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Worries grow over Medicaid overruns

Oct 16, 2019

Credit The Empire Center

A policy seminar titled Medicaid Migraine, held Wednesday by the fiscal watchdog group the Empire Center as part of the Gov. Hugh L. Carey Policy Forum, addressed the rapidly increasing health care costs in New York that led to Gov. 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. In New York, it's funded by the federal government, the state and individual counties. For much of the past decade, state Medicaid costs were kept relatively under control because of a spending cap – known as the global cap -- agreed to by Cuomo and the State Legislature. The cap was tied to the rate of medical industry inflation.

Bill Hammond, the Empire Center’s health policy analyst, said since 2016, the costs have been escalating. Last year, spending was about 8% more than the previous year. Hammond said the global cap was designed to impose spending reductions whenever costs rose too steeply, but he said those enforcement mechanisms were not used.

He said 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, said the delay raised an alarm.

“It’s very much a wakeup call,” Hammond said. “Except the waking up should have happened about a year ago. It should have happened last summer or fall, when it first started showing up on the balance books.”

The delayed payment was not made public at the time, but it 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 until the next fiscal year. Hammond said that would just worsen the problem.

“Medicaid is such a large program,” Hammond said. “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 expenses 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, and 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 donated $100,000 to the state Democratic Party during Cuomo’s re-election campaign, according to a report in the New York Times. Cuomo’s aides and the hospital group deny that there’s any connection.

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.