Medicaid Fact Sheet:
Examples of Savings in the Enacted Budget

The Enacted Budget reflected savings of nearly $1 billion from the projected growth of Medicaid.

Here are some examples of how the budget reduced spending.

Hospitals: New York State spends more in hospital reimbursement than any state in the nation. This budget reduced the growth of spending by $172 million.

• Reduced trend factor. Unlike other kinds of service providers, hospitals have an automatic inflationary trend factor set in law. This budget reduced the trend factor by 25 percent. Taxpayer savings: $23 million.
• Reduced funding for workforce costs. In 2002, hospitals were provided with funding from a one-time revenue to support ongoing pay increases for workers based on their workforce costs. This budget recognized that this was not an appropriate use of Medicaid dollars and reduced this funding and reallocated remaining funds to those institutions that serve higher populations of Medicaid patients. Taxpayer savings: $21 million.
• Shifted to Actual Costs for Graduate Medical Education. Prior to this budget, hospitals had been reimbursed for the costs of training and educating doctors based on outdated information. As such, some institutions were being reimbursed for costs of services they were not providing. This budget ended that practice to ensure that hospitals are only being paid for services they provide. Taxpayer savings: $20 million.
• Discontinued a Health Facility Restructuring Loan program. Taxpayer savings: $20 million
• Reduced Health Care Reform Act (HCRA) subsidies for Graduate Medical Education and Worker Retraining: Taxpayer savings: $44 million.

Nursing Homes: New York State spends more on nursing homes than any state in the nation. This budget reduced the growth in spending by $75 million.

• Reduced trend factor. Like hospitals, nursing homes have an automatic inflationary trend factor set in law. This budget reduced the trend factor by 25 percent. Taxpayer savings: $18 million
• Phase-out funding for workforce costs. Nursing homes had been reimbursed for workforce costs based on labor statistics. This budget begins to phase-out this funding and changes the system to reimburse nursing homes based on more relevant Medicaid data. Taxpayer savings: $21 million.
• Decreased nursing home quality improvement grants. This State grant program will be significantly reduced since new labor costs will be recognized under the nursing home rebasing methodology enacted last year. Taxpayer savings: $36 million.

Pharmacy. New York State spends more on pharmaceuticals than any state in the nation. This budget reduced the growth in spending by $198 million.

• Reduced the cost of Medicaid pays for drugs. This budget recognizes that the State has leverage over price as a larger purchaser of drugs. Under the Enacted Budget, pharmacy reimbursement rates will be reduced in the Medicaid and Elderly Pharmaceutical Insurance Coverage (EPIC) programs to more closely reflect the actual wholesale costs to pharmacies. Taxpayer savings: $23 million.
• Federal DRA Limits: Pharmacy reimbursement will also be lowered for the Federal Deficit Reduction Act of 2005 that established lower prices for multi-source generic drugs. Taxpayer savings: $58 million.
• Additional pharmacy rebates: The State's efforts to maximize drug rebate revenues from pharmaceutical companies will generate additional revenues to offset drug costs. Taxpayer savings: $40 million.
• Require enrollment in Medicare Part D. This is done to maximize this new Federal benefit and ensure that EPIC seniors will have continued access to the drugs they need without any added costs. Taxpayer savings: $43 million.

Health Maintenance Organizations/Insurance Companies. This budget reduced spending growth by $175 million.

• Froze inflationary trends. The budget froze for one year inflationary trends in reimbursements for managed care and other providers that had been instituted in law. Taxpayer savings: $102 million.
• Increased Covered Lives Assessment on insurance companies. This assessment was increased and a portion of the revenues collected are directed towards high Medicaid hospitals. Taxpayer savings: $51 million.

Anti-Fraud initiatives. This budget included numerous initiatives to cut fraud, waste and abuse in Medicaid that will save a projected $132 million in the budget.

• Increased auditing of providers. The budget increased staff of the Office of the Medicaid Inspector General by 30% including 100 new auditors to identify, prevent and combat Medicaid fraud. Taxpayer savings: $100 million.

NOTE: The information on this page is taken from the 2007-2008 Financial Plan.