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by REBECCA BELLAN
Cuomo’s plan would force New York City and state counties to rein in Medicaid spending – or pay the price. But do they even have control over Medicaid?
NEW YORK CITY and other municipalities are up in arms over the additional financial burden they might have to assume if Gov. Andrew Cuomo’s 2021 proposed budget passes. In an attempt to close a $6.1 billion gap, Cuomo has proposed shifting Medicaid costs to counties that don’t adhere to criteria that local officials and some experts say are going to be challenging to meet, especially for New York City. Cuomo’s $178 billion plan would have counties limit property tax growth to 2% and Medicaid spending to 3% growth annually. Localities that exceed the property tax cap, even if they stayed within the 3% Medicaid spending cap, will be required to pay for all local Medicaid spending growth from the prior year. Local governments that stay within the property tax cap but exceed the Medicaid spending threshold will be required to pay for any growth over 3%. Additionally, the governor created a new Medicaid Redesign Team to find $2.5 billion in savings within Medicaid by rooting out waste, fraud and abuse in the system.
Last month, state Comptroller Thomas DiNapoli announced that his office could only find nearly $800 million in Medicaid savings, so $2.5 billion seems like a tall order. “The consequences are devastating,” New York City First Deputy Mayor Dean Fuleihan said about the budget proposal. New York City Mayor Bill de Blasio’s administration estimated that the additional Medicaid expenses would cost the city $1.1 billion, although the governor has reiterated that his budget shouldn’t cost localities anything.
Westchester County Executive George Latimer also spoke out against the proposal, saying that additional Medicaid costs would destroy the county’s budget. “Covering this cost will mean that roads, services and most importantly our taxpayers will suffer,” Latimer told state lawmakers. Erie County Executive Mark Poloncarz was similarly pessimistic, stating that this move would result in double-digit property tax hikes and big spending cuts to local programs.
“The very purpose of the Medicaid Redesign Team is to reduce the program’s spending growth by $2.5 billion and return spending growth to 3% while continuing to provide high-quality care to 6 million New Yorkers and ensuring the system remains financially stable for the future,” said Freeman Klopott, spokesman for state Budget Division. “The budget does not include any funding from local governments for Medicaid, though it does project that the measures designed to return them to the search for savings in the program will work and reduce growth by $150 million.”
Medicaid costs are responsible for about $4 billion of the $6.1 billion state budget gap. The Cuomo administration posits that localities have “no financial incentive to control costs” and that they have “failed to adequately monitor their programs, leading to overspending.” Medicaid has been around for 55 years. Traditionally, the federal government funds 50%, the state 25% and local governments 25%. Since 2015, the state has picked up all growth in local Medicaid spending, covering something like 35% of the costs of Medicaid. According to background information provided by Cuomo’s budget division, Medicaid growth is costing the state about $4.5 billion per year, while the costs for counties have remained flat. The goal of this budget, then, is to provide an incentive for the state and the counties to work together again to find savings.
“For years, when (counties) had local share, they would come and find areas of savings, they would identify inefficiencies in the program, and once we took over the program that completely stopped,” said state Budget Director Robert Mujica during a WNYC radio interview. “So as part of our efforts to control the growth in Medicaid spending, we want local governments to reengage with us and help us to control costs. This is not just the state’s responsibility. That’s a false narrative.”
Despite Cuomo’s claims of irresponsible spending, experts hold that it is the state, not localities, that controls the more powerful levers of Medicaid, specifically reimbursement rates and eligibility standards.
CUOMO’S PROPOSED RULES 3% Medicaid spending growth If localities go over, they’d be on the hook for all Medicaid growth over 3%.
2% Property tax growth If localities go over, they’d be on the hook for all Medicaid growth from the previous year.
“Localities have very little control over Medicaid spending, so to shift the burden onto them would be unfair, and in many ways regressive,” said David Friedfel, director of state studies at the Citizens Budget Commission, a research and advocacy organization that supports fiscal restraint. “It’s saying that because you have a lot of people who need Medicaid, people who don’t have a lot of income, that means that you as a locality need to pay more. That’s just the wrong approach, and it’s not how any other state in the country does it.”
