The state’s Medicaid spending was significantly lower than projected in the first quarter, but that’s not necessarily a positive sign for state finances.
As shown the chart below, the rate of Medicaid spending has become unusually volatile in recent years – running high in the first three quarters of each fiscal year and dropping to lower and lower amounts in the fourth quarter.
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.
This is a byproduct of the Cuomo administration’s unorthodox and damaging practice of delaying payments from one fiscal year to the next as a tactic for managing a growing structural imbalance in the Medicaid program.
This year departs from the pattern in a noteworthy way: Instead of jumping higher to “catch up” for underpayments in the previous fiscal year, first-quarter spending stayed unusually low.
State-share spending for so-called “Department of Health” Medicaid, which is the bulk of the program, came to about $5 billion for the first quarter, according to the comptroller’s June cash report.
That’s about $400 million less than 25 percent of the year’s budget amount, and $900 million less than projected first-quarter cash flow in the state’s financial plan.
This likely reflects recently delayed payments to health plans and providers, which the governor used to navigate a cash crunch brought on by the pandemic-related economic downturn and a three-month postponement of the tax filing deadline.
On the plus side, it may also reflect a drop in medical claims related to the cancellation of elective procedures and a general slowdown in health-care delivery during the coronavirus crisis. If so, the savings might well be offset by a corresponding surge in claims as the system reopens.
The state’s already high Medicaid costs have risen significantly in recent years, mostly due to unexpected increases in demand for home-based long-term care for the elderly and disabled. Rather than taking prompt action to regain control, the state has instead delayed payments from one fiscal year to the next, which has had the effect of exacerbating a structural imbalance while keeping the program’s true condition hidden from the Legislature and the public.
The situation came to a head last year when the governor belatedly acknowledged having postponed $1.7 billion in Medicaid payments from fiscal 2019 to fiscal 2020, leading to what became a $4 billion deficit.
That budget left unanswered the bigger question of how the state will make up for billions in lost revenue due to a major recession. The governor was given authority to make across-the-board cuts to Medicaid and other programs as he deems necessary, but he has postponed doing so while waiting for a bailout from Washington.
Meanwhile, some legislators are pushing to roll back some of April’s Medicaid changes and take other steps that would increase the program’s spending.