in federal money into the system over the next five years in return for systemic changes in New York's Medicaid program that will be designed to reduce the use of costly inpatient and nursing-home care. A state commission will report by Dec. 1 with a list of hospitals that should be closed and other restructuring ideas. New York must generate cost savings equal to the $1.5 billion federal investment in restructuring activities, or else the state will owe the federal government the difference.Besides closing or restructuring providers, the waiver requires the state to implement a preferred drug list for Medicaid beneficiaries, a pay-for-performance demonstration project and a long-term-care program that steers beneficiaries to services that cost less than nursing-home care. The state also must step up its efforts at rooting out Medicaid fraud and waste.Provider groups cautiously supported the waiver last week. In a news release, Daniel Sisto, president of the Healthcare Association of New York State, urged the Commission on Health Care Facilities in the 21st Century -- which will make the recommendation on which facilities should close or restructure -- to consider the short-term expenses of reform. Those expenses may exceed the money being added to the Medicaid program, Sisto said.The Greater New York Hospital Association said in a briefing to members that successfully negotiating the Medicaid waiver was a condition of the association's support for the facilities commission, created by Gov. George Pataki and the state Legislature in 2005. The waiver requires the state to ensure there are no legal barriers blocking the commission's recommendations; in practice, that means that the governor and the Legislature must approve the commission's recommendations, as the law setting up the commission requires their approval for the recommendations to become law.Devon Herrick, a health economist and a senior fellow with the National Center for Policy Analysis, said New York needed to reorient its Medicaid program away from inpatient and nursing-home care, regardless of whether the federal government was willing to underwrite some of the short-term costs. "It's well-known that New York has too many hospitals and overutilizes them for Medicaid," Herrick said.
$1.5 billion for N.Y. providers
State will need to close some facilities to get savings
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