Wednesday’s hearing on the governor’s Medicaid budget gives lawmakers a chance to learn more from top officials about how the program developed its $4 billion deficit. Here are some suggested questions.

In FY 2019, state Medicaid spending ran significantly over its budgeted amount, a problem that was not disclosed in the governor’s executive proposal last year nor during the budget negotiations that followed. In late March, the state postponed $1.7 billion in Medicaid payments into early April, shifting the expense from one fiscal year to the next. The newly passed fiscal 2020 budget did not anticipate this expense or reflect the higher rate of spending, which led to large deficits.

Q: Why wasn’t this overspending disclosed earlier?

Q: Budget Director Roberrt Mujica has reportedly said he first learned of the situation in late March. How could that happen?

Q: Why didn’t the health commissioner institute a cost-cutting plan, using his authority under the “global cap“?

Last March was not the first time a Medicaid payment was delayed. According to the Budget Division’s Annual Information Statement of June 2019, “Between FY 2015 and FY 2018, DOH managed the timing of payments across State fiscal years that ranged from $50 million to roughly $435 million.”

Q: Can you give us the details of those transactions – the amounts, the recipients, the originally scheduled payment dates, and the number of days they were delayed?

Q: What was the purpose of those deferrals?

Q: Why weren’t they disclosed earlier?

Under the Medicaid Global Cap, the Health Department is required to post monthly reports on Medicaid spending and enrollment. These were meant to document that the program was staying on-budget and provide early notice of excess spending.

Q: Why wasn’t Medicaid’s higher-than-expected spending mentioned in those reports during the course of last year?

Q: Why haven’t you posted any reports since last March? Why aren’t these reports being posted regularly and promptly? (UPDATE: On Tuesday morning, the Health Department posted global cap updates covering April through December 2019.)

According to the latest financial plan, the minimum wage hike of 2016 has added $1.5 billion to Medicaid costs in FY 2020, rising to $1.8 billion in FY 2021, not including federal matching aid. These numbers are 28 percent and 46 percent higher, respectively, than the amounts projected last year at this time.

Q: How are these numbers calculated? Do they include benefits as well as wages? Do they include the ripple effect on wages above $15 an hour? Who is providing the data?

Q: Is the state reimbursing providers for all minimum-wage-related costs, or just the share attributed to care for Medicaid recipients?

Q: Why are the numbers rising so fast?

In October 2018, the state announced Medicaid rate increases of 2 percent for hospitals and 1.5 percent for nursing homes, effective immediately. An analysis prepared by the Health Department shortly before the announcement showed hospitals with 1199 SEIU contracts were receiving 61 percent of the benefit of those rate hikes, even though they account for about half of admissions.

Q: Given that Medicaid spending was already running over budget at the time, what was the rationale for this rate hike?

Q: Why do 1199-affiliated hospitals receive a disproportionate share of the funds?

Q: Why did the department’s analysis of an across-the-board rate hike focus on the benefits for a particular union?

The FY 2019 budget directed proceeds of the Fidelis-Centene sale, in the amount of $2 billion over four years, into a newly established Health Care Transformation Fund. The executive is authorized to spend the funds on a variety of health-related purposes without further approval, but is required to report any expenditure to the Legislature within 15 days, as well as providing quarterly reports on receipts and disbursements.

Q: Why isn’t the executive branch providing these notifications and reports?

Q: A summary of the Health Care Transformation Fund in the current financial plan says the funds are being used for “housing rental subsidies” and “capital projects.” What are the details of these expenditures?

Q: What does “state-only Medicaid payments” refer to?

State officials have described the rate hike as earmarked to improve the pay and benefits of employees, including the costs of a July 2018 contract between 1199 and the League of Voluntary Hospitals. In a side letter to the contract, the parties agreed that a $145 million “surplus” in the employees’ benefit fund would be transferred to other programs. One of them was the Healthcare Education Project, an organization that lobbies in Albany on behalf of the union and its affiliated employers. 

Q: What share of the $145 million was transferred to the Healthcare Education Project?

Q: How did the fund develop a surplus? Why not lower employer contributions?

Q: What was the legal basis for diverting money intended for member benefits to lobbying and other purposes?

 

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

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