Feds urge more talks on N.Y. Medicaid application

New York has revised its request for a $10 billion Medicaid adjustment, which would allow using that money in related healthcare programs, after federal officials concluded capital investment and some other programs are ineligible.

The application was first filed 18 months ago, prompting Gov. Andrew Cuomo and Health Commissioner Dr. Nirav Shah last week to publicly blame the federal delay for threatening financially distressed New York hospitals.

HHS Secretary Kathleen Sebelius said in a letter responding to Cuomo that they've begun drafting "a potential agreement" based on New York's revisions, but there are "outstanding issues." She proposed additional staff meetings this week "to expedite this process."

Sebelius wrote that the so-called Medicaid waiver, intended to improve care for patients while lowering system costs, "will not, nor should it, determine the future path for particular New York hospitals."

Waivers enable states to use federal money resulting from cost savings in their programs.

New York now proposes spending most of the $10 billion over five years on more primary care and alternative care, like home visits by nurses to women with high-risk pregnancies, along with transitional subsidies for hospitals that will lose patients.

The major New York goal is to reduce avoidable hospitalizations by 25%, according to the state Health Department.

Among the items in the state's initial application that federal officials rejected as "unfundable" are capital investment, rent subsidies for high-needs patients with mental and physical health issues, regional planning grants, evaluation projects and information technology.

The Cuomo administration's proposed budget for the coming year said that "the Medicaid waiver and complementary investment will expand the availability of capital."

However, state officials clarified Friday in response to questions from The Associated Press that the new $1.2 billion capital program for healthcare would only involve non-federal funds, not money from the Medicaid waiver. They also propose expanding access to other capital "by encouraging private equity investments."

Cuomo and Shah said Tuesday nearly half of New York's 227 hospitals are financially distressed. Shah said Lakeshore Hospital in Chautauqua County and St. Francis in Poughkeepsie are "on the verge of financial ruin. Yet the biggest problem is in Brooklyn, where eight hospitals are fiscally distressed, including three that are at risk of closing."

"The reality is this," Shah said, "if the federal government continues to delay our waiver, hospitals in Brooklyn and statewide will close very soon."

Larry Schwartz, secretary to Cuomo, said Sebelius' letter was politely worded but it doesn't say what the governor and New Yorkers have been requesting for 18 months — that the waiver is approved.