1199 Goes to War

Eliot Spitzer is still talking to reporters, but in the meantime, 1199 is already doing its best to pour water

Eliot Spitzer is still talking to reporters, but in the meantime, 1199 is already doing its best to pour water on his health care agenda.

An unusually harsh joint statement from 1199 and the Greater New York Hospital Association said that Spitzer’s statements were “riddled with inaccuracies” and that there is “nothing strategic or policy-minded about a freeze in spending.” (In other words, they’re practically daring the press to portray this as a positive reform.)

The whole long, bluntly worded statement is after the jump.

— Azi Paybarah

“As the great Senator Pat Moynihan said, ‘We are all entitled to our own opinions; we’re not entitled to our own facts.'”

-Gubernatorial Candidate Eliot Spitzer, July 25, 2006

Setting the Record Straight: A Response to Governor Spitzer’s
January 26th Health Care Speech

Last Friday, Governor Eliot Spitzer outlined his vision for the future of New York’s health care system. Unfortunately, the Governor’s address was riddled with inaccuracies, both large and small. If we are to tackle the enormous challenges facing our State’s health care industry, we must be willing to deal in facts, not rhetoric.

New York’s health care community–comprised of hospitals, nurses, doctors, health care workers, and other health providers–has repeatedly offered to work with the new Administration to help achieve the goals Governor Spitzer has set for our great State: covering the uninsured; controlling Medicaid costs; reforming the private health insurance market; reducing the skyrocketing costs of pharmaceuticals and medical devices; and reducing the medical malpractice insurance costs that are driving doctors out New York’s inner cities and rural communities. Our comprehensive plan, entitled Shared Sacrifice: A Prescription for Comprehensive Health Care Reform in New York State (see www.gnyha.org), contains reform proposals that we believe will help reduce costs and enhance quality without destabilizing New York’s health care system through unnecessary and unwarranted cuts to hospitals and nursing homes, cuts that, the Governor has stated, would go to pay for property tax relief and education spending. Health care cuts do not put patients first. They put patients at risk.

We encourage all New Yorkers to read Shared Sacrifice. In the meantime, we feel it necessary to set the record straight. Below is a response to some of the statements in Governor Spitzer’s health care speech, many of which, unfortunately, we suspect he will repeat today.

Governor Spitzer: “We will impose a freeze on the Medicaid rates paid to nursing homes and hospitals and a partial freeze on managed care plans…These freezes will be strategic.”

Response: A freeze in hospital and nursing home rates will make it impossible for providers to afford the latest medical supplies, equipment, pharmaceuticals, and other items for which costs are rising, items that New Yorkers desperately need.

There is nothing strategic or policy-minded about a freeze in spending. Despite the Governor’s attempts to portray his policies as new, freezes in hospital and nursing home reimbursement rates have been proposed by every Governor since the inception of the Medicaid program in 1965. It takes no thought or “strategic” thinking to come up with the idea of a freeze. A freeze is a cut, and does not constitute reform. Hospital and nursing home costs will continue to increase, due to legitimate increases in the fixed costs of providing care: pharmaceuticals, medical devices, medical supplies, medical malpractice insurance increases, and the overall increase in the cost of goods and services, all of which will continue to occur in spite of a freeze. A freeze on Medicaid rates simply makes it more difficult for financially struggling health care providers to afford to provide the best care for their patients and residents. Hospitals already lose more than $2 billion a year on Medicaid payments that fail to meet their costs.[1] A freeze will only exacerbate this situation. And, by definition, the providers most hurt by the freeze are the providers with large volumes of Medicaid patients, particularly public and not-for-profit providers located in inner city communities. Pretending that a freeze is a sophisticated or “strategic” policy choice is asking people to pretend that the laws of economics have been repealed. The Legislature should reject this proposal.

Governor Spitzer: “New York’s Medicaid program has spent more than $8 billion over the last five years on graduate medical education — $77,000 per graduate resident in 2005 compared to similar states like California that spent just $21,000 per resident.”

