The mission of the New York State Department of Health (DOH) is to promote the health of all New Yorkers. DOH’s staff of 5,239 oversees all public health programs in the state. It faces two challenges: continuing to expand access to healthcare under the federal Affordable Care Act, or ACA; and controlling costs in the $58 billion Medicaid program, the largest in the nation.

Implementing ACA

A key goal of the ACA was to promote access to healthcare by expanding health insurance coverage. As part of the implementation of the ACA, New York established a health insurance exchange, known as the New York State of Health, for individuals and small businesses to enroll in a health insurance plan. It was launched on Oct. 1, 2013, with 16 private insurers offering individual plans, 10 private insurers offering small business plans, and public insurance offered through Medicaid.

The exchange was successful in expanding health insurance enrollment—about 961,000 New Yorkers secured coverage. The greatest number, about 525,000, enrolled in Medicaid. New Medicaid enrollees fall into two categories: the newly eligible from program expansion and the previously eligible for whom the exchange expedited enrollment. About 87 percent of new Medicaid enrollees were already eligible under existing program rules. Because of New York’s already generous Medicaid eligibility standards, only single and childless adults with incomes between 100 percent and 138 percent of the poverty line—about 68,000 people—were enrolled as a result of expansion; for these individuals, the state will receive 100 percent of the funding needed to cover the cost of care from the federal government, compared with the 50 percent funding match for those eligible under existing guidelines.

Among the 371,000 purchasers of private coverage, 74 percent received the federal subsidies authorized under the ACA, and the remainder purchased private insurance without needing federal financial assistance. About 65,000 were children newly enrolled in the Child Health Plus program, for which the state receives enhanced federal funding.

The Division of Budget projects that Medicaid enrollment will increase from 5.2 million to 6.0 million from fiscal years 2015 to 2018. Given Medicaid’s rapidly growing enrollment, providing the large population with care in a cost-effective manner will be an increasingly important issue.

Controlling Medicaid Costs

New York’s $58 billion Medicaid program is the largest and one of the most expensive per person in the nation. In federal fiscal year 2012, the most recent year for which there is comparable data, New York’s Medicaid spending was $2,815 per capita, nearly twice the national average, and the highest among all of the states. Spending per beneficiary averaged $9,833 in New York, the second highest, compared with $6,413 in the U.S.

New York’s large Medicaid program also grew rapidly, with the state’s share increasing 6 percent on average annually between Fiscal Years 2000 and 2009. With the implementation of a series of reforms recommended by the Medicaid Redesign Team, a stakeholders group convened in 2011 by Gov. Andrew Cuomo, the rate of growth has slowed to 4 percent.

“Managed care for all” is a cornerstone of the cost containment plan on the well-tested theory that if providers better coordinated care and have incentives to reduce unnecessary services, the total cost of care will be reduced. Although almost all (96 percent as of December 2012) of the non-elderly, non-disabled Medicaid population has been enrolled in managed care, new plans must be developed and expanded to manage care for the most costly segments of the population, the elderly and disabled.

Because the federal government’s stake in New York’s Medicaid program is high, the Center for Medicare and Medicaid Services approved an investment of $8 billion of federal funds in the New York healthcare system to support managed care and payment reform over the next five years. In order to qualify for federal funds, providers are required to join in large networks under lead agencies that are required to meet stringent performance targets. The overarching goal is to use federal funds to transition to a pay-for-performance system and improve the quality of care by reducing avoidable hospital admissions by 25 percent. DOH will select the projects funded under the waiver and monitor implementation to assess whether the goal of providing more cost effective care is met.

Elizabeth Wyner is a health policy associate. Elizabeth Lynam is vice president and director of state studies with the Citizens Budget Commission.