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

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The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo "Readers will recall that the Empire Center is the think tank that spent months trying to pry Covid data out of Mr. Cuomo’s government, which offered a series of unbelievable excuses for its refusal to disclose...five months after it sued the government, and one week after a state court ruled that the Cuomo administration had violated the law and ordered it to come clean—Team Cuomo finally started coughing up some of the records."   -Wall Street Journal, February 19, 2021

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