The ball in Times Square isn’t the only thing dropping on New Year’s Eve: The state Health Department also announced a 1 percent reduction in most Medicaid payments.

It’s the Cuomo administration’s first public step toward closing a mushrooming deficit in the safety-net health plan that covers more than 6 million New Yorkers.

The rate cut, which takes effect Jan. 1, was published in the Dec. 31 edition of the New York State Register.

The notice said the move will reduce gross Medicaid payments, including federal matching aid, by $124 million in the final quarter of the current fiscal year and $496 million in the fiscal year beginning April 1. The state’s share of the savings was not specified, but it would likely be about half of that amount – or $62 million this year and $248 million next year.

That’s about 3 percent of the amount Cuomo has said he intends to cut before the end of March.

Officials say the state faces a $4 billion deficit in fiscal year 2019-20, which they intend to close by cutting $1.8 billion in spending and pushing $2.2 billion in expenses into future fiscal years. The state also faces a projected gap of $6.1 billion for 2020-21.

It should be emphasized that these cost-cutting moves are about slowing growth. Even if they are fully implemented, overall spending on Medicaid will almost certainly increase in the year ahead.

The rate cut applies to the vast majority of Medicaid spending, including payments to hospitals, nursing homes, doctors, pharmacists, home-care providers and Medicaid managed-care plans.

The cut will not affect certain programs and providers that are paid entirely with federal funds or otherwise exempt by federal law – the largest example being Medicaid-funded services provided through the Office of Mental Health and the Office for Persons with Developmental Disabilities.

These providers, in fact, are due to receive a funding increase meant to boost the wages and benefits of caregivers by 2 percent, which was a provision of the state budget approved in March. That rate hike, also announced on Tuesday, is expected to increase gross Medicaid spending by $140 million.

In a third notice published Tuesday, the Health Department also revived its proposed changes to the rapidly growing Consumer-Directed Personal Assistance Program, which allows qualifying individuals with disabilities to employ their friends and family members as in-home caregivers.

The changes affect reimbursement for the “fiscal intermediaries” that handle paycheck processing, tax deductions and other financial services on behalf of consumers in the program. Officials are proposing to pay them a fixed monthly fee per client instead of a percentage-based fee, a change it has said would save the state $75 million a year.

In October, a judge blocked a similar plan on grounds that the state had not followed the proper rule-making procedures – the process it has now launched with Tuesday’s announcement.

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

You may also like

Budget Deal Slows Medicaid Growth But Plants Seeds for Future Spending

The growth of New York's Medicaid spending is projected to slow but not stop as Governor Hochul and the Legislature effectively split their differences over health care in the newly enacted state budget. Read More

Albany’s New Health Insurance Tax Comes with Few Limits

The newly enacted state budget imposes a multibillion-dollar tax on health insurance without specifying who must pay how much – leaving those basic details to be decided later by the health commissioner in negotiation wit Read More

One of New York’s Biggest Medicaid Contractors Is Quietly Acquiring a Competitor

Author's note: This post has been updated to correct an error in the second paragraph. As state lawmakers debate the future of Medicaid home care, one of the program's bigg Read More

New York’s Home Health Workforce Jumped by 12 Percent in One Year

New York's home health workforce has continued its pattern of extraordinary growth, increasing by 62,000 jobs or 12 percent in a single year, according to newly released data from the U.S. Bureau of Labor Statistics.  Read More

While New York’s Medicaid Budget Soared, Public Health Funding Languished

Four years after a devastating pandemic, the state has made no major investment to repair or improve its public health defenses. While funding for Medicaid over the past four years Read More

A Medicaid Grant Recipient Sponsors a Pro-Hochul Publicity Campaign

While much of the health-care industry is attacking Governor Hochul's Medicaid budget, at least one organization is rallying to her side: Somos Community Care, a politically active medical group in the Bronx that recently r Read More

New Jersey’s Pandemic Report Shines Harsh Light on a New York Scandal

A recently published independent review of New Jersey's pandemic response holds lessons for New York on at least two levels. First, it marked the only serious attempt by any state t Read More

A Politically Active Medical Group Gets $29 Million in ‘Distressed’ Provider Funds

State officials awarded $29 million in 'distressed' provider funding to a politically active medical group in the Bronx, state records confirm. a network of physicians and other he Read More