New York's governor proposed a $2.85 billion cut to state spending on Medicaid in the coming year as the state scrambles to close a $10 billion gap in the next seven weeks.
Medicaid on chopping block
New York governor proposes large cuts to help erase budget deficit
The state begins its next fiscal year April 1, earlier than nearly all other states, and must erase a projected $10 billion deficit. States continue to face significant budget shortfalls as the economy fitfully recovers from the recession and unemployment remains painfully high. “New York state is functionally bankrupt,” Gov. Andrew Cuomo said as he unveiled a proposal that was swiftly criticized by hospitals and nurses.
Among those who objected to the governor's budget were Kenneth Raske, president of the Greater New York Hospital Association and Dennis Rivera, head of a powerful New York healthcare union—both recently named to a state panel to redesign Medicaid.
“We believe this to be the largest Medicaid cut in New York's history,” the trade group and union said in a joint statement. The statement said the drop in state spending amounts to 10% of the Medicaid budget, and New York would also forfeit another $3 billion in federal funds. Medicaid is jointly financed by the states and federal government.
The New York State Nurses Association argued the size and scope of proposed cuts raise concerns that adequate nurse staffing would suffer. “Cuts to healthcare are not the answer to the state's overwhelming fiscal crisis,” the group said in a statement.
Cuomo's budget would reduce state, federal and capital Medicaid expenses by
$982 million and calls for additional changes to reduce a total projected $2.85 billion state budget gap for the safety net insurer. The Medicaid redesign team, which includes Raske, Rivera and 25 other members, are expected to report recommendations to reduce spending by March 1. “Their point and purpose is to redesign the programs,” Cuomo said in his budget address.
The redesign team, which held its first public hearing in mid-January, first learned of the $2.85 billion target for Medicaid spending cuts as the governor released his budget plan, Raske said in an interview. Raske rejected the target as too large and said the panel members “are working with every ounce of effort that we can possibly muster” to propose ideas that curb spending without compromising care. “It is a daunting challenge,” he said.
Federal funding to New York for Medicaid will plunge by $5 billion next year as recession relief to states, enacted by Congress in early 2009, comes to an end.
“One of the main drivers in this budget is that New York got about $6 billion in federal funds last year, in terms of stimulus, and we inhaled it, and we injected it into our body and it is now gone,” Cuomo said. “And we have a withdrawal from the federal stimulus money.”
In June, billions of dollars in federal Medicaid relief is scheduled to end.
The Center on Budget and Policy Priorities, in a recent survey of state agencies, legislatures and governors' offices, said 44 states and the District of Columbia face a combined $125 billion budget deficit for the coming year. States relied heavily on extra federal Medicaid funding to help plug deficits since the recession began, the report said. The boost in federal Medicaid spending and other state aid accounted for most of the $135 billion to $140 billion that flowed to states under the American Recovery and Reinvestment Act of 2009.
New York's state Medicaid spending is projected to increase to $18 billion from $14.4 billion under Cuomo's budget. The governor argued mandated rates and formulas call for increased Medicaid spending of roughly 13%, which he described as unsustainable.
“Nothing, my friends, is increasing by this amount,” he said of recent years' Medicaid increases. “Not home values. Not salaries. Not inflation. No income. Not anything.” Formulas also fail to tie payment to performance, he said. “Growth in Medicaid will be recalibrated to a fair and objective standard,” he said.
Kathleen Shure, senior vice president of managed care and insurance expansion for the GNYHA, said statutory increases to provider Medicaid pay account for a small share of the 13% increase identified by the governor. She noted the 1.5% inflation adjustment to provider reimbursement under New York law has been frozen in the prior three years.
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