Institute Forum

Summary: What Federal Health Reform Means for State and Local Governments December 16, 2009

Health Reform Poses Major Cost Questions for States, Counties

As Congress considers various health reform proposals aimed at providing insurance coverage for more Americans, state and local governments will face major new challenges of cost and implementation, government and academic experts told an Institute Public Policy Forum on Dec. 16.

For more:

Audio (Full)
Video of Timothy Hoff's presentation
Video of Wendy Saunders' presentation
Video of John Rodat's presentation
Video of Question-and-Answer session

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Leading off the discussion was Timothy J. Hoff, an associate professor at the University at Albany's School of Public Health, who briefed the audience on legislation being considered by the Senate, which he predicted is more likely to pass than the House's proposal. Hoff emphasized that the plan was undergoing intense debate, and that the details were subject to change.

Hoff described a plan that would provide insurance coverage to more Americans — accomplished in part through expansion of the Medicaid health insurance plan for the poor, whose funding is shared by federal, state and county governments — and reduce the federal deficit over the coming decade. But, he explained, the plan did not address medical cost control and passed off significant duties to the states. States would be responsible for an increased share of Medicaid funding, regulating and administering insurance exchanges that would serve as “one-stop shops” for health coverage, and for overseeing myriad demonstration programs funded through the Senate bill, Hoff said.

Among the questions and concerns Hoff raised about the Senate plan were:

Wendy Saunders, deputy secretary for Health, Medicaid and Oversight for New York State, said Gov. David Paterson supports federal health reform, and the opportunity to provide health coverage to some of the state's 2.5 million uninsured residents. But she said the state has two major concerns about health reform proposals before Congress — whether the reforms will be affordable to the state, and whether states will be treated equitably.

Under the Senate proposal that Hoff discussed, Saunders said states like New York that have been on the forefront of expanding insurance coverage to their residents would experience increased costs, while states with fewer residents already insured would get increased aid for expanding coverage. While the proposed House bill would result in Medicaid cost savings for New York of about $4 billion or so a year, the Senate measure would increase New York taxpayer costs by close to $1 billion annually, she said. And because no congressional proposals offer coverage to everyone, hospitals will continue to treat patients who are unable to pay for services. This may be a particular problem for New York hospitals, and especially those in New York City, Saunders said, because they treat a large number of immigrants who, according to bills before both the House and Senate, would not receive insurance coverage.

Saunders also warned that health-care premiums will continue to rise sharply in coming years. The average premium for a family health plan in New York, now around $13,500, will jump to a projected $24,000 by 2016, she said.

John W. Rodat, Albany County's commissioner of management and budget, said health reform was likely to affect the county in three key ways: as an employer that may face new tax impacts from changes in health benefits, as a funder of Medicaid, and as the owner of a public nursing home. Congressional health reform proposals expand funding for home- and community-based services for seniors, but not for nursing home care, Rodat said.

A proposed new tax on the highest-value health plans would be set at levels that include most state and local government workers in New York, Rodat said. If such a tax takes effect, public-employee unions can be expected to seek offsetting pay increases at the bargaining table, he said.

Medicaid expansion would affect the county both directly and indirectly — as the state is likely to make cuts elsewhere in order to meet increased Medicaid funding requirements, Rodat said. Under current proposals, New Yorkers are likely to fund more of the Medicaid expansion through federal tax payments than they get back from the federal government by way of added benefits, he added.

Ultimately, Rodat said the big question in determining whether health reform would work was whether it would actually keep health care costs from skyrocketing as they have in recent years.

New York is home to an estimated 2.5 million uninsured today, compared to 1.5 million 30 years ago, Rodat said.

“The simplest explanation of why that is, is not changes in the structure of the labor market, although that has an effect,” he said. “It’s that health benefit costs, health insurance premiums, Medicaid costs per capita, have grown much too quickly for us to be able to afford it. ... (M)ore people have fallen out of the system, and the crisis we face today is the result of that.

“Will the cost control provisions of federal health reform actually make a difference?” Rodat asked. “If not, we will be looking at a far bigger mess than we have today.”


The Nelson A. Rockefeller Institute of Government, the public policy research arm of the State University of New York, conducts fiscal and programmatic research on American state and local governments. It works closely with federal, state, and local government agencies nationally and in New York, and draws on the State University’s rich intellectual resources and on networks of public policy academic experts throughout the country.