SECTION 3: WELFARE, SOCIAL SERVICES, MEDICAID, PUBLIC HOSPITALS, AND PUBLIC HEALTH
These categories of public expenditure are grouped because of the way they are tabulated in the census of governments. Federal aid for Medicaid is counted as “welfare” aid, along with aid for cash welfare payments and other social services. State Medicaid payments to public hospitals are counted as aid to hospitals, not welfare spending. Charges by both public hospitals and other public health providers are combined. Therefore, while the report provides “direct” spending data separately for cash welfare, social services, Medicaid, public hospitals, and public health, these categories are discussed as a group when tabulating who pays for them. More than any other categories of public service, the level of government providing these services is different than that which funds them. A separate tax-basis analysis, therefore, is necessary to understand the relative level of health and social services spending in different places.
Chart 3.1:
State and Local Direct Expenditures
Sources: Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
In fiscal 1997, New York State’s direct state and local spending on welfare, social services, Medicaid, public hospitals, and public health was equal to 6.8 percent of all the personal income of state residents. That was 44 percent higher than the national average (4.7 percent), and higher than in any other state except Mississippi. It was also 125 percent higher than New Jersey. New York’s state spending in these categories was just 21 percent above the national average, but its local spending was double the national average. This is because the majority of welfare and Medicaid expenditures are recorded at the state level, not the local level, in most states. In New York State, while Medicaid is considered a state program, welfare is considered a local program.
In fiscal 1972, New York State’s welfare, social services, Medicaid, public hospitals and public health expenditures equaled 6.2 percent of the income of state residents, 59 percent higher than the national average of 3.8 percent. Expenditures in these categories increased as share of income in most states from 1972 to 1997, in some cases by a substantial amount. They fell as a share of income in California, Massachusetts, and Colorado. In New York State, California, and nationwide, expenditures were more likely to be recorded at the local level in 1972 than in 1997.
For a spreadsheet of this data, with data for all 50 states, click here.
Chart 3.2:
State and Local Taxes Required to Fund
Welfare, Social Services, Medicaid, Health & Hospitals
Sources: Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
More than in most categories of expenditure, the level of government directly providing welfare, social services, Medicaid, public hospital and public health services is not necessarily the level that pays for it. As the chart shows, the state and local tax revenues required to fund expenditures in these categories absorbed 2.7 percent of the income of New York State residents, 35 percent more than the national average, and 107 percent more than in New Jersey (1.3 percent). The burden was higher than New York in Maine, Minnesota, and Alaska, and as high in Massachusetts, but lower in most other states.
While local governments often administer programs in these categories, they are seldom asked to pay for much of them. As a result, while the New York’s state tax-financed spending was only slightly above average (1.7 percent of income vs. 1.6 percent), its local tax-financed spending was nearly three times as the national average. New York State elected officials determine the eligibility for publicly-funded health and social services, the extent of services, and the level of reimbursement for health and social service providers. New York State’s local governments, however, must raise a large share of the money required to fund them.
In fiscal 1972, both the tax burden of funding expenditures in these categories, and the share collected at the local level, were higher than today in New York State. State and local-financed spending in these categories absorbed 4.0 percent of the income of New York State residents, more than double the national average (1.9 percent). . Nearly half was collected at the local level. Massachusetts was the only other state over 2.5 percent. To return to the state welfare spreadsheet, click here.
Chart 3.3:
Direct State and Local Spending:
Welfare, Social Services, Medicaid, Public Hospitals
Sources: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
The composition of welfare, social services, and health care spending has changed dramatically over the years, both in New York State and nationally. The big increase has been in payments to private-sector Medicaid and other health care vendors. In fiscal 1972, these payments equaled 0.9 percent of income in New York State, 25 percent higher than the national average. By fiscal 1997, they equaled 3.2 percent of income in New York State, 60 percent higher than the national average of 2.0 percent. Medicaid costs soared relative to income from 1990 to 1994, rising from 2.1 to 3.1 percent of income in New York State, and from 1.25 to 2.0 percent of income nationally, in just four years.
The big decline has been in cash welfare payments. In fiscal 1972, cash payments directly to New York State’s poor people equaled 1.73 percent of the income of state residents, but by 1997 they had fallen to just 0.65 percent of income. This was still 70 percent higher than the national average of 0.38 percent. In fiscal 1972, cash welfare accounted for 31 percent of New York State spending in these categories, compared with just 10 percent in 1997. The number of persons receiving cash welfare has continued to fall since then. (Public health agency spending is not included in this chart).