Response: The Governor’s statement is simply not true. New York’s Medicaid program has not spent $8 billion over the last five years on graduate medical education (GME). Included in the $8 billion cited by the Governor as Medicaid spending is $2 billion contributed by private insurance companies to cover their share of costs incurred by teaching hospitals providing care for patients enrolled in their private insurance plans. These are not Medicaid costs at all. Yet the Governor compares this amount to the amount California spends on GME through Medicaid alone. In order to make a relevant comparison, the Governor would need to add the amount teaching hospitals in California charge to private insurers to that state’s Medicaid spending –a calculation he apparently has not made. While it might make for good rhetoric, the Governor is comparing apples to oranges.[2]

Moreover, let’s remember what these funds are used for: payments for teaching hospitals ensure that New Yorkers have access to the most sophisticated treatments in the world. Cutting them will threaten all New Yorkers’ access to world-class specialty care. GME payments paid by Medicaid are directly related to patient care. Medicaid is not paying for classroom lectures and textbooks when it pays for GME, but instead is paying for highly trained teaching physicians overseeing young doctors taking care of actual Medicaid patients in some of the most sophisticated hospitals in the world. The fact that Medicaid is paying for GME simply means that its poorest residents are able to have the same access to teaching hospital care as is available to the general population.

Governor Spitzer: “When we looked closer at this broken [GME] formula, we discovered that many of those dollars are going to pay for phantom residents and doctors who don’t even exist.”

Response: This is also untrue, and a rhetorical argument that has been made by Governors in the past but repeatedly rejected. New York has always reimbursed graduate medical education (GME) costs for hospitals that are not teaching hospitals and do not have any residents–not because hospitals have billed fraudulently, but because New York State law has incorporated certain costs, including costs incurred by non-teaching hospitals, in the definition of “GME.” Here’s why: Medicaid hospital payments are based upon a hospital’s total costs in 1981, updated by inflation. Within those recognized costs, a portion is labeled “GME.” The statutory definition of “GME costs” includes, in addition to the salaries of residents and teaching doctors, any physicians who receive a salary from the hospital. There are many non-teaching hospitals, with no residents, that employ physicians. In these cases, there were never any residents–but there were always employed physicians whose costs needed to be covered by Medicaid, Medicare, and private insurers. The State labeled these costs “GME” even though there was no education involved, for lack of a better label. The State could certainly change the definition, and reimburse Medicaid’s share of employed physician costs under another label, but the fact is that these are legitimate expenses incurred by our hospitals, and these costs must be reimbursed. State officials understand this–but rather than reclassifying these legitimate expenses, they have chosen to make a false argument about “phantom residents” merely to justify cuts to teaching hospitals.

It is also important to point out that, although hospital payments are supposed to be updated for inflation each year, the State has paid less than inflation many times during the 24-year history of the system, with the result being that aggregate Medicaid inpatient payments are 7% less than aggregate Medicaid inpatient costs. The shortfall is $440 million. Therefore, there may indeed be some hospitals with fewer residents in 2007 than they were training in 1981; however, any argument that there is a payment excess associated with lost residents is countered by the fact that any supposed excess would be more than offset by underpayments associated with the 7% overall payment shortfall. Since money is fungible, the hospitals with fewer residents in 2007 than in the base year are simply using any monies they receive for patient care. Once again, a cut to these payments would directly harm patient care services.

Governor Spitzer: “The same lack of accountability has also been evident in the special subsidies the State gives hospitals to underwrite labor costs. In January 2002, with hundreds of millions in new revenue on the table for health care, the time was ripe for a debate on how best to invest this money. But instead of a public debate, the State committed billions of dollars in new spending to underwrite a portion of the increased costs of the hospitals’ pending labor agreement. As a result of this deal, well over $3 billion alone was pumped into the health care delivery system with little to no accountability. Don’t get me wrong: labor costs are real, and the need for training is real. What made this a poor choice instead of a wise investment is that the money was not based on the number of patients served and it didn’t create a robust system of accountability for institutions that were growing out of control.”

