The state share of Medicaid spending is projected to jump 22 percent under the recently approved state budget, an unusually steep one-year jump for what is already one of New York’s biggest expenditures.

The updated financial plan released this week by the Cuomo administration anticipates the state will pay $27.5 billion toward the health plan for the low-income and disabled, an increase of $5 billion. Total Medicaid spending, including federal aid and state-mandated contributions from local governments, is expected to be up $7.6 billion, or 10 percent.

 

Source: NYS Budget Division

Those are by far the largest Medicaid increases of Governor Cuomo’s term in office, both at the state and total level.

The surge appears to be driven by two pandemic-related factors—rebounding utilization of the health-care system and rising enrollment. 

Even as coronavirus patients overwhelmed some hospitals last spring, routine medical activities dropped sharply due to fear of infection, a temporary ban on elective procedures and other lockdown policies.

As a result, spending by New York Medicaid, as with many health plans, was down overall in 2020—and is currently jumping back to normal.

Meanwhile, Medicaid enrollment surged as New Yorkers lost jobs and income during the pandemic-induced economic downturn. The rolls grew from just over 6 million in February 2020 to 7 million in April. Although the economy is recovering, that trend has not yet been reflected in enrollment figures.

The impact on state finances has been blunted somewhat by federal relief funding, which included boosting the federal matching formula, which normally covers half of New York’s costs, by 6.2 percentage points—which was worth $3.4 billion in 2021. 

Source: NYS Budget Division

The Cuomo administration expects that extra aid to last through the first three quarters of this fiscal year, reducing its value to $2.5 billion in 2022. That drop largely explains why New York’s contribution is rising 22 percent when overall costs are up 10 percent.

That same “cliff” effect is likely to repeat next year, when what’s left of pandemic relief funding expires. The state will either have to close the gap with its own money or find a way to cut costs.

A late April report from the office of Comptroller Tom DiNapoli highlights another Medicaid-related development:

The State continued to defer $1.7 billion of Medicaid payments ($3.5 billion total including federal share), despite the availability of year-end resources in SFY 2020-21 to make the payment in the fourth quarter. These payment delays provide the appearance that State Department of Health Medicaid spending remains within the “Global Cap,” but obscure true spending on the program. Furthermore, the combined impact of deferred payments and enrollment growth will increase pressure on the Financial Plan in subsequent years, particularly in the event of another economic downturn.

The global cap, which dates back to Cuomo’s first year in office, nominally limits the growth of state Medicaid spending based on the medical inflation rate—although it is subject to loopholes that have grown over time. It also empowers the executive branch to unilaterally trim Medicaid payments as necessary to stay on budget, but the governor has never exercised that authority.

As the comptroller’s report also points out, the new budget gives no details on how it will use another temporary pot of federal aid—worth $1.6 billion and earmarked for home-based care for the elderly and disabled. Budget legislation allows the executive to use that money for “grants that are not advertised, competitively awarded or subject to the Comptroller’s pre-approval of contracts,” which undermines safeguards against waste, fraud and abuse, the report warns.

Meanwhile, cash flow within the state’s Medicaid program continued to fluctuate significantly from one quarter to the next throughout 2021—and is projected to do the same in 2022. These gyrations appear to reflect the Cuomo administration’s strategy of delaying certain payments from one fiscal year to the next—which made it appear that the program was staying on budget when, in fact, it was slipping increasingly out of balance.

Source: NYS Budget Division

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

You may also like

The Health Department’s response to a FOIL request for nursing home data triggers 2020 déjà vu

Despite Governor Hochul's promise of transparency, the Health Department keeps responding to requests for COVID data with tactics from the Cuomo administration Read More

How Are the Billions in Emergency Aid to New York Being Spent?

A new  posted yesterday on the Comptroller’s website could become the lens through which New Yorkers see how tens of billions of dollars in one-shot federal funding is being spent by governm Read More

Hochul’s Emergency Order Imposes Insurer Restrictions Sought by Hospital Group

Buried in Governor Hochul's emergency order on health-care staffing is a temporary bar against insurance companies challenging claims submitted by hospitals–and an influential hospital association is taking credit. Read More

Home Care Agencies Project Widespread Staffing Shortages in the Next Phase of New York’s Vaccine Mandate

Agencies providing home-based care to elderly and disabled New Yorkers face a large-scale loss of employees when the next phase of the state's vaccine mandate takes effect on Oct. 7, according to a newly released industry s Read More

Remembering the scandal that brought down Health Commissioner Howard Zucker

The resignation of Dr. Howard Zucker as state health commissioner marks the end of a term marred by scandal over his role in managing the coronavirus pandemic. The much-debated compelling nursing homes to admit COVID-positive patients, though it origi Read More

As leaves turn, NY’s post-pandemic recovery still has very far to go

Entering the second autumn since the COVID-19 outbreak of March 2020, the pace of New York State's pandemic economic recovery has been abysmal by almost any standard. New York was the national epicenter of the pandemic, and Governor Cuomo's "" business Read More

More NY job gains in August—but employment needs to rise a lot further

New York's jobs report for August looked relatively strong—but only by comparison, that is, with . On a seasonally adjusted basis, New York gained 28,000 private-sector jobs last month—a growth rate of 0.4 percent, according to . This was double th Read More

After 10 weeks, all but five of the Empire Center’s 63 requests for pandemic data remain unfulfilled

Over the 10 days that Hochul has been in office, there has been no further progress on the Empire Center's record requests. Read More

Subscribe

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

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries: Info@EmpireCenter.org

Press Inquiries: Press@EmpireCenter.org

About

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.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!