The Cuomo administration recently revealed that New York’s Medicaid program is running over budget by an astonishing 16 percent, or $4 billion, even though enrollment is flat and medical inflation is at historic lows.
This seemingly out-of-nowhere spending spike has triggered the Empire State’s worst fiscal crisis since the Great Recession. It raises an awkward question for fans of single-payer health care in Albany: If state government can’t properly manage the fraction of the health-care system it already controls, why should it be trusted to take over the whole thing?
State lawmakers are giving serious consideration to a sweeping proposal known as the New York Health Act, Albany’s version of Medicare for All. If enacted, it would replace virtually all existing insurance, public and private, with a government-operated system financed entirely by tax dollars.
The bill’s supporters are pitching it as a model of efficiency that will somehow cover everyone for everything at an affordable price. Yet already, the state’s existing single-payer plan — Medicaid — is busting its budget in spectacular fashion.
Lawmakers allocated it $25 billion in state funds this year, a bump of 5 percent, or about double the medical-inflation rate. On top of what already was the highest per-capita Medicaid spending in the 50 states, that should have been plenty.
According to the latest official estimate, however, the program’s actual spending is on track to hit $29 billion, for a whopping year-to-year increase of 23 percent. That’s the definition of out-of-control.
What makes the spike especially troubling is that it’s happening at a time when the economy is growing, overall enrollment is steady and federal funding is on the rise. The crisis is almost entirely the result of feckless management.
To cite a few examples:
Overpromising. In 2016, Gov. Andrew Cuomo committed to reimburse Medicaid providers for the impact of his big minimum-wage hike — but underestimated the cost by a factor of four. The full tab for this year is now projected at $3 billion, half state and half federal, which is more than the entire Medicaid budget for the state of Maine.
Ignoring warnings. Medicaid spending showed clear signs of running over budget as early as the summer of 2018, but state officials kept the situation quiet and failed to promptly exercise their cost-cutting authority, which allowed the problem to snowball.
Cutting deals. In October of last year, when the program was already deep in the red, Cuomo unilaterally ordered Medicaid rate hikes worth hundreds of millions of dollars for hospitals and nursing homes. The decision, taken without prior notice or public debate, was a victory for two of the governor’s biggest political allies and donors, the Greater New York Hospital Association and health-care labor union 1199SEIU.
Cooking the books. Cuomo continued hiding Medicaid’s deficit throughout this year’s budget negotiations, then secretly delayed $1.7 billion in payments from March to April, effectively punting the problem from one fiscal year to the next. A private insurance firm that tried such a trick would probably be shut down by state regulators.
Fumbling reform. Two rule changes meant to control long-term-care costs were recently blocked in court, largely because judges found that the state had failed to follow proper legislative and regulatory procedures.
Delaying action. In a budget update last month, the administration said it intended to cut $1.8 billion in spending before the end of the fiscal year in March. But it put off announcing the details for another two months, which will make them that much more painful to enact.
Although Cuomo was the primary actor in all of these decisions, the Assembly and Senate either actively supported or meekly accepted everything he did — up to and including the $1.7 billion payment delay, which was a stark violation of budgeting norms.
So all of official Albany has been complicit in badly mismanaging a health plan that covers 6 million lower-income and disabled New Yorkers, some of whom literally couldn’t survive without the care that Medicaid finances.
Albany would undoubtedly slip into the same bad habits when running a single-payer system, only the stakes would be astronomically higher. Overspending a statewide health plan’s budget by 16 percent would translate to a deficit not of $4 billion, but $48 billion, or $2,400 for each state resident.
Instead of spreading their dysfunction to the entire health system, lawmakers better get their act together on Medicaid.