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The state's efforts to limit Medicaid spending are showing measurable progress with annual growth at less than 2 percent. Still, state spending on Medicaid is projected to rise by nearly $700 million a year over the next four years and improving the quality of care for Medicaid patients remains a challenge after more than two decades of reform, according to a report released today by New York State Comptroller Thomas P. DiNapoli.

"New York's Medicaid program is undergoing major changes, with ambitious plans ahead that also carry risk," DiNapoli said. "A federal waiver may bring as much as $8 billion in additional aid as an incentive to drive further reforms. However, failure to meet key benchmarks would result in a loss of significant potential federal funding. That could force the state to increase its own spending on the program or rein in Medicaid costs in ways that have been largely avoided in recent years."

Medicaid spending in New York has long been among the highest in the nation in absolute dollars and on a per-enrollee basis. The federal government paid 51.7 percent of New York's $55.3 billion in Medicaid spending during SFY 2013-14. The state paid $18 billion or 32.5 percent, while New York City and county governments paid $8.8 billion, or 15.9 percent (totals may not sum due to rounding). Overall spending on the program rose by an average 5.3 percent annually from 2001 through 2010. From 2010 through 2013, New York held average annual increases in spending to 1.7 percent.

Medicaid enrollment in New York rose by more than 580,000 beneficiaries, or 12.3 percent, reaching 5.3 million, from 2010 through 2013. Total enrollment is expected to exceed 6.4 million by state fiscal year (SFY) 2016-17, and state-funded spending is projected to increase $2.8 billion by SFY 2018-19, according to the Division of the Budget (DOB). While enrollment has risen steadily in recent years, particularly among lower-cost children and working age adults, spending per Department of Health (DOH) Medicaid enrollee in New York declined each year from 2009 through 2013.

The $8 billion federal Medicaid waiver amendment approved in April 2014 by the Centers for Medicare and Medicaid Services provides incentives for cost controls and a broad restructuring of New York state's Medicaid system. For example, in the fourth and fifth years of the waiver, the state has agreed to limit the growth in total Medicaid spending – excluding growth in federal funding associated with the Affordable Care Act (ACA) – to the ten-year rolling average of the medical component of the Consumer Price Index. Such a cap currently only applies to state spending on DOH Medicaid services. Broadening the target to overall Medicaid spending will result in increased pressure for the state and providers to limit costs.

The state also has agreed to stronger incentives to limit growth in Medicaid spending on inpatient hospital and emergency room services in the third, fourth and fifth years of the waiver. If New York does not achieve these and other performance milestones, the state could lose out on more than $380 million in federal aid.

Since the late 1980s, the state has moved nearly three-quarters of Medicaid recipients from the fee-for-service delivery system into managed care. A key element of the restructuring initiative is to carry this transition to its fullest potential, with the goal of enrolling "virtually all," or 95 percent, of Medicaid recipients in managed care by April 2018.

DiNapoli has expanded an ongoing Medicaid audit initiative that has found nearly $2 billion in waste, fraud and abuse since 2007, including $171 million in 2014.     

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