Karen DeWitt

New York is facing a looming budget deficit because of rising costs and spending on health care in the state’s Medicaid program. It’s increasingly likely that the state will resort to what critics say is a fiscal “gimmick” to keep the rest of this year’s and next year’s spending plans in balance.

An update by Gov. Andrew Cuomo’s budget office on Oct. 17 said the state’s Medicaid deficit has grown to between $3 billion and $4 billion, and that the Medicaid program has developed a “structural imbalance.” If nothing is done to curb spending, the Medicaid gap could grow as high as $7 billion over the next four years.

In recent days, Cuomo has begun acknowledging that it’s a concern.

“The Medicaid gap is a major problem for the state,” Cuomo said on Nov. 6. “It is going to be a major financial issue for the state next year.”

Reasons for the increase in Medicaid spending include the state’s increase in the minimum wage; union contracts that include salary raises for hospital and nursing home workers; and the popularity of the Affordable Health Care Act, or Obamacare, which has led more New Yorkers to receive health care benefits through Medicaid.

In late March, Cuomo’s budget office quietly delayed for three days a $1.7 billion payment owed to health providers. As a result, the payment registered in the current fiscal year, which began in April, instead of the previous fiscal year, which ended March 31.

The governor’s budget office said it is “expected” that another $2 billion payment due in March 2020, will be delayed until early April so it will be credited in the 2021 fiscal year instead.

Bill Hammond with the fiscal watchdog group the Empire Center said that’s an irresponsible practice.

“I think everybody would admit it’s a gimmick,” Hammond said. “You don’t have enough money in your checking account to pay your bills and so you just tell the people who are expecting money, ‘You have to hang on for a few days until my checkbook replenishes.’ ”

State Comptroller Tom DiNapoli, in a monthly budget monitoring report, also said the plan raises alarm bells.

He said delaying Medicaid payments for two years in a row raises “troubling questions” as to whether the state may return to past practices of allowing operating deficits to continually recur from one year into the next. In the past, the state sought temporary loans each year to make up for those deficits, known as the annual “spring borrowing.” It was eliminated 30 years ago.

The governor’s budget office said even with the delayed payment, $1.5 billion still needs to be cut out of the Medicaid program in the remaining few months of the fiscal year.

Spokesman Freeman Klopott said “increased utilization and medical inflation” has led to the deficit, and he said the office is developing a plan that will fix the structural imbalance without sacrificing health care quality.

According to the budget office, options include mandatory cost controls, or “across-the-board reductions in rates paid to providers and health plans and reductions in discretionary payments.”

Hammond said time is running out to make the cuts.

“There’s only four months left (in the fiscal year),” Hammond said. “They have to get that savings in a relatively short period.”

At the same time that the Medicaid costs have been rising, there have been two questionable uses of the health care program, Hammond said.

One, first reported in the New York Times, found that hospitals were given an additional $140 million — the largest reimbursement rate increase in a decade — after a large hospital organization gave money to the state’s Democratic Party during the 2018 governor’s race. Cuomo won a third term in office in that race. Cuomo’s aides and the hospital group deny that there’s any connection.

And $145 million was redirected to a health care education fund that benefits the state’s largest health care union, SEIU 1199. The fund in the past has run ads to support the governor’s positions on health care spending.

A midyear budget report that was due on Oct. 31 could shed more light on how the governor’s budget office is managing the Medicaid shortfall. But that report has not yet been released.

© 2019 WXXI

You may also like

What we know (and don’t know) about NY COVID-19 nursing home deaths after DOH report

David Robinson The state Department of Health's own analysis of COVID-19 nursing home deaths has renewed politically the charged debate over how and why coronavirus ravaged the most vulnerable New Yorkers. Read More

Faced with $10B deficit, MTA says it’s eyeing cutting overtime spending

Alfonso Castillo The financial impact of the COVID-19 pandemic on the Metropolitan Transportation Authority is adding urgency to the agency’s efforts to curtail overtime numbers that critics say remain alarmingly high. The MTA said at Wed Read More

City and state officials contend with a dire future as New York reopens

Brian Pascus As New York begins to reopen from the Covid-19 lockdown, Read More

Pandemic, recession don’t bring down school budgets

Stephen T. Watson This year's school elections were delayed and then shifted entirely to voting by mail thanks to the Covid-19 pandemic, which also shut down schools here and across the country. District officials worried this new method of Read More

Here’s Cuomo’s Plan for Reopening New York

Jesse McKinley ALBANY, N.Y. — Gov. Andrew M. Cuomo on Monday presented a soft blueprint for how New York State’s economy might begi Read More

States with few virus cases get big share of relief aid

Geoff Mulvihill Alaska, Hawaii, Montana and Wyoming are not epicenters of the coronavirus pandemic. Yet these four states scored big this spri Read More

What to expect in the state’s first round of spending cuts

Rebecca Lewis Regular viewers of Gov. Andrew Cuomo’s daily coronavirus press briefings have heard the governor say time and again that New York state is broke. Revenue projections are way down and the state is facing a budget deficit that is Read More

Eyeing Medicaid Cuts, Cuomo Puts His Stamp On A $3 Trillion Stimulus Bill

Caroline Lewis During state budget discussions in March, Governor Andrew Cuomo  that the pandemic would not stop him from pushing through changes to Medicaid that he said were necessary to contain the growth of its more than $70 billion annu Read More


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


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


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.