Need to Reinstate Medicaid Cap

Medicaid is a federal and state program established in 1965 to provide healthcare for people with limited wealth. It is often confused with Medicare, which is a federal program that provides health coverage to people, regardless of wealth, who are 65 and over and to people who are under 65 and who have a disability.

While all states are required to provide Medicaid, states have flexibility as to how the program is managed. Among other things and within certain confines, states have the ability to set income eligibility limits and to determine what types of services are covered under the program. Compared to other states, New York has a very expansive Medicaid program with high income eligibility limits and wide-ranging services. As a result, on a per capita basis, New York has the most expensive Medicaid program in the nation. On an overall spending basis, New York Medicaid program is second in the nation only behind California, a state twice the size of New York. This year, Medicaid spending in New York is expected to reach $74 billion. Of the total NY Medicaid expense 57% is paid for by the federal government, 33% is paid for by the state, and 10% is paid for by the counties and NYC.

In the 2011-12 state fiscal year, Governor Cuomo and the state legislature, facing a tremendous potential increase in Medicaid cost, imposed a global cap on the state’s share of Medicaid spending through the Department of Health. It was envisioned that the cap, based on a rolling average of the medical inflation rate, would slow the rate of state Medicaid costs. Indeed, it did. During the first few years of its implementation, along with various reforms put in place by a Medicaid Redesign Team, per receipt spending dropped even while enrollment, due to Obamacare, surged 31%.

Unfortunately, the global cap has weakened over time because, among other things, various spending exemptions to the cap have grown. One example is a result of the state’s minimum wage hikes that were enacted in 2016. The state has boosted Medicaid payments to reflect providers’ higher labor costs due to the increase in the minimum wage but excluded this additional expense from the cap. That amount is expected to be $1.1 billion for 2020. Also, the state, rightfully so, in 2012 froze the local share of Medicaid costs. This increased cost to the state is also exempt from the cap and has risen to $1.1 billion per year.

Putting aside the exemptions, the biggest blow to the Medicaid global spending cap came in 2018-19 when the Cuomo administration postponed a month’s worth of Medicaid payments from the end of March to early April effectively putting off the expense from one fiscal year to the next. This, which is nothing more than a budgetary gimmick, allowed the state to keep Medicaid spending under the global cap for fiscal year 2018-19. However, it simply puts the expense into this fiscal year and will make it even more difficult for the state to abide by the spending cap this year.

The increase in Medicaid spending has real consequences to the state budget and to the state’s spending priorities. In an excellent report recently published by the Empire Center, which can be found at their Web site, it was noted that if, beginning in 2013, the global Medicaid cap had been applied without exception, the program’s 2019 budget would be $9 billion less than it is now! That is $9 billion that could have been returned to taxpayers, spent on education, or solved some of New York’s many infrastructure’s needs.

Medicaid is an important program that has helped millions get health coverage. In our state, about 6.2 million New Yorkers are enrolled in the program. However, because of the size of the program and because the cost of NY’s program is so much higher than the costs in other states, we must do more to control the spiraling Medicaid costs. Tightening up the Medicaid global cap and not resorting to budget gimmicks would be a good place to start.

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