New York spends more on Medicaid than any other state - 35 percent more than California, a state with nearly twice New York's population. In 2004 alone, New York spent $42 billion on Medicaid. Even though New York splits the cost with the federal government and counties, the state's share (about $10.5 billion) is equal to its combined spending on criminal justice, social welfare and transportation.

The issue is cost and the consequence is uncompetitive taxation. The county share of Medicaid contributes to local taxes per capita that are 83 percent above the national average.

New York's total tax burden - whether calculated on a per capita basis or as a share of income - has been No. 1 or No. 2 in the nation since 1970.

New York's generous public services were affordable in the early 20^th Century when New Yorkers could boast a vigorous economy, but the world has become a much more competitive place. New York's high taxes encourage businesses to expand elsewhere, leaving shrinking opportunities for New York's young adults. No wonder that Upstate is losing its 18-44 year olds - nearly 8 percent during the 1990s when this group grew 4 percent nationally.

Sensible changes recently made at the national level in the 2006 Deficit Reduction Act will help, but New York has a uniquely costly Medicaid system.

• Address the high cost of long-term care by
  1. Plugging the "spousal refusal" loophole that allows wealthy elders to shift the cost of a spouse's care onto the taxpayer simply by refusing to pay the bills
  2. Providing tax incentives encouraging people to save for long-term care
  3. Educating the public about the need to plan ahead
  4. Creating a new Long Term Care Compact (S.3530/A.10634) giving seniors the option of pledging a portion of their assets in order to qualify for a long-term care subsidy.
• Lower the "local cap" on Medicaid spending by one-half percent each year, so that the inflation rate paid by counties goes down to 2.5 percent in 2009 and down to zero by 2014;
• Redirect $20 million in "graduate medical education" funding for a physician-specialist recruitment/retention program to attract doctors in high-need specialty areas to Upstate.
• Allow Upstate counties to offer different benefit packages to Medicaid recipients, or to create subsidy payments that working recipients can use to purchase employer-sponsored insurance, as is being developed in Florida and South Carolina.