president_barack_obama_2012_portrait_crop-150x150-7198876With the stroke of a pen, President Barack Obama has just put added pressure on the second-biggest category of New York’s state operating funds budget—Medicaid.

Obama’s recent executive orders shielding undocumented immigrants from deportation could drive up New York’s Medicaid costs by $1.1 billion to $2 billion, state Senate Republican Leader Dean Skelos warned in a letter yesterday to the state’s U.S. senators.

While even the low end of that estimate is quite possibly on the high side, Skelos clearly is correct on the key point: Obama’s action will add, to some measurable degree, to state-funded Medicaid spending in New York. It’s only a question of how much, and how soon.

This situation pits Governor Andrew Cuomo’s commitment to fiscal restraint against his support for Obama’s immigration stance. On the one hand, Cuomo’s budget caps state-funded Medicaid spending (now $16.7 billion) and requires program cuts if the cap is in danger of being exceeded. On the other hand, the governor’s Office for New Americans effectively is committed to maximizing the number of illegal immigrants in New York who can come out of the shadows and sign up for the program.

In other words, while one arm of the Cuomo administration is trying to hold down Medicaid expenditures, another is working to drive them up.

Who’s involved?

The basics are explained in a New York Times story last Friday:

A key part of the new actions will allow many undocumented parents whose children are citizens or legal residents to apply for reprieves from deportation and work permits — though not formal legal immigration status — through a newly created program called Deferred Action for Parental Accountability, which is expected to begin in six months. The actions also expand a 2012 program that offers relief to undocumented young people who came to the country as children, called Deferred Action for Childhood Arrivals.

Under federal law, immigrants covered by Obama’s new programs won’t be eligible for Obamacare or Medicaid.  However, the “care of the needy” provision in New York’s Constitution has been interpreted by the state Court of Appeals as barring the state from denying Medicaid coverage to legal immigrants who are not eligible for federally funded Medicaid.

Local governments pay nearly half of the non-federal share of Medicaid, but Cuomo has just applied a hard cap to their total Medicaid expenditures.  This means Mayor Bill de Blasio will have no reluctance to organize efforts to sign up as many new applicants as possible. Sure enough, as the Times reported:

In New York City, the immigration actions have spurred the formation of a new interagency task force that met recently at City Hall with representatives from two dozen city agencies.

In December, Mayor Bill de Blasio and city officials will also seek to coordinate their efforts with other cities at a summit on immigration at Gracie Mansion that is expected to draw more than two dozen mayors, said Nisha Agarwal, the city’s commissioner of immigrant affairs.

How many eligible?

In a state-by-state analysis released just before the Obama order, the Migration Policy Institute said 234,000 parents in New York will be eligible for Obama’s new deferred action program, and that 104,000 New York immigrant children would be immediately eligible for the Deferred Action for Childhood Arrivals (DACA) program. (The head of another advocacy group, the New York Immigration Coalition, suggested to the Times last week that 250,000 New Yorkers could apply “in the first few months.”)

The 2013 average Medicaid cost for all categories of service was $7,929 per recipient as of 2013, according to this presentation by the state’s Medicaid director. State budget data indicate the average cost per Child Health Plus enrollee as of 2013 came to about $1,500. So, take the Migration Policy Institute estimates, assume 100 percent successfully apply for the new Obama programs, and assume further that all of those parents and new DACA kids are added to the Medicaid rolls. Multiply the number of adults by $7,929 and the number of children by $1,500. The result is $2 billion — the high number cited by Skelos in his letter. Assume only 75 percent apply, and that only 75 percent of that number sign up for Medicaid, and the figure drops in half, to just over $1 billion—Skelos’ lower number.

While Skelos could be accused of exaggerating for political effect, a much more cautious estimate still yields a significant impact in the context of New York’s Mediciad budget. For the sake of argument, cut the Migration Policy Institute estimate by fully 50 percent—to just 169,000 in all–and assume that only half of those immigrants signs up for Medicaid. In that case, the added cost would come to $500 million. That still equates to 3 percent of state-funded Medicaid expenditures, which would eat up most of the 4 percent statutory cap imposed on the program as of 2014.

Take an even more conservative approach, assume only half of the immigrants apply for Obama’s new programs, that only half of this number signs up for Medicaid—and, further, that the marginal cost per recipient for these folks is also half the average, or $4,000 per recipient for all categories and just $750 for children. Using these rock-bottom estimates, the additional spending still comes to $250 million, or a not insignificant 1.5 percent of the 2015 total. (Yes, some of these immigrants are now receiving Medicaid emergency services, but any net savings realized by shifting these people to regular Medicaid must also reflect a loss of federal reimbursement.)

Bottom line: the number will be significant, in the context of New York’s state funded Medicaid program.

So far, the Cuomo administration effectively is working to drive the added cost as high as possible. Again, from the Times:

In response to the immigration actions, the Office for New Americans, which has an annual budget of $7 million, plans to expand services at the opportunity centers and increase operating hours for an information hotline, Mr. [Cesar] Perales said. It is also working with local bar associations to recruit and train a volunteer corps of lawyers to assist with applications, and with a nonprofit group to adapt a screening questionnaire used at the opportunity centers for citizenship applications to determine eligibility for the new deferred action program for parents.

With a push from Obamacare, New York’s Medicaid enrollment has risen by 450,000 in just the past two years, state data indicate. It will be interesting to see how much higher the enrollment projection goes in Cuomo’s next Executive Budget.

PS — This new Manhattan Institute paper provides a timely reminder that immigrants also contribute to economic growth.  This is surely the case in New York City, in particular. But will the immigrants benefitting from Obama’s orders, once they come out of the legal shadows, be generating more economic activity? Seems unlikely.

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About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

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