Washington’s latest pandemic relief bill includes a targeted boost in Medicaid funding that appears to be tailor-made for the home state of Senate Majority Leader Chuck Schumer.

The provision adds hundreds of millions of dollars—and possibly more than a billion—to the gusher of pandemic relief flowing to Albany as lawmakers near passage of a state budget later this month.

Whether this particular pot of aid helps or hurts the state’s finances in the long-term remains to be seen.

Section 3107 of the $1.9 trillion American Rescue Plan would temporarily increase federal matching aid for so-called home- and community-based services. This is a part of Medicaid in which New York is by far the biggest spender—and therefore stands to reap the largest share of new dollars.

Also, the money is to flow over a 12-month period that precisely aligns with New York’s fiscal year, from April 1, 2021, to March 31, 2022, which is unique in the U.S.

The Congressional Budget Office has forecast that the provision will distribute $9.3 billion nationwide, and Schumer’s office says approximately $600 million would flow to New York.

That estimate is likely too low. As of 2016—the most recent year for which complete data are available—New York accounted for 18 percent of Medicaid spending on home- and community-based services. If that ratio still holds true, the aid boost would be worth about $1.6 billion for New York.

That 18 percent ratio might well have increased. The bulk of the home- and community-based services benefit takes the form of personal assistance, which refers to non-medical help (such as shopping, housekeeping and bathing) provided to people with disabilities in their daily lives. As Cuomo’s Medicaid Redesign Team noted last year, spending on personal assistance has soared in recent years, from $5.6 billion in 2016 to an estimated $12.8 billion in the current fiscal year.

The additional cash will likely be welcomed by the state’s rapidly growing home-care industry and its allies in the Legislature. Depending on how it’s used, however, the boost could spell trouble for New York’s finances in the longer term.

The bill in Washington—which is headed for final approval in the House this week—specifies that the new money for home- and community-based services must “supplement, not supplant” what states already allocate. 

Thus, the aid increase effectively pushes the state to spend even more on an outsized and rapidly growing portion of New York’s Medicaid health plan that Cuomo has recently tried to rein in. If used to expand the program, the temporary aid boost will leave a budget hole to fill when it expires next year.

The Medicaid Redesign Team proposed to control growth of the benefit by taking such steps as tightening eligibility rules and limiting the number of contractors who participate. Those recommendations were approved by the Legislature, but have yet to take full effect.

As of 2016, New York accounted for 40% of nationwide Medicaid spending on personal assistance, even though it has about 6 percent of the population. Given the growth since then, New York might well be spending more on personal assistance than all other states combined.

The toll of the pandemic in nursing homes, where the coronavirus spread rapidly and killed tens of thousands of residents, has led advocates to argue for expanding home care as an alternative to institutionalization for the elderly and disabled. As New York demonstrates, however, directing more money to home-based care does not necessarily achieve the desired result.

Although it spends by far the most on home- and community-based services for the elderly, New York still has a proportionally large nursing home population—and a tragically heavy COVID-19 death rate in those facilities.

Schumer’s office says the American Rescue Plan will send $23.8 billion to New York as a whole, including $12.6 billion in unrestricted aid for state government. That’s on top of billions in aid provided by previous federal relief bills, including a temporary across-the-board 6.2-point increase in Medicaid’s federal matching percentage, worth $6.5 billion or more to New York.

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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