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

You may also like

How a Medicaid Program To Improve Nursing Home Care Ended Up Paying for Union Benefits

New York State's budget-making process sometimes works like a closed loop, as interest groups on the receiving end of state spending reinvest a portion of their proceeds to lobby Albany for still more money. Read More

Turning NY’s Yellow Buses Green Could Cost $8B+

New York in 2022 imposed the largest unfunded mandate on schools in a generation, requiring them to replace their buses with electric models. New price data indicate the cost is still rising. Read More

The Election Day After Tomorrow

New York’s “cap and invest” program (NYCI), a central part of the state’s efforts to reduce greenhouse gas emissions, appears designed to hold back much of the program’s sticker-shock until January 2027—after the 2026 election. Read More

How Eliminating the Medicaid ‘Gap’ Would Perpetuate Inequity in Hospital Funding

A change in Medicaid reimbursement currently being pushed by New York's hospital industry appears likely to benefit high-end hospitals proportionally more than safety-net institutions, a review of hospitals' financial repor Read More

Union Membership Dropping in NY Too

The decline in union membership observed nationally appears to be occurring in New York as well. Read More

Hochul’s ‘Straight Talk’ on Medicaid Isn’t Straight Enough

Arguably the biggest Medicaid news in Governor Hochul's budget presentation was about the current fiscal year, not the next one: The state-run health plan is running substantially over budget. Read More

NY private employment was flat at end of 2023

New York's post-pandemic employment recovery stalled in the final quarter of 2023, with the state ending the year still 76,400 private jobs below its February 2020 level. Read More

Construction Unions Beg To Get Into SUNY

Weeks after state university officials warned about looming deficits, state legislators and construction unions are pushing to make SUNY’s financial picture worse. Read More