cuomo-nypost-300x200-2131548This year’s state budget came with a hidden asterisk: In the final throes of negotiations with legislative leaders, Governor Cuomo quietly postponed a month’s worth of Medicaid payments from the last week of March to the first week of April – shifting $1.7 billion in spending from one fiscal year to the next.

The maneuver, which wasn’t made public until weeks later, appears to throw the new budget out of balance – unless the Cuomo administration can squeeze an extra 8 percent in savings from the Medicaid program.

It also muddies Albany’s fiscal picture. Last year’s state-funded Medicaid spending, which was officially booked at $21.7 billion, would have been $23.4 billion had the March payments been made on schedule – and would have far exceeded the statutory “global cap” on the program’s growth.

Total state operations spending for 2018-19, listed at just over $100 billion, would have been higher by the same $1.7 billion, and thereby exceeded Cuomo’s self-imposed 2 percent cap by almost two points.

Also thrown in doubt are the projected numbers for Medicaid spending and total spending in fiscal year 2020 – which do not appear to have been revised upward to reflect the last-minute shift.

The first public notice of the delay came in May, on page 37 of the Budget Division’s 271-page “Enacted Budget Financial Plan.” It was also highlighted in a budget analysis released last week by Comptroller Tom DiNapoli.

The move is reminiscent of budget gimmicks used in the past, including by the current governor’s father, such as lagging the state payroll and “selling” Attica prison to the state Urban Development Corp. the difference being that those steps were taken in the heat of fiscal crises and promptly announced to the public.

The recent Medicaid postponement was not driven by a shortage of money. According to cash reports from comptroller’s office, the state ended the fiscal year with a state-funds balance of more than $12 billion.

Rather, the payment delay of three business days “was done to limit spending to the Global Cap indexed rate for FY 2019,” the Budget Division said. It attributed the excess spending to “growth in managed care enrollment and costs above projections, as well as certain savings actions and offsets that were not processed by year-end.”

First enacted in 2012, the global cap mandates that state Medicaid spending be held to the 10-year rolling average of the medical inflation rate. If spending is on track to exceed the cap, the health commissioner has unilateral authority to cut Medicaid fees as necessary – authority that was not exercised in this case.

To the contrary, the administration chose last fall to grant temporary Medicaid rate increases to hospitals and nursing homes – a previously unbudgeted step that’s projected to cost the state $500 million over three years. 

In its Annual Information Statement, dated June 12, the Budget Division gave this explanation of how the additional expense of $1.7 billion will be managed within the 2019-20 budget: 

The Financial Plan assumes Medicaid spending in FY 2020 will comply with the Global Cap. As such, DOB and DOH will continue to develop options to reduce spending within the Global Cap and/or continue to manage the timing of payments, which may include a deferral to FY 2021 if spending is not reduced to levels that adhere to the Global Cap. Options to reduce spending include the execution of the statutory powers granted to the Commissioner of Health to limit spending.

In other words, the state will either squeeze an extra $1.7 billion in savings from Medicaid – by invoking the authority it chose not to use last year – or it will simply push payments further into the future.

Of course, complying with the global cap will be that much harder this year. To do so, the Health Department must both slow the rate of ongoing spending compared to last year while also absorbing the unpaid bills from March, which by themselves equate to almost 8 percent of state funding for the program. Counting federal matching aid, an 8 percent cut would translate to a loss of $3.4 billion or more in revenue for hospitals, nursing homes and other Medicaid providers.

The Medicaid cap has been increasingly weakened in recent years, as the governor and lawmakers modified it to exclude certain expenses – most notably, the impact of a minimum wage hike on labor costs for Medicaid providers.

Outside-the-cap spending was on track to be 9 percent of the Medicaid budget for last year. If the $1.7 billion had been paid on schedule, the combined overage would have been 17 percent.

The governor has also increasingly skirted his self-imposed 2 percent cap on state spending growth. Last year, the Citizens Budget Commission calculated that the actual growth rate in the 2018-19 budget was 4.47 percent. If the full amount of Medicaid spending is factored in, last year’s growth rate jumps to more than 6 percent.

 

About the Author

Bill Hammond

As the Empire Center’s director of 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

Hospitalization rising in some areas

Coronavirus hospitalizations are surging in parts of upstate, including three regions that the Cuomo administration authorized to begin reopening today. Read More

Uneven ‘relief’ for NY providers

A review of federal emergency payments to New York health-care providers reveals a striking disparity: Four of Manhattan's most prosperous private hospitals collected more individually than the 11 city-owned hospitals combined. Read More

Essential Plan surplus hits $3B

As Governor Cuomo pleads for financial help from Washington, one of his state's programs is sitting on $3 billion in unspent federal aid: the Essential Plan. Read More

A grim toll gets worse

The full toll of the coronavirus pandemic in New York is likely thousands higher than the official death tallies, according to newly released federal data. Read More

More fiscal turmoil for Medicaid

In a sign of pandemic-related strain on state finances, the Cuomo administration is postponing a series of multi-billion-dollar Medicaid payments over the next three months. Read More

Upstate escapes the worst

With the coronavirus pandemic hitting some parts of New York much harder than others, Governor Cuomo has signaled that he will begin to relax shutdown restrictions in low-virus parts of the state. Here's a closer look at how infection and fatality rates vary from region to region. Read More

Another Medicaid payment delay

State Medicaid spending dropped to nearly zero in March as the Cuomo administration again delayed payments to balance the state's books. Comptroller Tom DiNapoli's cash report for March, posted on Wednesday, showed just $9.2 million in Medicaid disbursements. The state's share of Medicaid spending averages almost $2 billion per month. The comptroller's numbers reflect so-called Department of Health Medicaid, which covers the bulk of the program but excludes most spending on recipients with mental disabilities. Read More

Why New York?

#NYCoronavirus: It's increasingly apparent that New York is suffering more severely from the coronavirus pandemic than any other part of the U.S. and most of the rest of the world – raising stark questions for city and state leaders. What is it about New York, and especially New York City, that made it especially vulnerable to infection and death? And how can that be changed before the next virus breaks loose? Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

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.