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 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

New York’s Shrinking Budget for Public Health Deserves More Attention

As Medicaid costs spiraled over the past decade, other parts of the state Health Department were losing money and staff—leaving New York with diminished public health resources when the pandemic struck last year. Read More

What to Expect When the Health Department Complies with the Empire Center’s FOIL Request

Although the state Health has recently revealed significant additional information about the pandemic death toll in New York's nursing homes, it has not fully complied with last week's court order in a Freedom of Information lawsuit brought by the Empire Center. Read More

New York Reveals Another 1,516 COVID-19 Deaths in Long-Term Care Facilities

The death toll in New York's long-term care facilities jumped by another 1,516 this weekend as the Cuomo administration adjusted its reporting on adult-care facilities to include residents who died after being transferred to hospitals. Read More

The Cuomo Administration Releases More Data on Coronavirus Deaths in New York Nursing Homes

The state Health Department has revealed additional detail about coronavirus deaths in New York nursing homes, showing for the first time how many residents of each home died of COVID-19 outside of the facility, typically in a hospital. Read More

The State’s Revised Nursing Home Death Toll Leaves Many Questions Unanswered

Numbers belatedly released by the Cuomo administration last week pushed New York's COVID-19 mortality rate in nursing homes from 35th to 13th highest in the U.S., an Empire Center analysis shows. Read More

A Letter From Washington Shrinks New York’s Budget Gap by $2 Billion or More

In a letter to governors two days after President Biden's inauguration, the U.S. Department of Health and Human Services said that the pandemic-related federal public health emergency "will likely remain in place for the entirety of 2021." Read More

The Cuomo administration is withholding data on nursing home vaccinations as well as deaths

The Cuomo administration's resistance to sharing pandemic data from nursing homes has broadened to withholding vaccination numbers as well as full death counts. Read More

Governor Cuomo’s budget proposal leaves the Medicaid throttle open

Perhaps the most remarkable thing about Governor Cuomo's Medicaid budget is how little it changes the program's spending pattern. In spite of a once-in-century pandemic that rocked the state's health-care system and decimated state revenues, the govern 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.

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

SIGN UP TO STAY UP TO DATE ON THIS AND THOSE OTHER ISSUES THAT IMPACT NEW YORKERS.