In fiscal 1972 spending at New York State’s public hospitals equaled more than two percent of the income of state residents. After the de-institutionalization state hospital patients from 1972 to 1981, and additional cutbacks from 1993 to 1997, however, it had fallen to just 1.4 percent of income in fiscal 1997, still 38 percent more than the national average. New York State’s spending on other social services (which include the operations of public social service agencies and payments to non-Medicaid social service vendors) equaled 1.05 percent of the income of state residents in fiscal 1997, about the same level as in fiscal 1980, but 50 percent higher than the national average. For a spreadsheet of this data, click here.
Chart 3.4:
Direct Expenditures: Medicaid, Hospitals & Public Health
Source: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
Much of New York State’s spending on health care takes place in New York City. The City’s spending on public health, as a share of its residents’ income, was about average in fiscal 1997, but its spending public hospitals was double the national average. Local governments in other parts of New York State spent less than the national average on health and hospitals, as a share of their residents’ income. In the Rest of New York State, public health spending was twice as high as average, and there were significant non-Medicaid payments to private health vendors as well (in NYC all such vendor payments were through Medicaid, for which the federal and state governments share the cost). Low public hospitals spending kept the Rest of New York State below the national average. New Jersey’s local government spending in these categories was one-quarter the national average, as a share of its residents’ income. For a spreadsheet of this data, click here.
State Government: 1997
Source: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
Medicaid is tabulated at the state level in New York, and New York’s state expenditures for Medicaid and other private health care vendors equaled 3.2 percent of the income of state residents in FY 1997, far above the national average of 2.0 percent. New York’s state public health spending was below average as a share of income, but its state hospital spending was above average. New Jersey’s state spending in these categories, like its local spending, was below average as a share of income.
Chart 3.5:
Direct Expenditures: Welfare & Social Services
Source: 1997 Census of Governments. Income: Bureau of Economic Analysis.
Much of New York State’s spending on welfare and social services takes place in New York City. The City’s spending on cash welfare and other social services was five times the national average (most local governments are not responsible for welfare spending). The Upstate Metros and the Rest of New York State also spent far more than the national average, as a share of their residents’ income, on cash welfare and other social services, though less than New York City. Despite the division of responsibility for welfare and social services in New York State, local governments in the Downstate Suburbs, where there are fewer recipients, spent just slightly more than an average amount in fiscal 1997. New Jersey’s local government spending in these categories was about average, as a share of its residents’ income, even though the state’s cash welfare expenditures are tabulated at the local level. To return to the welfare and health care spreadsheet, click here.
State Government: 1997
Source: 1997 Census of Governments. Income: Bureau of Economic Analysis.
New York State’s state government had no direct cash welfare expenditures, and very little social service expenditure, as a share of income in fiscal 1997, since these categories are tabulated at the local level. New Jersey’s state spending in these categories was also below average as a share of income. In fact, New Jersey’s welfare payments per recipient are among the lowest in the United States, even though it is an affluent state.
Chart 3.6:
Expenditures From Own Taxes
Source: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
When measured in terms of local tax-financed spending, mandated contributions to New York’s state Medicaid program cost New York’s local governments as much or more than the other health and social service programs that they administer themselves. New York City, where Medicaid recipients are concentrated, is hurt the most – its “aid” payments to the state for Medicaid equaled 0.85 percent of the income of New York City residents in FY 1997. The cost of this “local to state aid” is over 0.50 percent in the Upstate Metros and the Rest of New York State. The Downstate Suburbs, with fewer recipients, were required to contribute the least, but these contributions are rising rapidly as their population ages. While New York City spent more in categories partially funded by federal and state aid, the Upstate Metros and the Rest of New York State spent more in primarily locally-financed categories such as public health. As a result, the local tax-financed portion of welfare, social services, Medicaid, and public health and hospitals was nearly as high in the Upstate Metros, and higher in the Rest of New York State, than in New York City. In most of the country, local tax financed spending in these categories was low, and limited primarily to public health, public hospitals, and administrative costs. For a spreadsheet of this data, with data for all New York State counties, click here.
State Government: 1997
Source: 1997 Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
As noted in the text that accompanies Chart 3.2, with much of the burden of Medicaid and welfare shifted to the local level, the state taxes required to funds these services in New York were barely above the national average. This was true despite the above average level of spending in the state, and the low federal matching share. State welfare and Medicaid mandates are the most important reason that New York’s state taxes were low, but its local taxes were high.
Chart 3.7:
Share Of U.S. Medicaid Spending and Recipients
Sources: Medicaid spending and recipients; U.S. Health Care Financing Administration, 2082 report (www.hcfa.gov). 1997 estimate of the population in poverty and age 85 or over, U.S. Census Bureau.