Response: Payments for workforce recruitment and retention ensure that all New Yorkers have the highest quality health professionals, including nurses, doctors, pharmacists, and other health care workers, when they or their loved ones need care at a hospital or nursing home. This is especially critical given the severe, well documented shortages of health care personnel in New York’s marketplace.

Not only does the Governor attempt to ignore the very real problem that providers have in attracting good quality staff, his statement simply misstates the facts surrounding the history of the health care recruitment and retention initiative enacted by the Governor and State Legislature in 2002. For many years, State lawmakers had publicly debated how to deal with the severe shortages of nurses, pharmacists, radiology technicians, and other health care personnel that hospitals, nursing homes, and other providers across New York State were beseeching policymakers to address. Wages in this industry were simply too low to attract and retain qualified personnel.

In January 2002, the decision to allow the conversion of Empire Blue Cross/Blue Shield to a publicly traded entity, and an agreement in Washington to increase the Federal Medicaid matching rate, funding was finally available to provide assistance to hospitals, nursing homes, and personal care providers across the State–union and non-union, public, not-for-profit, and proprietary–with their recruitment and retention of critical health care personnel. The collective bargaining agreement between 1199 SEIU and the League of Voluntary Hospitals and Homes, which covers 150,000 largely low wage health care workers, certainly served as a catalyst for the enactment of this initiative; however, the program was based on sound policy, including a requirement that all hospitals, nursing homes, and personal care providers, as a condition of receiving funding, certify that they were spending the funds on recruitment and retention of direct patient care personnel.

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. Over the five years since 2002, the labor adjustment provided about $1.4 billion (not $3 billion, as the Governor asserts) to hospitals and the balance to other sectors of the health care provider community. The funding was distributed on the same basis to every hospital and nursing home in the State–union and non-union–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. Finally, it is worth noting that nearly a billion of this funding was targeted for the State’s home care industry and was used to great effect to lift tens of thousands of severely underpaid homecare workers out of poverty.

Governor Spitzer: “New York’s nursing homes rank among the nation’s worst in citations for placing their residents at immediate risk for serious injury or death.”

Response: We do not know where the Governor got this statistic (he does not source any of the statistics he cites in his speech). We do know, however, that on the quality measures published by the Federal Centers for Medicare and Medicaid Services (CMS), New York’s nursing homes outperform the national average on nearly every measure.[3] The number of “citations” issued by regulators–as opposed to the rate of citations–is in part a function of the State’s large population (i.e., California, New York, and Texas will have a larger overall number of citations than Rhode Island, Wyoming, and Delaware) as well as the relatively aggressive regulatory surveillance in New York as compared to other states. “Citations” include minor citations for a variety of issues not related to quality, such as when a patient voluntarily decides to leave against the advice of his or her doctor. The quality indicators used by CMS, researchers, and quality experts show that New York’s homes are doing a good job and outperforming nursing homes in nearly every other State.

Governor Spitzer: “The Berger Commission: This was a process that should never have been necessary in the first place. In most industries, when the demand for a specific service falls permanently, as has the demand for long stays in hospitals, supply inevitably follows. Yet because of wasteful State subsidies and the State’s failure to make strategic choices, tax dollars have been spent on empty hospital and nursing home beds instead of insuring our 400,000 uninsured children. Now we face dramatic instead of gradual change to rationalize a system in desperate need of reform. These changes are painful – and we will use every effort to implement them in a way that is sensitive to patients, communities and workers. But because of the State’s inability to confront the status quo, these are the kinds of hard choices we must now make to increase health care quality and decrease health care costs.”

