Options for eliminating local funding for Medicaid analyzed in new report

| Press Releases

The feasibility of a full state takeover of the remaining local share of Medicaid costs in New York is explored in a new report released today by the Empire Center for Public Policy.

Authored by health policy director Bill Hammond, the report’s key findings include:

  • Fully abolishing the local Medicaid share would require reallocating almost $8 billion in state resources or—due to the effects of federal matching aid—cutting almost twice that amount from Medicaid spending.
  • Excluding New York City from relief would reduce the cost by 70 percent, but would be hard to justify on fairness grounds.
  • Potential impact of a takeover on total local property tax levies would vary widely around the state, ranging from an average of just 4 percent on Long Island to 13 percent in the Mohawk Valley and western New York regions. New York City’s Medicaid share is equivalent to nearly one-quarter of its property taxes.
  • Strengthening an existing cap on New York’s Medicaid spending, which remains among the highest in the country, would potentially save enough money to finance a takeover within two decades.
  • If a takeover is pursued, the existing property tax cap could be modified to maximize relief for local taxpayers across the state.

The report notes that New York shifts more of its Medicaid costs to local government than any other state—a system widely regarded as dysfunctional because it puts a disproportionately high burden on localities with poorer residents and weaker tax bases.

Several proposals for eliminating the local payments have been advanced in recent years, but Hammond argues that none of them has fully confronted the complexities and trade-offs of a takeover by the state.

“The local share of Medicaid has evolved into something that’s hard to defend, but also hard to unwind,” writes Hammond. “Because the current system distributes costs so unevenly, any solution must therefore distribute relief unevenly. … Leaders committing to this path must be prepared to grapple with tough choices for years to come.”

The Empire Center, based in Albany, is an independent, not-for-profit, non-partisan think tank dedicated to promoting policies that can make New York a better place to live, work and raise a family.