There are four reasons why the burden of Medicaid is so great in New York, each of which multiples by the others. The first is the division of financial responsibility among the federal, state, and local governments, as discussed in Section 1. Second, New York State has more potential Medicaid recipients. As the chart shows, in 1997 New York State’s share of the nation’s poor (8.4 percent) and very old (age 85+) people (7.5 percent) was above its overall share of population (about 6.7 percent). In addition, New York’s businesses are less likely than average to offer their employees private health insurance. These factors push up New York’s share of the nation’s Medicaid recipients, both in total and in nursing homes and intermediate care facilities (ICF), to 9.0 and 8.3 percent of the nation, respectively.
Third, in some categories New York State allows far more people to be eligible for far more services than any other state. For example, home health care and personal care services were promoted as a way to allow the elderly to live independently outside of nursing homes, thus saving money overall. In fiscal 1997 New York State accounted for nearly one quarter of all home health care recipients, and nearly one-third of all home health care spending, in the United States. It accounted for nearly one-half of all “personal care” spending, which includes shopping and housekeeping services for the elderly. Yet New York’s share of the nation’s Medicaid nursing home and ICF recipients was not low – it was above the state’s share of very old senior citizens. In California, in contrast, high home health care spending was associated with a below average nursing home population. For a spreadsheet of this data, click here.
New York State also has relatively generous rules to permit the formerly middle-class elderly to transfer assets to their children and declare themselves poor, and thus Medicaid-eligible. For example, New York chooses to allow spouses to retain the maximum amount of income the federal government allows under Medicaid, while New Jersey permits the minimum. New York State is not always generous to the elderly, however. If the frail elderly move in with their children, who provide much of their care for nothing, then the children’s income is counted against the parents’ eligibility of Medicaid, thus denying them publicly-funded home health care.
Chart 3.8:
Medicaid Spending Per Recipient
Sources: Medicaid spending and recipients; U.S. Department of Health and Human Services, Health Care Financing Administration, 2082 report (www.hcfa.gov).
The fourth reason for the high burden of Medicaid in New York is the extremely high prices that the state’s health and social services providers charge. New York’s Medicaid spending per recipient was 90 percent higher than the national average overall, and 86 percent higher than average for hospitals and nursing homes. To return to the spreadsheet of Health Care Financing Administration Medicaid data, click here.
This additional money has not purchased additional coverage. According to data published in the U.S. Census Bureau’s Statistical Abstract of the United States, the share of New York State residents without health insurance is above average (table 178 in the year 2000 edition). While there are some states whose cost per recipient was as high as New York’s (ie. New Jersey), no state combined New York’s high cost per recipient, large number of recipients, and low federal matching share. As a result New York, with 6.7 percent of the nation’s population and 8.1 percent of its personal income, accounted for 17.1 percent of the nation’s Medicaid spending.
New York’s health care prices were high for Medicaid, but not in general. As discussed in Section 2, the average private-sector worker earns somewhat less than the national average in Upstate New York, and 29 percent more than the national average in Downstate New York (if the high-paid finance industries in Manhattan are excluded). According to Hewitt Associates, an employee benefits consulting firm, the average cost of employer-provided health insurance (including the employee’s contribution) was $3,974 in the U.S. as a whole. It was $4,078 in the Hudson Valley and Capital District (slightly above average), $4,782 in the New York City area (20 percent above average), and $3,978 in the rest of New York State (slightly below average). In other words, the price of health care to the private sector was roughly in proportion to overall private-sector wages, given that labor doesn’t account for the entire cost of health care, and supplies should cost no more in New York than elsewhere. The federal Medicare program also has a regional cost factor, based on average wages. In 1999, New York State’s Medicare spending per recipient was 16 percent above the national average, with higher reimbursements presumably paid in high-cost downstate areas.
Chart 3.9:
Public Employment In Health And Social Services
Source: 1997 Census of Governments. Population: 2000 Census of Population, unadjusted data.
Medicaid spending has fueled a boom in private, mostly “non-profit” health and social services employment in New York City, but the city’s public employment was also high in those categories. New York City’s local government employment in public health (81 per 100,000 residents) was about equal to the national average (76). Its employment in public hospitals (506), however, was nearly three times the national average (183), and its employment in social services agencies (302) was also more than three times the average (90). Overall, other parts of the state also have more public employment in these categories than the national average, but less than New York City. To return to the local employment spreadsheet, click here.
State Government
Source: 1997 Census of Governments. Population: 2000 Census of Population, unadjusted data.
