ALBANY — The state told hospitals and nursing homes this week that they will be hit with another cut in Medicaid funding as the health care system reels from costs related to fighting the COVID-19 virus and state revenue plummets by the billions of dollars in the resulting economic shutdown.

A document from the state Health Department sent to hospitals, nursing homes, assisted living facilities, clinics and physicians said the 0.5% cut will be effective retroactively to April 2 “and each state fiscal year thereafter.”

That amount is in addition to the 1% cut announced by the Cuomo administration in December.

The latest cut was a result of recommendations by the Medicaid Redesign Team Gov. Andrew M. Cuomo created in February to address a $6 billion budget deficit before the virus hit, mostly because of Medicaid spending. The team, which includes representatives from health care organizations and unions, was charged with cutting $2.5 billion in costs.

“The state is implementing the recommendations developed by the Medicaid Redesign Team and approved by the legislature in the enacted budget to drive efficiencies in the nation’s most successful Medicaid program,” said Freeman Klopott, spokesman for the state Division of Budget.

“Meanwhile, the state is facing a 14 percent drop in revenue due entirely to the pandemic and in the absence of federal funding to offset this loss, we are preparing a plan to reduce spending by over $10 billion,” Klopott said. “Any category where we do not reduce funding will simply mean deeper cuts in another.”

Subject to the 1.5% cut are hospital inpatient services, indigent care programs, nursing homes, home health care programs, long-term managed care and assisted living facilities, clinics, hospital outpatient services, pharmacies, physicians for in-office and off-site services, and for dental and imaging services, according to the document sent to health care providers and obtained by Newsday.

In an executive summary issued March 19, in the early days of New York’s COVID-19 outbreak, the Medicaid Redesign Team said cuts would be proposed at a later date despite “outbreak of the COVID-19 public health emergency which has created significant disruption to the health care system and the broader economy.”

“I imagine it is going to be more difficult for some providers than others,” said Bill Hammond, health care analyst for the Empire Center think tank. “Some providers have deep pockets and financial reserves and they can charge higher rates, so this should not be critical for them. If you are a clinic in a low-income neighborhood, this is a bigger part of your revenue … these providers are maybe the ones that shouldn’t be cut.”

Hammond said the cuts are aimed at slowing the rapid growth of Medicaid, which he said is still expected to grow overall by 3%.

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