New York’s Medicaid Dysfunction

When it comes to home care, the Empire State stands out—in the worst way

By Tim W. Ferguson

In 1970, the median age in America was 28.1 years old. Today, just over 50 years later, that number has risen to 38.8 years—more than 10 years older. There’s no doubt that the United States faces an aging population, one that will be difficult and expensive to look after. Informal, in-home means of caring for the elderly and others seeking assistance with daily living—like a son or daughter caring for aging parents—have great appeal, since this keeps them out of institutional settings like nursing homes. But these options are much less appealing in New York, where such care has become a costly nightmare.

A Special Case

The Empire State’s bill for so-called Personal Care Services (PCS)—the provision of nonmedical services bathing, dressing and meal preparation to the elderly, people with disabilities and people with chronic or temporary conditions—under the federal Medicaid program has mushroomed to $12 billion in the last year—fully a sixth of New York’s total tab for those considered medically indigent. The PCS money can be liberally allocated to a universe of contractors, including the patients’ own relatives. Allegations of fraud—such as home visits and care that never happened—have trailed the program, but many contractors are well connected in the Albany statehouse and have thwarted most reforms.

As a November 2022 report from the Empire Center’s Bill Hammond showed, New York’s home-care program doubled in cost in the five years leading up to the COVID-19 pandemic. An estimated 479,000 providers of such care were paid there in 2021—more than the retail and fast-food workforce combined. And even then, the number of residents of New York’s notably troubled nursing homes has only gone down slightly—even though reducing those ranks was the ostensible public-policy purpose of fostering the PCS alternative.

To date, New York has been a special case. A third of the state’s population is covered under Medicaid, and its PCS totals nearly equate to all of the other participating states combined. Medicaid, although greatly financed by federal taxpayers, is a state-run program, and some states are stricter than others when it comes to enforcing eligibility rules (and New York tends to be lax). But as those subsidies from Washington have increased, particularly since the Affordable Care Act, even conservative states have been widening eligibility, ramping up their Medicaid programs via legislative vote or popular referenda. Administrative controls vary by state, opening the door to similar problems elsewhere, especially in urban situations akin to New York City. (The District of Columbia comes closest to matching New York’s per capita PCS costs.) The state with the biggest potential for rapid growth of PCS spending is California, where Medicaid enrollment also is high, the population is beginning to age and there exist multiple large urban centers and mismanaged social services. Its version of the federal program, called Medi-Cal, is often overseen at the county level.

So far, California’s per capita PCS spending statewide is only 15% of New York’s—but it’s still enough to attract scandal. California is trying to address elder-care needs through expanded assisted-living placements, for which it got a go-ahead from Washington last January. But even a recent CalMatters story—one that expressed support for greater social welfare—reports the waiting list is long.

Little Oversight in the Empire State

Surely, in situ care is easier to make widely available. “When used appropriately,” Hammond’s report notes, New York’s PCS “offers a valuable alternative to institutionalization. It makes it possible for people with serious disabilities to live in the community, closer to family and friends—and often costs less than placement in a nursing home.”

But then there is New York’s dysfunction. Spending on PCS there “surged 178% from 2015 to 2021, which was 10 times faster than the growth of its elderly population,” the report continues. In New York City, there are 236 home aides for every 1,000 residents over 65. And the labor force involved is the focus of arduous union organizing and political pressure, with a minimum wage of $17 an hour now set for the Gotham metro region (and rising by at least $1 in 2023). Medicaid basically covers the rise in labor costs at third parties that provide the services. This can’t help but drive more provision of services, which after all are essentially free to the end user, and with that the taxpayer tab. Greater longevity in old age also accelerates costs.

Obviously, few elderly would frivolously seek assistance with personal hygiene and other intimate matters. But with PCS extending to shopping, transport and housekeeping, the temptation to enroll in a program with no expense barrier has proven strong in New York. The Empire Center study urges stricter screening at the demand end—with priority given to those already in institutional care or qualifying for it. Both medical and financial criteria for entry could be tightened, Hammond notes, and a total cap on individual billings imposed. (Some Medicaid home care is provided round-the-clock, rather undercutting the presumed cost-savings advantage over an institutional setting.) As with so many government subsidies, the seemingly unending official pandemic “emergency” has put off whatever mild strictures Albany has resolved to impose.

Federal overseers can attempt to monitor state performance, through such arms as the Medicaid Fraud Control Units that spot patterns and warn of larceny afoot. A 2017 report from the Office of Inspector General at the Department of Health and Human Services boasts of fraud prosecutions but notes that “because PCS attendants are not required to be directly enrolled as Medicaid providers in most States, there is no precise information on the number of PCS attendants who participate in the Medicaid program.” That does make it harder to check up on their claims.

It should be remembered that all Medicaid benefits are intended for those without ability to pay. Bills paid by taxpayers are subject to recoupment from estates or prior to death if possible. Only homes and a few other immediate assets are excludable. But the practice of shielding actual holdings has become widespread, and few jurisdictions show an ardor for collecting on what the law allows.

Ultimately, the only real protection against laxity at the state or occasionally local level is a political check and balance. In Democratic-dominated New York, that no longer carries much force. Industry and interest-group lobbies have combined to push for ever-expanding coverage, and even law enforcement, in the form of the state attorney general, is rarely a deterrent to abuse.

‘The High Cost of Good Intentions’

Managed care has come to Medicaid, as it has to much of American healthcare, but there’s little evidence that its gatekeeper function has much bearing here. Managed-care companies are paid by patient head count, so they could generate more enrollment (revenue) by offering easy access to a PCS benefit. Lawmakers cannot expect to outsource discipline in eligibility. Nor, for now at least, will there be much pressure from a White House committed to expanding and not constraining social-transfer programs.

In a more rational approach to providing care for older Americans, payroll tax deductions for long-term care insurance would be imposed as they are for Medicare. Washington State is pioneering this approach, with a law that goes into force in 2023. Less intrusively, experiments can be tried to induce the purchase of such coverage with more favorable application of Medicaid regulations. The complications of such a “marketplace” militate against universal acceptance, however. There are various tax-break options. Politicians will prefer an elder-care benefit along the lines of what they’ve tried in child care.

As we seek a remedy for New York-style PCS overload, there’s always the risk of shifting the burden into some other tax bucket. One possibility is the hospice care program under Medicare, which, as a recent New Yorker article showed, has been abused by various set-ups, including home care by relatives. At this point most widely scammed in the Western U.S., the supposed six-months-to-death care has been manipulated to subsidize ongoing assistance to seniors while profiting pliant doctors and nominal providers.

Even if the New York dysfunction can be arrested before it spreads to much of the national Medicaid mix, it’s clear that the overall program contains the markings of what John F. Cogan in his 2017 book called “The High Cost of Good Intentions.” At $728 billion in the latest annual national count, Medicaid has grown by 70% in the last 10 years. It doesn’t take fraud and abuse to widen the remit of a federal entitlement, although a loose or corrupt state partner can certainly make matters worse.