'New York's Health Care System Is Broken'

In the latest twist in the increasingly hostile battle over health care, Governor Spitzer yesterday stepped up his defense of his health care budget by appealing directly to hundreds of hospital trustees with a letter urging them to support his Medicaid budget plan, which is being attacked in a statewide television advertising campaign waged by the Greater New York Hospital Association and the 1199 SEIU health care employees union. The groups have said Mr. Spitzer's plan to slow the growth of Medicaid costs by freezing hospital fees and payments for graduate medical education will put more hospitals out of business. Taking his message directly to the fiduciaries, Mr. Spitzer argues that the groups are exaggerating the consequences of his proposed cuts and are delaying what he says are necessary changes to fix a broken and overpriced health care system. The text of the letter follows.

March 6, 2007

Dear [Trustee Member]:

As a former trustee of a major New York hospital, I appreciate the commitment you have for your hospital, its staff and its patients. It is a commitment I shared as a hospital trustee and one I continue to have as New York's Governor to all the hospitals of this State and to our entire health care system. That is why I am writing you directly to make clear the urgency for fundamental health care reform and to ask you to join me as a partner in this important endeavor.

My patient-centered vision for health care means that the status quo — what we spend, how we spend it and what we get in return — must change. The interest groups that represent your hospitals – Greater New York Hospital Association (GNYHA) and Local 1199/SEIU (1199) – have spent millions of dollars attempting to distort what we are trying to do. Allow me to set the record straight.
Consider these facts:

• NYS is #1 in the nation in Medicaid spending per capita, more than twice the national average;
• NYS is #1 in the nation in hospital spending per capita, also more than twice the national average; and,
• NYS is #1 in the nation in combined state and local taxes, which as studies have shown, has largely been driven by soaring Medicaid spending.

Now, consider what these record numbers of tax dollars are getting us:

• 2.6 million uninsured New Yorkers, including 400,000 children;
• #1 in the nation for percentage of deaths from chronic disease;
• #3 in the nation in per capita deaths from coronary disease; and,
• 1 in 4 New York children is obese; and 1 in 12 has asthma.

Anyway you look at it, New York's health care system is broken. New Yorkers pay far too much and get far too little in return. And yet the same politically-driven spending decisions that created this crisis in the first place are what GNYHA and 1199 seek to protect.

Our budget implements a vision for health care that pivots away from the institution-centered system we have toward the patient-centered system we need. That means greater access to health insurance – a commitment to make insurance available to all 400,000 uninsured New York children, and cut in half the 2.6 million uninsured over the next four years. It means greater investment in preventive, primary, and home- and community-based care — sectors that have long been overshadowed by institutional care. And it means a greater commitment to public health initiatives aimed at obesity, diabetes, cancer, asthma, lead poisoning, HIV/AIDS and other chronic health problems.

In addition to these investments, our budget takes actions to realign the health care system and adapt it to health care demands that have changed dramatically over the past decade –the need for more innovative and less restrictive approaches to long-term care; more focused and managed approaches to chronic disease; the demand for safe, high quality, and efficient health care services; the promise of health information technology; and the need for qualified and trained caregivers, particularly in areas of our state that are traditionally underserved.

My budget begins to address each of these areas by getting the growth of Medicaid under control, by ensuring that Medicaid dollars pay for services to Medicaid patients, by starting a long-needed update of our reimbursement system so Medicaid dollars reward the right kind of care, and by beginning needed reforms in Graduate Medical Education. These efforts will be further bolstered by work through our Departments of Health and Insurance, which will focus on insurance coverage, health information technology, public health and many other critical areas of our health care system.

The statewide effect of our budget actions on hospitals ($302 million) is a reduction of just 0.2% of our hospitals' operating revenue – the same hospitals that have enjoyed revenues of 6.9% on average every year for the past four years, and the same hospitals whose representative association, GNYHA, together with 1199, can afford to spend $22.5 million in campaign contributions since 1999, $12.7 million on lobbying since 2003 (more than the teacher's unions, public employees and trial lawyers combined), and millions more on television advertisements – all in the effort to make sure the health care system that is failing New Yorkers stays exactly the way it is. We are confident that this minimal reduction in Medicaid revenue can be managed with greater efficiencies and smarter management.

You have a powerful voice in this debate. Yet, thus far, that voice has been drowned out by millions of dollars worth of television ads that attack our health care plan with cheap sound bites and misleading facts. It's time for an honest, open debate on the future of health care in New York. I urge you to engage in this debate, to ask the questions that you as trustees and as members of the public must demand be answered. Together, we can reform our health care system and improve health care quality at a price we can all afford.

Sincerely,

Eliot Spitzer

SPITZER AND THE HOSPITAL TRUSTEES: AN EXCHANGE

Governor Spitzer concluded his letter to hospital trustees by asking them to "consider" 10 questions countering complaints aired by health care groups about his Medicaid plan: Hours later, the Greater New York Hospital Association, one of the two main sponsors behind the multimillion-dollar television advertising campaign attacking the governor's budget, responded with 10 answers. Excerpts follow:

Mr. Spitzer: How can it be that the same hospitals that claim poverty and demand billions of dollars in state subsidies can afford to sustain a $65 million "education" fund, contribute $22.5 million in to political campaigns since 1999, and spend $12.7 million on lobbying since 2003?

GNYHA: These cuts will seriously destabilize the health care system upon which all New Yorkers rely with little or no reform offered in return. Then the Governor questions why the hospitals and nursing homes and their workers, who care for uninsured New Yorkers — and lose money every day doing so — are defending themselves from funding cuts and are calling for real reforms. Whenever anyone threatens our ability to provide quality health care to all New Yorkers we will make our case in every way possible.

