NY eyes $18 bln of Medicaid savings to be split with U.S.

March 23 Fri Mar 23, 2012 4:25pm EDT

March 23 (Reuters) - New York plans to overhaul the nation's most expensive Medicaid health care system to save $18.3 billion over five years, and will ask the federal government for half of those savings, a state health department official said on Friday.

By the end of 2012, the state plans to ask the federal government to give it a waiver that will let it run the program more flexibly and allow it to start reaping these savings, said Michael Moran, a spokesman for the state Department of Health.

Much of the savings would be achieved by switching to managed care, with clinics, for example, paid annual sums for each patient they care for instead of getting a fee for each service they provide.

New York's $53 billion-a-year Medicaid program, which provides health insurance for the elderly, impoverished and disabled, is the nation's biggest and most generous.

The federal government pays for half of the health plan's cost. The state's share is about $15.3 billion, while New York's counties pick up the rest.

Last year, increases in the cost of Medicaid were capped at the inflation rate for medicine, about 4 percent. The previous year, Medicaid's cost was estimated to have gone up around 13 percent.

In the new budget that starts on April 1, Governor Andrew Cuomo, a Democrat, proposed having the state take over administering the program for the counties, and cutting their cost increases to zero over a three-year period.

The health system overhaul is also expected to improve patient care.

"We have a very expensive, comprehensive program, but ... we tend to rank overall in outcome in the middle of the pack," Jason Helgerson, the state Medicaid director, said at a recent meeting of the Municipal Analysts Group of New York.

California and Texas have already gotten waivers from the federal government that give them more freedom in how they run Medicaid programs. Helgerson said New York's track record should help it make its case.

The state has saved the federal government $2 billion in the current fiscal year by making a number of changes, such as cutting payments to hospitals for "potentially preventable conditions" patients acquire after they are admitted.

Since New York has the country's most expensive program, its savings have a major impact in reining in how much the federal government spends, Helgerson said.