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Medicaid cost overruns stress NY state’s budget

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ALBANY — Officials representing New York’s hospitals, nursing homes, counties and insurance plans are bracing for reductions to Medicaid funding as Gov. Andrew Cuomo proposes a new state budget this week.

The Democratic governor will have to bridge a projected $6.1 billion deficit in a roughly $175 billion spending plan. About $4 billion of the shortfall comes from cost overruns in the state’s Medicaid program, which provides healthcare services for more than six million people. The current state budget expires March 31.

Different kinds of providers last week warned against cuts in certain areas and offered ideas that they said would avoid service disruptions and pain. The New York Health Plan Association, which represents insurers, suggested the state re-examine several pools of money that indirectly fund hospital operations.

Local 1199 of the Service Employees International Union — which represents workers in hospitals, nursing homes and home health care — favors raising more revenue to offset potential cuts through taxes or surcharges.

LeadingAge New York, which represents owners of nursing homes and other senior-care facilities, said the state should earmark a share of new housing funding to build affordable units for seniors.

“The strategy on long-term care has been cut, cut, cut, and not strategic investments that will bend the overall cost curve,” said Ami Schnauber, LeadingAge’s vice president for public policy and advocacy.

A spokesman for the governor said details of his Medicaid plans would be released Tuesday, and declined to elaborate. Melissa DeRosa, a top aide to the governor, said this month that the state would convene health-care stakeholders to help develop its Medicaid plan.

During his State of the State address Jan. 8, Mr. Cuomo also suggested he might require localities to bear more of the burden.

The federal government pays for about half the cost of New York’s roughly $80 billion Medicaid program, the state splits the remaining share with New York City and the other 57 counties. Localities paid $7.6 billion in 2019, including $5.4 billion from New York City, according to the New York State Association of Counties.

The state capped the size of the local contributions, starting in 2013. This is projected to add $1.3 billion in costs for the state during the fiscal year that starts April 1. Mr. Cuomo said the situation was “unsustainable” during his speech and later told reporters that localities were “writing a check that we sign.”

New York City Mayor Bill de Blasio and other county leaders said they were concerned by the comments. Erie County Executive Mark Poloncarz, a Democrat, said county budgets for 2020 were “locked in,” and changes could result in property tax increases.

Health insurance executives said they were concerned Mr. Cuomo could increase taxes and fees levied on insurance plans, which are often passed on to employers and individuals. In 2019, those surcharges totaled more than $5 billion.

The Medicaid imbalance has been growing for more than a year. In April 2019, Mr. Cuomo delayed a $1.7 billion required payment across fiscal years. The maneuver allowed the last state fiscal year to conclude in balance, but created a hole in the current fiscal year.

To address this shortfall, the state Department of Health ordered a 1% across-the-board reduction in Medicaid reimbursements for providers that took effect Jan. 1. Bill Hammond, director of health policy for the Empire Center, a fiscally conservative think tank, said this would only yield about $248 million in annual savings.

Mr. Hammond said Mr. Cuomo should focus on the long-term care sector, which has seen explosive enrollment growth in recent years. He said the state should deal with the imbalance by controlling costs, not raising revenue.

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