Mr. Spitzer: How can it be that those same hospitals that claim poverty and demand billions of dollars in state subsidies can afford to pay their executives multi-million dollar salaries?"

GNYHA: This budget debate has nothing to do with executive compensation. … Medicaid doesn't even cover the cost of care for its own beneficiaries, underpaying hospitals 7% for inpatient services and 45% for outpatient services. … Besides, a review of proxy statements from 350 major U.S. corporations reveals a median annual compensation of $11.3 million for the CEOs of the 22 for-profit health insurance, pharmaceutical, and medical device manufacturing companies surveyed — over 20 times more than the median annual compensation of hospital chief executive officers in the downstate New York region (less than $500,000), and 13 times more than the median for chief executive officers in large, multi-hospital systems in the New York metropolitan area ($800,000).

Mr. Spitzer: How can it be that the State gets blamed for the financial condition of our hospitals when year after year some of our hospitals make millions or break even and others lose millions, and yet those hospitals have comparable patient populations? Is it the state or management that is to blame?

GNYHA: According to the Urban Institute, hospitals in New York State lose $2.2 billion annually caring for Medicaid patients. These payments are set by the state. They represent state policies, policies that the governor is making worse, not better. The State is to blame for its bad Medicaid spending policies. Who else?

Mr. Spitzer: If this budget were truly bad for patients, why are consumer organizations and primary care groups supporting it?

GNYHA: We too support elements of the governor's budget. But, according to his own budget office, he cuts $1.3 billion in health care programs for the poor, and only invests $10.6 million in health insurance for uninsured children and only $130 million overall in new health care programs — less than 10% of his cuts. This is not a good budget overall for health care.

Mr. Spitzer: Don't smart management principles dictate that hospitals will be able to absorb this minimal and short-term revenue loss — just 0.2% of New York hospitals' total operating business?

GNYHA: As the Governor stated less than one week ago during his speech to the Association for a Better New York, the effect of the budget actions on hospitals is 1% of aggregate hospital operating revenue statewide, or nearly $500 million. … The governor's cuts for individual hospitals, including hospitals in the state and city's poorest communities, amount to as much as 6% of operating revenues. As anyone who has ever run a business can attest, a 1% reduction for a business already on the brink, let alone a 6% reduction, will have a profound impact upon that business's ability to continue operations.

Mr. Spitzer: How can it be that in a 52-page report by GNYHA entitled "Shared Responsibility: A Prescription for Comprehensive Health Care Reform in NYS," the only mention about reforming the way in which hospitals operate to better adapt to the changing demands for health care is the Berger Commission?

GNYHA: The Berger Commission recommendations represent a huge restructuring of New York's health care system, affecting 57 hospitals —one-quarter of the total state-wide — saving the Medicaid program (by the Commission's estimates) $2.5 billion over 10 years, and costing New Yorkers 14,000 jobs…. What sense does it make to cut hospital funding while in the midst of closings, mergers, and downsizings?

Mr. Spitzer: How can a budget that reduces GME spending by $104 million out of graduate medical education payments that exceed $1.4 billion dollars — the highest in the nation — destabilize New York's teaching hospitals, especially when $24 million of that amount is being reinvested in Medicaid payments to hospitals serving the largest numbers of Medicaid patients?

GNYHA: First, $80 million of the $104 million is in targeted Medicaid cuts to just a few teaching hospitals, most of which are teaching hospitals in very poor communities. Second, the budget takes $24 million from all teaching hospitals (including public hospitals) and gives it to a subset of the state's public hospitals. This makes no sense. We strongly support more support for public hospitals, but why cut them and then give them money back?

Mr. Spitzer: The Berger Commission was supported by the hospital associations because it was recognized that closing underutilized beds would strengthen the health care delivery system. Shouldn't that make all hospitals stronger going forward and better able to manage reform?

GNYHA: Yes, that is the hope. But the governor's budget, by cutting hospitals by $500 million while the industry is struggling to work through the Berger Commission recommendations, will only make it difficult if not impossible to achieve the promise of the original Berger Commission concept. Because there is no state budget deficit, the governor should put aside his hospital cuts and allow the Berger Commission process to go forward.

Mr. Spitzer: Insurance expansion will improve the continuity of care, improve patient health and improve hospitals' bottom lines. Doesn't that have to be the state's priority? How can we make health insurance affordable for New York's businesses and consumers, if the state props up inefficient hospitals?

GNYHA: We strongly support insurance expansions, and they should be the state's priority. … The question implies that the cuts are necessary to fund the governor's insurance expansion. They are not. The expansion costs less than 1% of the health care cuts in the governor's budget…In addition, Medicaid cuts to hospitals will force hospitals to try to shift costs to private insurers, if they can—if they are successful, this will increase costs for businesses and consumers, not make health care more affordable.

Mr. Spitzer: Can you defend a 2002 election-year deal to use billions of Medicaid dollars to fund a labor agreement, sending hundreds of millions of precious Medicaid dollars to hospitals that serve few Medicaid patients?

GNYHA: The use of the funding is subject to audit by the State Department of Health and can be recouped if it is found that it has not been spent on activities designed to alleviate workforce shortages…The funding was distributed on the same basis to every hospital in the State and was required to be used to address workforce shortages. These shortages, as documented by the Center for Workforce Studies at the State University of New York at Albany, will continue for the foreseeable future.