UPDATE: In response to a query from the Empire Center, the Budget Division has lowered its estimate of total Medicaid spending in fiscal year 2021, correcting a table that had erroneously double-counted $2.2 billion in federal stimulus aid. The new total is $80.3 billion, which is a 6 percent increase from the year before. The post below has been revised accordingly.
Despite a round of cost-cutting this spring, New York’s Medicaid spending is on track to jump by 6 percent
9 percent this year thanks to a massive influx of federal aid.
According to the Cuomo administration’s updated financial plan, posted on Thursday (and later revised), total Medicaid spending is projected to hit $80.3 billion
$82.5 billion in fiscal year 2021, which began in April. That’s $4.5 billion or 6 percent $6.7 billion or 9 percent more than was spent on the program in fiscal 2020, and $1.9 billion or 2 percent $4.1 billion or 5 percent more than projected in May (see chart).
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.
The revised spending total reflects a startling 17 percent
23 percent increase in federal aid, to $48 billion $50.2 billion in 2021 compared to $40.9 billion last year. That includes $2.2 billion in “enhanced” matching aid under federal coronavirus relief legislation, plus an additional $4.8 billion $7 billion in matching aid.
The state used the relief funding to offset its own contribution to Medicaid, which dipped from $26.5 billion to $24.9 billion.
All of these numbers come with a major caveat: The budget as adopted was significantly out of balance. In the absence of a further bailout from Washington – which remains uncertain – Governor Cuomo has been empowered by the Legislature to cut billions from various programs, including Medicaid. He was also given authority to close gaps with borrowed money.
What specific steps Cuomo intends to take are left unclear in Thursday’s document. Instead, its gap-closing plan shows “TBD” – for “to be determined” – in place of dollar amounts possibly to be taken out of Medicaid, school aid, higher education, social services, transportation and other programs.
Further complicating the outlook is a surge in Medicaid enrollment triggered by the pandemic-induced recession and widespread layoffs. The revised financial plan anticipates that another half-million New Yorkers will join the rolls, which had already increased by about half that amount as of May.
The adopted budget included $2.2 billion worth of cost-cutting changes to Medicaid recommended by Cuomo’s Redesign Team – some of which have been on hold because of strings attached to federal aid. It’s increasingly clear that those moves, characterized by critics as “slashing” health care, are destined at most to modestly slow Medicaid’s rapid growth.
New York’s per capita Medicaid spending rose to more than double the national average as of 2018, and costs have continued surging since then. Although reforms adopted during Cuomo’s first term give him broad power to contain costs, he has failed to invoke that authority. Instead, he has repeatedly resorted to delaying payments to put the state’s books in superficial balance.
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