Suppose you stumble across a malfunctioning ATM that mistakenly churns out extra twenties with every withdrawal. Do you alert the bank like an honest citizen, or pocket the cash and hope you don’t get caught?

Now suppose the ATM is a federal program to help the near-poor, and you’re the governor of New York State.

This is more or less the situation faced by Gov. Cuomo with the Essential Plan, a form of Obamacare, that since 2016 has been providing free or low-cost health coverage to low-income New Yorkers. It currently has 710,000 enrollees.

It turns out the state is receiving way more federal aid than it needs to pay for the program — to the tune of hundreds of millions of dollars a year — thanks to an out-of-whack formula in the Affordable Care Act.

Team Cuomo has chosen not to refuse the money or warn Washington about what’s happening. Instead, they’ve gone with option C: sue the feds to keep the broken ATM running until someone gets it fixed or turns it off.

The surprising truth emerged last week, when the Empire Center obtained a state Department of Health memo being shared with insiders. It showed the Essential Plan running a hefty surplus, which Cuomo intends to use for plugging holes elsewhere in the state budget.

The situation is all the more surprising because the plan recently took a $1 billion cut to its federal funding, courtesy of a constitutional flaw in President Barack Obama’s Affordable Care Act. Plus, the memo says the state has been overpaying the insurance companies who manage the benefit under contract with the state.

When a taxpayer-funded health plan can waste money, sustain a $1 billion hit to its funding and still operate in the black, something has clearly gone wrong. And rather than try to set things right, New York indulged its long, bipartisan tradition of milking federal health programs for all they’re worth.

The Essential Plan is a “basic health plan,” an optional feature of Obamacare that only New York and Minnesota chose to implement. New York’s version is available to state residents with incomes up to double the federal poverty level, or $24,280 for an individual. Premiums are either $0 or $20 a month, depending on income.

To pay for the coverage, the state is entitled to 95% of the federal subsidies that plan enrollees would have received if they bought commercial insurance through an Obamacare exchange. Those payments have amounted to almost $4 billion a year.

In October, the Trump administration halted one of those subsidies, known as cost-sharing reductions, citing a court ruling that the money had not been properly appropriated by Congress. New York stood to lose $1 billion, or a quarter of the Essential Plan’s federal funding.

In response, New York joined two lawsuits to reclaim the money it didn’t actually need, including one last month with Minnesota.

The latter suit included a claim that New York might have to cut other programs “to avoid jeopardizing coverage” for Essential Plan enrollees. That does not square with the Health Department’s own memo, which shows the Essential Plan running a $560 million surplus, even after the $1 billion cut.

The argument that New York is legally entitled to funding beyond the actual cost of the program is dubious. The cry of poverty is brazen.

Worse is the Cuomo administration’s plan to spend the surplus on other programs, such as subsidizing financially weak hospitals. Once the feds wake up to that diversion, they’re liable to demand repayment — as state Senate Health Chairman Kemp Hannon (R-L.I.) warned last week at a budget hearing. If New York somehow wins its suit and claims another billion-plus dollars, it will be digging the hole even deeper.

Cuomo and his aides see New York as being under attack from Washington — on tax policy, immigration and other issues — and may feel that all is fair in political warfare. But the money they’re trying to grab comes from taxpayers, not the President or Congress. Their gamesmanship with public funds gives the whole enterprise of government-funded health care a bad name.

Better Cuomo should drop the lawsuit, urge Congress to rewrite the funding formula and come fully clean about the Essential Plan’s finances: Did it run a surplus before now? If so, what happened to the extra money? And why wasn’t any of this made clear to the taxpaying public?

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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