With welfare administration shifted to the local level, New York’s state social services employment per 100,000 state residents (38) was less than half the national average (78), and its public health employment (46) was below the national average (59) as well. In addition, New York State’s employment in social insurance administration (ie. unemployment insurance and workman’s compensation), at 24, was 27 percent below the national average (36). New York State’s public hospital employment (263), however, was far above the national average (167). New Jersey was above average in state hospitals as well. To return to the state employment spreadsheet, click here.
Chart 3.10:
March 1997 Payroll Per Employee
Source: Local government: 1997 Census of Governments, March 1997 payroll divided by full time equivalent employment. Private Sector: Bureau of Economic Analysis, 1997 annual private earnings by place of work divided by annual average private employment.
State Government vs. the National Average
Source: Local government: 1997 Census of Governments, March 1997 payroll divided by full time equivalent employment. Private Sector: Bureau of Economic Analysis, 1997 annual private earnings by place of work divided by annual average private employment.
In general, New York City’s local government health and social service workers earn less than the national average, relative to the private sector. This is especially true for the City’s social service workers, such as those employed by the Administration for Children’s Services, who earn only four percent more than the national average, compared with 29 percent more than the national average for the private sector. Pay is higher, relative to the private sector, elsewhere in the state, particularly for public hospital workers in the Downstate Suburbs, and public health workers in the Upstate Metros. New Jersey’s local government health and social service workers also earn less than their private-sector counterparts, but do earn more than those in New York City. To return to the local government pay spreadsheet, click here.
Generally, New York’s state health and social service workers earn somewhat more than those in New Jersey, who in turn earn somewhat more than those in the United States as a whole. New Jersey’s social service workers, however, earn more than New York State’s social service workers. To return to the state employment and pay spreadsheet, click here.
Chart 3.11:
State Direct Expenditures
Sources: Census of Governments. Income: Bureau of Economic Analysis. See introduction for details.
The United States has two welfare systems: one for people who work (unemployment insurance, workman’s compensation, Social Security, Medicare, Food Stamps, the Earned Income Tax Credit) and one for people who generally do not work (welfare, Medicaid, public housing, Supplemental Security Income). While New York remains relatively generous to those who do not work, its unemployment insurance spending is not high. In fiscal 1997, New York State’s unemployment insurance benefit payments equaled 0.4 percent of the personal income of state residents, about the same as the national average. In contrast New Jersey’s unemployment insurance spending, at 0.7 percent, was the fifth highest in the United States.
In fiscal 1972, New York State’s unemployment insurance benefits payments equaled 0.8.percent of the income of state residents, well above the national average of 0.5 percent. These benefits payments fell by 45 percent as a share of income in New York from FY 1972 to FY 1997, just as cash welfare payments fell by 62 percent. The trend in unemployment insurance can thus be considered part of an overall shift in social spending, from payments to needy individuals to payments to private health and social service organizations. Unemployment insurance benefit payments also fell as a share of income in the nation as a whole, and most other states, from FY 1972 to FY 1997. For a spreadsheet of this data, with data for all 50 states, click here.
Section 3 Summary
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New York State’s health and social services spending was the second highest in the country, behind Mississippi. While the federal government covered much of this, the portion financed by state and local taxes still equaled 2.7 percent of the income of state residents, higher than in all but a handful of states.
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In most states, the federal and state governments pay for virtually all welfare, social services, and Medicaid spending, although these programs are sometimes administered at the local level. In New York State, however, a substantial share of the cost is shifted to the local level. This places the greatest burden on New York City, where most of the state’s poor, dependent households are concentrated, but other parts of the state are increasingly burdened as well. In fact, the financial burden in the primarily rural counties grouped here as the Rest of New York State was as great as in New York City.
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At one time, New York State’s cash payments to needy individuals, both for welfare and for unemployment compensation, were generous by national standards, but cash payments have fallen steeply as a share of overall social spending. Meanwhile, New York State’s Medicaid spending has soared, and was 60 percent higher than the national average by Fiscal 1997. The state taxes required to fund New York’s rising spending remained just average, however, since much of the cost was shifted to local governments.
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New York’s health and social services providers charged the state’s Medicaid program nearly double the national average per recipient. The number of recipients in the state was also high, in part because New York’s share of the nation’s poor and elderly persons was above average, and in part because New York makes it easier for the formerly middle-income elderly to transfer assets and declare themselves poor, and thus Medicaid-eligible.
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The number of local government public hospital and social services employees in New York State is also above average, relative to population, especially in New York City. These workers tend to be paid less, relative to the national average, than private sector workers in New York City, but (for public health and hospitals workers) somewhat more elsewhere in the state.
To move on to Section 4, click here.
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