Response: These remarks show little or no appreciation for the unique aspects of the health care marketplace or the facts that led to the creation of the Berger Commission. The Commission was created to check the blunt instrument of the market, which was randomly closing hospitals and nursing homes in financial distress across New York, despite demonstrated community need. Indeed, 1199 SEIU and GNYHA supported the Berger Commission–despite the fact that it explicitly would change the status quo by closing, downsizing, merging, and consolidating hospitals. Health care is not like the purely market-driven industries the Governor is familiar with from his days policing Wall Street financial firms. Hospitals are needed in many communities where market forces would dictate they would not exist–particularly in communities where consumers have little or no ability to pay for services (low-income communities with many uninsured families).

The Berger Commission was created because market forces were cutting the supply of hospitals and hospital beds in New York, but in a way that did not take care of community needs. In the decade before the Commission was formed, 36 hospitals around the State had closed or converted to clinics or other purposes. These were painful changes, and the hospitals that closed did not benefit from the phantom “subsidies” the Governor is referring to. Another eight hospitals were in bankruptcy at the time the Commission was formed, including a major system in New York City, Saint Vincent Catholic Medical Centers. The Berger Commission issued an extremely complex and intricate set of recommendations that affect 57, or one-quarter, of the State’s hospitals, recommendations that will be extremely challenging and complicated to implement. Imposing deep new Medicaid cuts on hospitals and nursing homes, as the Governor proposes, will only make them weaker at a time when they are trying to merge, consolidate, convert and restructure.

Governor Spitzer: “Patients, not institutions, must be at the center of our health care system. That means that every decision, every initiative and every investment we make must be designed to suit the needs of patients first. The result will be a high-quality health care system at a price we can all afford. This guiding principle stands in stark contrast to the principle that has guided health care policy for the last decade. Instead of a “patient-centered” approach to health care policy driven by the needs and demands of New Yorkers, we have had an “institution-centered” system.”

Response: We completely agree with Governor Spitzer that our health care system must be “patient-centered” rather than “institution-centered.” What we disagree with–and New Yorkers reject–is the false separation the Governor tries to create between patients and their caregivers–doctors, nurses, health care workers, hospitals, nursing homes. New Yorkers care deeply about their local hospitals–because their local hospitals are the nurses, doctors, aides, and other health care professionals that have successfully cared for them and their loved ones in times of need.

The recent experience with the Berger Commission recommendations–where local communities have risen up in opposition to recommendations to close hospitals, even hospitals that health care policymakers seem to agree should close–reveals the strong bonds between New Yorkers and the very institutions Governor Spitzer is seeking to demonize. New Yorkers do not support their local hospitals and nursing homes because they are part of the “army of the status quo,” or because they support “entrenched special interests,” but rather because they trust their hospitals and rely upon them to provide health care for their families when they are most in need.


All New Yorkers should demand real reform of the health care system, including coverage expansions, reductions in medical malpractice costs, an end to private health insurers profiteering at the expense of patients, and real reductions in the cost of pharmaceuticals and medical devices for patients. Governor Spitzer should be applauded for his proposals to reduce the number of uninsured, to reduce Medicaid spending on pharmaceuticals, to reform the unfair business practices employed by insurance companies, and other reforms. However, the Governor’s proposals to harm the health care delivery system, through cuts to hospitals and nursing homes, should be opposed, particularly at a time when the State is undertaking a major effort to restructure the hospital and nursing home systems. Despite the Governor’s attempts to isolate the provider community and the patients they serve, we stand ready and willing to work with the Governor and the Legislature, as we have in the past, on important proposals to reform New York’s health care system.

[1] Urban Institute, “Caring for the Uninsured in New York,” October, 2006.
[2] In addition, New York should be wary of using California as a comparison. First, California tightly controls which hospitals Medi-Cal patients can utilize, mainly concentrating Medi-Cal patients in public hospitals as opposed to its major teaching hospitals. In addition, California is a poor model for Medicaid; California spends less per Medicaid client than any state in the entire country, including Mississippi, Texas, Louisiana, and West Virginia, and has a higher overall uninsured rate and a higher uninsured child rate than New York.
[3] U.S. Centers for Medicare and Medicaid Services, Nursing Home Compare, www.Medicare.gov.

1199 Goes to War