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Medicaid reimbursement cuts are concern for nursing homes, hospitals

In health care, one man's budget reform is another man's budget problem.

That's why hospitals and nursing homes reacted with concern Wednesday to Gov. Eliot L. Spitzer's first spending plan, which would trim Medicaid reimbursements to the facilities.

It's difficult to gauge whether the concern will grow into loud opposition. Officials also acknowledge that the state's costly and complex health care system is crying out for change.

"We don't know the impact of the proposals yet, and they could be problematic when you factor in hospital restructurings recommended by the Berger commission," said Michael Hughes, a spokesman for Kaleida Health. "But we support efforts to cover the uninsured and focus more on primary care."

Likewise, the Healthcare Association of New York State, one of two large industry lobbying groups in the state, offered only mild criticism of the budget, saying it recognized the governor's budget as "an earnest attempt" to begin restructuring the health care system.

There were few surprises here, for Spitzer had previewed his major proposals last week. His primary themes: Medicaid should focus on the needs of patients rather than on those of institutions, and greater spending controls on the massively expensive program should help fund expanded health coverage.

"Too many services are provided in institutional settings rather than in primary care and community-based settings," Spitzer said in his budget message, stressing that the current health care payment system creates incentives to duplicate services and to treat patients in inappropriate settings.

Among the proposals:

*Trim $1.2 billion from Medicaid with payment cuts, including elimination of a provision that pays hospitals more for training doctors than the cost.

*Expand coverage to most of the state's 400,000 uninsured children through the Child Health Plus program by raising income eligibility levels for Child Health Plus to 400 percent of the federal poverty level, from the current 250 percent.

*Reduce pharmacy reimbursements in Medicaid.

Start projects to reduce hospitalization of nursing home residents and individuals with multiple disorders, such as mental illness and substance abuse.

*Increase efforts to reduce Medicaid fraud.

*Expand managed long-term-care programs that keep the elderly out of nursing homes.

Medicaid is the state-federal program that covers care to the poor, disabled and nursing home residents. At $45 billion last year, it costs more than any other state's program -- $2,213 person in 2005 compared with the national average of $1,014.

The governor didn't propose a cut in total costs. Instead, he wants to hold the growth of Medicaid to 1.7 percent, compared with average annual growth rates of 8 percent.

It almost guarantees conflict.

"Gov. Spitzer intends to spend his political capital on health care," said E.J. McMahon, director of the Empire Center for New York State Policy, an affiliate of the Manhattan Institute.

"The budget relies on going after hospitals and nursing home reimbursement rates, so his biggest fight will be with those institutions," he said.

Of particular concern is a proposed reduction in the cost-of-living adjustments made each year to Medicaid payments.

"It's hard to stay in business when your costs exceed your revenues," said Thomas Schobert, administrator of the Niagara Rehabilitation and Nursing Center in Niagara Falls.

One institution that appears satisfied is Roswell Park Cancer Institute.

Spitzer proposed $78 million in direct funds, $18 million for research and $25 million for maintenance projects. This is the same total as last year and reflects a two-year budget plan previously worked out with state officials.

"We don't see any major impact, although there will be some devil in the details," said Dr. David C. Hohn, Roswell Park president and chief executive officer.


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