That’s why even right-leaning analyses are skeptical that Cuomo’s plan will actually reduce waste. “It’s not really about controlling costs,” said Bill Hammond, director of health policy at the Empire Center for Public Policy, $85 billion in Medicaid spending but has twice the number of enrolled residents.
Normally, enrollment and costs rise fastest during recessions when more people qualify for Medicaid due to declining income. In recent years, thanks to unemployment being at an all-time low, enrollment in New York’s program has been flat. So why are New York’s Medicaid costs so high?
One cause is the state increase in the minimum wage to $15 per hour. “We’re paying people who work in the health care sector better, and that increases costs,” said Jennifer March, executive director of Citizens’ Committee for Children of New York, a nonprofit child advocacy organization. She is concerned that balancing the state budget will negatively impact New York City’s
– BILL HAMMOND, EMPIRE CENTER HEALTH POLICY DIRECTOR
a conservative think tank. “It’s about shifting the blame from Albany to City Hall.”
According to de Blasio’s fiscal year 2021 budget, New York City property tax revenue is expected to reach $31 billion, up from $29.7 billion in 2020. That’s a 4.5% increase in revenue, which would likely breach the 2% cap. (It’s a little unclear because the cap excludes tax revenue from new properties that weren’t on the tax rolls the year before.) New York City has never had to deal with a state-imposed cap on property taxes before, but other localities have been adhering to a 2% ceiling since the law passed in 2011. However, if the economy slows down or enters a recession, sales tax revenues will begin to decrease, which will put pressure on localities to override the tax cap.
Medicaid spending growth outside New York City has also been slower, according to state Department of Health data on Medicaid spending, so other counties would typically have a better chance on average to stay under the 3% spending increase limit. Statewide, the average Medicaid spending growth rate from fiscal year 2018 to fiscal year 2019 was 5.6%. New York City’s was 7%.
Medicaid costs in New York totaled nearly $75 billion in fiscal year 2018, with the state chipping in over $20 billion, counties paying about $7 billion collectively and the rest coming from the federal government. It’s the second costliest Medicaid program in the country, after California, which had neediest children both immediately and in the long run. “You can’t have it both ways,” March said. “We are a state that committed to providing insurance to people and committed to making sure people make liveable wages. Costs are going to increase.”
A $1.7 billion chunk of the $4 billion Medicaid gap comes from last year’s Medicaid bill that was rolled over into this year when Cuomo realized that total Medicaid spending would be higher than budgeted, according to Friedfel.
Sharp enrollment hikes in expensive long-term care programs are another major culprit, specifically personal care services, which involve at-home assistance with nonmedical care, like help getting dressed, going to the bathroom or making meals. In New York City alone, costs in this program shot up 14% in just one year.
In other states, enrollment in this program is discretionary. Slots are limited and they’re targeted to the neediest people. “New York has made it an entitlement,” Hammond said. “So if you meet the minimum threshold, both financially and medically, you get as many hours of personal care as somebody approves for you. Demographics alone don’t explain what’s going on. The rate of enrollment in the personal care program is growing about 17 times faster than the growth rate of the over-65 population.”
Hammond and Friedfel agree that there’s room to control costs by looking at what has driven such a rise in personal care services. “In New York City, there’s 1,800 people who run the Medicaid program,” Cuomo said during a press conference on Feb. 7. “They do the evaluation as to what service you should get: nursing home, home care. They make the determination on how much home care: two hours, four hours, six hours, 24 hours. They then reevaluate that.”
“Cuts to personal care services would be very detrimental to our clients’ health because they wouldn’t have the choice of providers,” said Susan McCormack, director of consumer directed personal assistance services at the Long Island Center for Independent Living. McCormack just went to Albany to lobby for the continuation of long-term care services. “The last thing we want to think about is that if somebody can’t get the services they need, it would mean either hospitalization or institutionalization. So many people can’t get access to services they need without having somebody in the home. We all understand the Medicaid budget needs to be brought under control, but I don’t think attacking personal care is the way to go.”
