(1) Categorically rejecting any cost-cutting measures because of the coronavirus crisis is unrealistic. The state has seen $10 billion to $15 billion in revenue evaporate almost overnight. Even if lawmakers raise taxes, substantial reductions in spending will be necessary. Allowing Medicaid to keep growing at its current pace would necessitate far deeper cuts to school aid and other programs.
This is an installment in a special series of #NYCoronaVirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.
(2) The extra Medicaid funding from Washington does not come close to filling the gap. Although Senator Chuck Schumer and others have said it would be worth $6 billion per year or more to New York, other estimates (including my own) have put the number between $4 billion and $5 billion. Either way, it’s misleading to use that annualized figure because the aid will be provided on a quarter-to-quarter basis. When the president declares an end to the coronavirus emergency declaration – which everyone hopes will be less than a year from now – the money will quickly stop.
(3) Accepting the aid has downsides. First, it comes with strings attached that would inhibit the state from implementing the recommendations of the Medicaid Redesign Team or other cost-cutting reforms. Governor Cuomo may be overstating the obstacles, but his underlying complaint is valid. The state needs to be able to manage its Medicaid costs in a fiscal crisis, and decisions about the right way to do that should be made in Albany, not Washington.
(4) The second downside is that using temporary aid to paper over a long-term imbalance in Medicaid is dangerous, as Governor Cuomo knows from personal experience. The last time Washington provided extra Medicaid funding, in the aftermath of the Great Recession, it expired on December 31, 2010 – the day before Cuomo took office. The loss of that funding was a major cause of the $10 billion gap he had to close in his first budget.
(5) Although it’s commonly said that Cuomo is trying to “cut” Medicaid by $2.5 billion, it would be more accurate to say that he’s slowing the growth. Even if the full $2.5 billion in savings are enacted into law, state-share spending on Medicaid will still increase by about $1.5 billion, or 6 percent, compared to the budget as originally approved for this year.
(6) None of the measures proposed by the Medicaid Redesign Team would directly impair the coronavirus response, and most of them would not affect hospitals. One proposal, for example, reduces a state subsidy for doctors’ malpractice premiums, which should not be the taxpayers’ responsibility in the first place. The largest number of proposals seek to contain the rapidly rising costs of long-term care, especially non-medical “personal assistance” provided to recipients at home, in some cases by friends and family members. Controlling these costs would free up resources, making it easier for the state to finance its coronavirus response.
(7) In the absence of targeted reforms, the state would have little choice but to resort to across-the-board cuts in payments to providers and health plans – which hurts the efficient and lower-paid caregivers along with the wasteful and higher-paid ones. The Health Department formally warned of that possibility in a notice published in Wednesday’s New York State Register, declaring that it intends to make $2.5 billion in across-the-board cuts unless other savings are found. Paradoxically, this move likely would not jeopardize the state’s ability to draw down federal aid – putting Washington in the position of blocking smarter, more surgical changes in favor of the meat-ax approach.