Fixing NY Medicaid

Learning from welfare reform

New York’s Medicaid program is now testing, on a small and limited scale, giving people financial incentives and requiring compliance in changing their behavior. The approach has promise — if done right; it’s important to keep in mind the lessons of welfare reform.

When an individual insists on eating too much of the wrong food while not exercising at all, or smoking or never getting a physical checkup, he’s at serious risk of developing a chronic illness.

His choice, his problem? Yes, but when that same person is enrolled in a taxpayer-funded health-insurance program like Medicaid, he also risks becoming a very expensive problem for the rest of us.

Government can’t force people to live more healthful lives. And many people instinctively bridle at the notion of trying to change behavior by constraining consumer choices, even when motivated by the best intentions; that’s why Mayor Bloomberg’s proposed citywide ban on large sugared soft drinks has been so controversial.

But incentives in Medicaid are another matter. Fiscal conservatives who attack such initiatives as a misuse of public funds should keep in mind that many states, private insurers and employers have been trying versions of the same approach for decades.

The idea is simple: A small amount of money spent now to reward people for getting regular checkups and adhering to specific treatment plans can yield much bigger savings down the road. This is good for health outcomes and good for taxpayers

And we certainly need to do something about New York’s $54 billion-a-year taxpayer-funded Medicaid program; it’s seriously broken.

Acute-care costs constitute 52 percent of all Medicaid spending in New York; a large portion of that bill stems from countless patients with preventable and treatable chronic conditions that were not effectively managed earlier.

Gov. Cuomo has launched a multiyear Medicaid-overhaul effort. His administration wants to centrally coordinate and intensively manage care in Medicaid for all patients. But there’s a missing element: the role of patients themselves to be responsible.

The persistence of unhealthy behaviors among chronically ill individuals is a daunting problem — seemingly every bit as intractable as the dependency issues confronting welfare prior to major reforms in 1996.

Welfare reform led to a major transformation. The 1996 law, using the findings from state and local experiments, turned welfare from a program with few expectations of recipients into a system of incentives and responsibilities designed to encourage work.

The reform let states experiment with a mix of incentives and client responsibilities — including earned income tax credits, job placement, case management and various support services such as child care and transportation in return for work. The results met with near-universal acclaim.

Cuomo and other Medicaid reformers can learn from the welfare overhaul — by recognizing that incentives and personal responsibility matter and can play a major role in changing behavior, leveraging better health outcomes and reducing costs.

New York is poised to take a first step by receiving a small federal grant to provide cash rewards to Medicaid patients who enroll in programs for smoking cessation, diabetes prevention and management, weight control and hypertension management. But it’s not bold enough. The Empire State should become a leader in testing new approaches that are positive for Medicaid patients and for the taxpayers who pay for the program.

My new report for the Empire Center for New York State Policy suggests:

* Broadening incentives tied clearly to requirements that Medicaid patients adopt healthy behaviors and follow recommended treatment plans.

* Allowing private managed-care plans to provide higher cash rewards — above the current $75-a-year cap — for Medicaid clients practicing healthier behaviors.

* Requiring patients to sign healthy-behavior agreements, enroll in wellness programs and comply with treatment plans — or face consequences (as in welfare reform).

The costs of chronic care are just too high not to act. Redesigning the publicly financed Medicaid system is only half the equation — changing patient behaviors is equally essential.