NCPA - National Center for Policy Analysis


March 20, 2006

Medicaid is the joint federal-state health care program for the poor and near poor. It is the largest single expenditure by state governments today. New York's Medicaid program is especially costly. New York has less than 7 percent of the U.S. population, but spends about 14 percent of the nation's Medicaid dollars.

In 2004, the latest year for which complete data is available:

  • New York spent $10,349 per enrollee, compared to the nationwide average of $6,834. Only New Hampshire spent more.
  • New York Medicaid spent about $2,165 for each state resident (more than any other state) and almost two-and-one-half times the national average.

Why is New York's Medicaid program so costly? According to the National Center for Policy Analysis (NCPA), higher living costs do not account for the high Medicaid spending in New York. The state spends more because of policies that encourage higher spending and discourage cost control. Other states share some of these same problems, but none have such a wide array of perverse incentives.

What can New York do to improve Medicaid and control costs? According to the NCPA, New York can control costs and improve services by adopting common-sense reforms, such as:

  • Negotiating discounts for most medical services through selective contracting.
  • Treating patients in outpatient settings, such as doctors' offices, where medically appropriate.
  • Paying higher fees to physicians to increase patients' access to health care and reduce expensive emergency room visits.
  • Controlling drug costs using private-sector techniques, including pharmacy benefit managers (PBMs).

The state should also consider contracting with private sector providers for services, fundamentally restructuring its program, and moving patients out of Medicaid and into private sector plans. As part of this reform effort, the state also needs to completely overhaul long-term care and home health services.

Source: John C. Goodman, Michael Bond, Devon M. Herrick, Joe Barnett and Pamela Villarreal, "Medicaid Empire: Why New York Spends so much on Health Care for the Poor and Near Poor and How the System Can Be Reformed," National Center for Policy Analysis, Policy Report No. 284, March 2006.

For text:


Browse more articles on Health Issues