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Cuomo eyes delaying Medicaid payment to avoid busting cap

Gov. Andrew M. Cuomo said he may again

Gov. Andrew M. Cuomo said he may again push more than $1 billion in Medicaid spending into the next fiscal year. Credit: AP / Hans Pennink

ALBANY — The Cuomo administration said it may again push more than $1 billion in Medicaid spending into the next fiscal year in order to avoid violating a legal cap and to forestall deep cuts in health care programs.

The Cuomo administration said the practice of pushing costs into the next fiscal year is simply managing “the timing of Medicaid payments to ensure compliance with the global cap,” the term for the annual cap on Medicaid spending.

“We are reviewing options to reduce spending and remain under the global cap, including the option to manage the timing of payments,” said Freeman Klopott, spokesman for the state Division of Budget, in a recent interview.

But it’s an option independent analysts warn is a mistake. They say the short-term fallout of further delays in payments would hurt hospitals and health care providers that are already operating on tight budgets. Long term, analysts warn further delays could result in forced cuts in care to the third of New Yorkers receiving Medicaid and cuts in other programs such as school aid.

“Postponing more payment would only make a bad situation worse,” said Bill Hammond, director of health policy at the fiscally conservative Empire Center think tank. “On a per capita basis, New York’s Medicaid program is already the costliest in the country. Last year, the state-funded portion of the program ran 8 percent over budget, and officials don’t seem to have a good handle on how they can slow things down.”

The state used that same option in this year's budget. In March, Gov. Andrew M. Cuomo and legislative leaders negotiated a $175.5 billion budget for the 2019-20 fiscal year that was due April 1. If they included the final Medicaid payment of $1.7 billion when it was due in March, the state would exceed the 4% “global cap” in growth in Medicaid spending for the 2018-19 fiscal year, which would end March 31.

So instead, the March payment was delayed for three days into April, when the current 2019-20 fiscal year began, according to the state Division of Budget records. It was the largest use of the legal option so far, although the Cuomo administration also postponed payments of $50 million to $435 million between 2015 and 2018, according to the Division of Budget.  

"We identify this Medicaid payment shift as a concern in our July budget report,” said Jennifer Freeman, spokeswoman for state Comptroller Thomas DiNapoli on Friday. “The state must analyze the underlying causes of the higher spending and what steps are planned to address it.”

The state and the analysts agree on the drivers of Medicaid costs: The continuing escalation of health care costs nationally, progressive state measures including the state’s 2016 passage of a $15 minimum wage law that includes health care workers, enhanced coverages such as the long-term care program that is attracting more New Yorkers, the state’s 2015 takeover of annual increases in Medicaid costs that had been paid by local counties in property taxes.

Those factors drove an overall 32% growth in Medicaid recipients which provided health care to 1.5 million more New Yorkers since 2012. That growth also triggered a surge in the state-and-federal program cost to $77 billion in the current fiscal year, from $54 billion in 2012. The state share of the cost is now $24 billion annually.  

But delaying the payment again could have bigger consequences, the analysts say. “It should be a concern to New Yorkers for multiple reasons,” said David Friedfel, director of state studies at the independent Citizens Budget Commission. “If they roll one payment again, that means they have to make 12 payments this year and they only had enough money for 11 payments last year, so there has to be some adjustment in the budget … it would threaten other areas.”

The commission had called the March delay in payment “an obfuscation of the state’s fiscal condition, allowing the state to avoid addressing a deep and recurring problem.” 

While a three-day delay in a Medicaid payment may seem small, the impact would be greater for the health care recipients, said John Kaehny, of the government watchdog group Reinvent Albany.

“It amounts to the state getting a short-term, interest free loan from hospitals and doctors and whoever else gets paid via Medicaid,” Kaehny said. “It's not the end of the world if the state does this once, but it has the potential to turn into a debt bomb if the state starts doing this regularly as a way to mask overspending on Medicaid.”

The Cuomo administration, however, said it will have a plan to contend with the costs and rejects the dire warnings from independent analysts.

“The sky is not falling because the state delayed a Medicaid payment for three days,” Klopott said. “We are continuing to explore a wide range of options to reduce Medicaid spending while still supporting the high quality of care New Yorkers deserve.”

The “global cap” was created in 2014. The measure was heralded by Cuomo and the Legislature as the way to dramatically limit spikes in Medicaid spending. Health care spending is a major funder of hospitals and has been at the heart of New York’s increased spending for decades. Shortly after entering office in 2011, Cuomo ended the practice of automatic “inflaters” in budget crafting that he blamed for double-digit rises in Medicaid spending. Then he and the Legislature capped Medicaid growth to a 10-year average of the medical cost-price index of about 4 percent, according to the state Division of Budget.

The cap and Cuomo’s other measures to restrain the growth in Medicaid spending saved millions in the early years. Cuomo said his Medicaid Redesign Team of 27 experts in the field tasked with combating waste and fraud in the system is saving billions of dollars through long-term reforms. 

"When the governor took office, Medicaid spending was growing by double digits," said Klopett, Cuomo's spokesman. "The state was able to reign in those costs to stay within the Medicaid Global Cap of 4 percent or less. We continue to monitor Medicaid spending patterns and evaluate year end results for future updates … We are also working on options to reduce spending to stay under the global cap." 

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