Confidential Report: Does New York Institutionalize Disabled Just for Federal Cash?

Shocking story from the Poughkeepsie Journal:

State institutions for the developmentally disabled generate so much federal Medicaid money that New York’s other programs for people with intellectual disabilities would be threatened without them, state officials acknowledge in an internal document obtained by the Poughkeepsie Journal.

The document, labeled “Confidential — Policy Advice,” raises questions about the state’s decision to keep 1,100 institutional beds at eight centers that were once slated to close. The goal of the five-page paper, an undated PowerPoint presentation with recent statistical data, was to “preserve [the] status quo” by heading off potential regulatory reforms such as the federal government’s 2008 attempt to curb Medicaid payments.

“Without continuation of this system,” the presentation states, “roughly $1.4 billion in annual federal funding that is currently used to support vital community and other services … would be lost.”

The Medicaid reimbursement rate for state institutions is $4,556 per person per day, the Poughkeepsie Journal has reported, three to four times higher than the cost of care. These overpayments fund a wide variety of other services for New Yorkers with autism, Down syndrome and other lifelong brain disorders, from workshops to family support. The Journal’s reports have spurred reviews by state and federal overseers.

Officials have previously acknowledged the overpayments. But the new document makes clear how dependent the state is on institutional revenue — as well as how fearful officials are of losing it.

Read the whole thing here. As Tyler Cowan points out, this creates some terrible, horrible, no-good, very-bad incentives for New York state. The state’s entire Medicaid system for all intellectually disabled people is highly dependent on the money the state receives from the feds for institutionalizing severely developmentally disabled patients. One doesn’t have to be overly paranoid to think there may be some number of disabled patients who don’t need to be institutionalized.