State leaders agreed as part of this year’s budget to move Medicaid administration from the county level to the state. (Unlike many states, New York historically has divided both the non-federal cost and administrative control of the program between state and local governments.) Given that Medicaid constitutes about one-third of all health spending in the state and is the biggest contributor to the property taxes imposed by county governments, this is big news.

Why does a change in bureaucratic control matter?

Cost is one reason. Administration represents approximately $1.1 billion of the $51 billion in overall Medicaid spending in New York. Supporters of the state takeover, notably Speaker Sheldon Silver and his colleagues in the Assembly, argued that the change could produce hundreds of millions of dollars in cost efficiencies and savings.

New Yorkers won’t notice a decrease in local property taxes this coming year as a result. The State Health Commissioner is charged with developing an implementation plan by Nov. 30. Whoever is elected governor this fall will then have the lead in recommending specific changes to the Legislature.

But the change could have significant impacts on program implementation, affecting the nature of Medicaid services as well as costs. It seems likely that a state takeover of administration will be followed by efforts to make Medicaid more cost-effective and uniform statewide. Currently, with 58 local jurisdictions (57 counties and New York City) making key decisions, this national/state program can produce very different results for people who live in different counties.

Take long-term care. Medicaid pays the majority of all nursing home bills. Research by the Rockefeller Institute indicates that counties vary widely in how they determine whether a given individual will be eligible for Medicaid coverage for such care. With the state in charge of administration, more uniformity could mean that eligibility decisions become more generous in some counties — and perhaps more restrictive in others.

Through administrative changes over the past few years, the state has already begun to centralize some of the eligibility processes for non-long term care services under Medicaid. Assuming control of eligibility for long-term care, and particularly nursing home care, will not be as easy.

Most people seeking Medicaid coverage for nursing home care must provide numerous documents, including over five years of information about their assets. Local departments of social services have been the place where people go for assistance in meeting these requirements. As the state assumes administrative responsibilities, centralization could reduce differences in what represents acceptable documentation for applications. It would also make the application process easier for people who move from one county to another.

Presumably, centralizing Medicaid administration should also promote more uniform coverage decisions. But it’s not clear it will actually achieve hoped-for cost efficiencies. The new law provides that employees of local county social services departments who administer Medicaid will become employees of the state, for instance. There will be pressure to pay those employees more as they go from the county to the state level.

More important to total Medicaid costs than administration is the cost of Medicaid benefits for enrollees. The average cost per enrollee in New York in 2007 was $8,450, while the cost of an elderly or disabled person was nearly three times that amount. Costs are concentrated within a small segment of the population, making administration of long-term care benefits particularly important.

A state takeover of Medicaid administration responsibilities and costs is a first step in getting a handle on an important and expensive program. But controlling costs in a sensible way will require careful evaluation of how administration affects access to Medicaid benefits.

A version of this commentary appeared previously in the Times Union of Albany, N.Y.