cuomo-nypost-300x200-2131548The Cuomo administration’s quarterly budget update includes a warning for the state’s health-care industry: Medicaid cuts could be coming.

The report, released Tuesday, says officials are developing a plan to reduce Medicaid spending that could include “across-the-board rate reductions to health care providers and plans.”

The $79 billion health plan for the poor and disabled covers about one in three New York residents and represents a major source of revenue for hospitals, nursing homes and other health providers.

Tuesday’s announcement follows the recent revelation that the state had quietly postponed $1.7 billion in Medicaid payments from March to April – a step officials said was necessary to avoid violating a “global cap” on the program’s spending for fiscal year 2019.

That unusual maneuver signaled that expenditures on the health plan for the poor and disabled were running about 8 percent over budget – a problem that has not abated.

Medicaid spending “continues to exceed projections,” the update released Tuesday says. “As such, [the Division of the Budget and the Department of Health] are working to develop options to reduce spending within the Global Cap and/or continue to manage the timing of payments. Options to reduce spending include the execution of statutory powers granted to the Commissioner of Health to limit spending, which include across the board rate reductions to health care providers and plans.”

Under “global cap” legislation first enacted in 2011, the bulk of state spending on Medicaid is supposed to grow no more than the 10-year average of medical inflation, which is currently about 3 percent. Because of various exceptions and loopholes added over the years, the 2019 budget allowed growth of more than 6 percent – but actual spending was on track to rise 15 percent.

When spending shows signs of exceeding the cap, the law empowers the health commissioner and budget director to develop a cost-cutting plan – but they refrained from doing so last year. Last fall, meanwhile, Cuomo boosted outlays further by quietly approving rate increases for hospitals and nursing homes, a big election-year win for some of his biggest political supporters.

The fiscal year 2020 budget approved by the Legislature in March does not include a plan for addressing the Medicaid overage, which was not made public until May.

During budget negotiations this spring, however, the governor raised the possibility of reconvening the Medicaid Redesign Team, a panel of officials and industry stakeholders that helped contain Medicaid costs during Cuomo’s first term. Don’t be surprised if Cuomo revives that concept in the near future.

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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