A policy seminar titled Medicaid Migraine, held by the fiscal watchdog group the Empire Center Wednesday as part of the Governor Hugh L. Carey Policy Forum, addressed the rapidly increasing health care costs in New York that led to Governor Andrew Cuomo’s budget office delaying a $1.7 billion payment to providers last year.
The $72 billion Medicaid program provides health coverage to low-income people, and is funded in New York by the federal government, the state and individual counties. For much of the past decade, state Medicaid costs were kept relatively under control, due to a spending cap agreed to by Cuomo and the state legislature, known as the global cap. The cap was tied to the rate of medical industry inflation.
The Empire Center’s health policy analyst Bill Hammond says since 2016, the costs have been escalating. Last year, spending was around 8% more than the previous year. Hammond says the global cap was designed to impose spending reductions whenever costs rose too steeply, but he says those enforcement mechanisms were not used.
He says the cost overruns came to a head earlier this year, when the governor’s budget office delayed by three days a $1.7 billion payment to hospitals, nursing homes, and other providers. The postponement from late March to early April meant that the costs were shifted from the last fiscal year into the present one. Hammond, speaking during a break in the seminar, says the delay raised an alarm.
“It’s very much a wake-up call,” Hammond said. “Except the waking up should have happened a year ago, last summer or fall, when it first started showing up in the balance books.”
The delayed payment was not made public at the time, but was discovered in an audit by the state comptroller’s office four months later.
Cuomo’s budget officials have not ruled out repeating the delay again. They say they might put off the final Medicaid payment in the current fiscal year, into next fiscal year. Hammond says that would just worsen the problem.
“Medicaid is such a large program,” said Hammond, “that even a small percentage growth adds up to billions of dollars, and when that compounds year after year after year, it adds up to a lot of money.”
The Medicaid budget deficit in New York could be as high as $7 billion over the next four years, according to the watchdog group Citizens Budget Commission.
Some of the factors that have been driving up costs are higher labor costs for hospitals and nursing homes. The minimum wage has increased and public worker union employees have received raises. Those costs have grown outside of the constraints of the global spending cap. More people enrolled in Medicaid under the federal Affordable Care Act, also known as Obamacare. The state also took over some of the counties’ share of Medicaid costs.
At the time the state was experiencing a Medicaid budget squeeze, it granted hospitals an extra $140 million in increased reimbursement rates. The additional funding came shortly after a major New York City hospital group made a donation to the state Democratic Party during Cuomo’s reelection campaign. Cuomo’s aides and the hospital group deny that there’s any connection.
Governor Cuomo was asked about the delayed $1.7 billion Medicaid payment and cost overruns during an interview Tuesday on Albany public radio station WAMC.
“To tell you the truth, I don’t understand that fully,” Cuomo said.
The governor’s health care experts were invited to the panel discussion, and the governor’s aides have appeared at past policy seminars held by the Empire Center. But this year, they declined to attend.
