The following appears in the March 25 – April 3, 2011 issue of the Long Island Business News:

To close the state’s $10 billion budget deficit, Gov. Andrew Cuomo  realized he had to curtail the spiraling costs of the special interests’ No. 1 sacred cow: Medicaid.

Projected to cost $54 billion in New York’s 2011-2012 fiscal year and covering 20 percent of state residents, Medicaid was created in the heyday of Lyndon Johnson’s Great Society. Title 19 of the Social Security Act of 1965 established guidelines for a Medicaid program that states could adopt to provide medical services for welfare recipients. The federal government would cover half the cost and the states would have to pay the other half.

Seeing this as an opportunity to receive huge sums of federal dollars, then Gov. Nelson Rockefeller quickly sent a Medicaid bill to the Legislature. Legislators had a field day. They added numerous amendments that offered coverage not just for welfare recipients but also for those they more broadly defined as “poor.” What’s more, the Legislature decreed that Albany would pick up only half of the state’s portion of Medicaid costs; the rest of the financial burden would have to be shouldered by local governments. So, Albany could in future years expand benefits but only pick up 25 percent of the tab. Local governments would have no say in whether chiropractic care was covered but would have to pay 25 percent anyway.

In essence, the law written in April 1966 mandated that welfare officials must seek out potential beneficiaries, and it exempted all relatives from any responsibility for the care of “indigent” family members. It was designed to make dependency a way of life in New York. The program succeeded in achieving that goal.

Since that time, Medicaid has been New York’s fastest growing budget item – rising at the alarming rate of approximately 11 percent annually. New York spends more than twice the national average and more per capita than the combined expenditures of America’s most populous states, California and Texas.

For years, Albany politicians have watched the oncoming fiscal train wreck without alarm. They viewed the expenditures as constituency services – keeping happy hundreds of thousands of health-care workers, health-care providers and those receiving medical and nursing home benefits.

Because Govs. George Pataki, Eliot Spitzer and David Paterson failed to get a grip on the Medicaid leviathan, the program has had a disjointed, sprawling administrative structure, has been plagued by rampant fraud and has had a payment system that creates financial disincentives for the delivery of cost-effective, quality health care and a caseload that has continued to swell. As a result, taxpayers have had to pony up more money every year to cover the state and county portions of the tab, which grew on autopilot each year.

To fix this mess, Cuomo appointed on Jan. 5 a Medicaid Redesign Team with the mandate to propose concrete formulas that would contain costs and could be attached to the 2011-2012 executive budget.

Because the membership of the team included representatives of every facet of the health-care cartel that has benefited from the status quo, I was skeptical about the outcome. However, when the report was released on Feb. 24, I was pleasantly surprised to learn that many of my fears were unfounded. While not a perfect solution, the recommen-dations are a solid first step because they include genuine cost-cutting initiatives and reform measures that do not impede patient care.

The task force’s report contained 79 recommendations that will generate $1.14 billion in cuts. The permanent statutory cost drivers will be eliminated, medical malpractice awards will be limited to $250,000 and an annual 4 percent growth cap will be imposed. Total savings for the fiscal year that begins on April 1 is anticipated to be $5 billion. George Gresham, president of Local 1199, pointed out that the team succeeded because the recommendations “resulted in pain, but it was shared pain.”

If New York’s county governments and local municipalities are serious about fixing their fiscal plights, they should look to the Medicaid Redesign Team for inspiration and heed the words “shared pain.” If they don’t, expect some local governments to hit the fiscal wall.

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