Advocates predict that localities will fight this budget proposal by holding press conferences and lobbying in Albany. “I’m assuming that the city of New York, the counties and other advocates are going to push back on the cost shifts to localities because it will impede their abilities to actually serve, in our case, the poorest New Yorkers,” March said.
The governor has 30 days from the date he unveiled the proposal to make amendments, and then the state Legislature will present its own budget.
“The Senate majority will be advancing our one-house budget which reflects our budget priorities,” said Gary Ginsburg, Senate Democratic spokesman. “We will continue to fight for a budget that provides essential government services and helps reduce the burdens on struggling New York families and localities.”
The state Senate’s one-house budget resolution includes a boost in aid to municipalities. “As a former county legislator and town councilman, I understand the struggles many municipalities face in providing top-quality services without burdening taxpayers, and I will continue fighting to ensure municipalities receive their fair share from Albany,” said state Sen. James Gaughran, a Democrat from Long Island and the chairman of the Local Government Committee. It’s unlikely that the budget proposal will pass the Legislature as it is now. “We’re in the 10th year of an economic expansion,” Friedfel said. “The state shouldn’t be in a position where they have to defer payments or push costs onto localities.” ■ Rebecca Bellan is a journalist who covers cities, culture, innovation, and technology.
Albany: NEW YORKERS ARE SICK OF PBMS.
Protect patients, taxpayers, and community pharmacies from prescription drug middlemen in 2020.
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DIANE SAVINO
STATE SENATOR
MEDICAL MARIJUANA AND PHYSICIAN-ASSISTED SUICIDE
You’ve been pushing the Medical Aid in Dying Act for at least four years. Is this finally the year that it passes? There’s definitely more interest in it. Compassion & Choices, who are doing the advocacy work, they’re doing a really good job addressing some of the concerns that members have. But this is a very complicated issue because it’s very sensitive. Nobody likes to talk about death. Period. They don’t like to admit that it’s going to happen to anyone. Right now it’s not a budget issue. Everyone is like, “Oh, come back and talk to me later.” But I have seen a difference in the way some of the members are looking at it. One, they’re not running away from me anymore! That’s always good. But I couldn’t tell you whether I think it happens this year. I hope so.
You were also the lead sponsor on legalizing medical marijuana.
Are you interested in expanding or improving that program this year? Yes! Absolutely. I’m not trying to disrupt the negotiations around adult use, but I’m not going to sit back and wait till the last minute because patients in this state are waiting too long, paying too much, and it’s unfair to them to get caught up in a political debate about whether or not we should do adult use marijuana. We can walk and chew gum at the same time. We have an existing program that isn’t meeting the needs of patients because it is too narrow, too small and too expensive. We have to fix that.
You also have a bill to legalize medical marijuana for animals. Are the current
RICHARD GOTTFRIED CHAIRMAN, ASSEMBLY HEALTH COMMITTEE
REGULATING PHARMACY BENEFIT MANAGERS
How do pharmacy benefit managers fit into the prescription drug supply chain? A PBM is an entity that administers prescription drug benefits in that they decide what drugs to cover. They take money from manufacturers. They take money from drugstores and get paid money by the insurance.
So why do they need to be regulated? Our bill is very carefully written. It doesn’t say anything about what an insurance company can do. It only says what a PBM can do and it says something like you can’t steal from your clients. You have to disclose what you’re doing to your client. You have to use care and professionalism – all words that would govern a lawyer.
So what does this all have to do with something called ERISA? The Employee Retirement Income Security Act is federal legislation that prohibits states from passing any law that relates to any employment benefit plan. The governor has argued that because our bill tells a PBM how to behave, that therefore we are violating ERISA. That’s not a totally wacko thought in that there are a lot of people who believe that. I think it’s a completely erroneous line of thought. For example, if I tried to represent an ERISA plan in court, and I wasn’t licensed to practice law, New York wouldn’t be preempted from saying, “If veterinary medicines not enough? It’s like people! If you have an animal and they require pain medication, they give them the same medication they give you! It’s just smaller doses. So, if it works for you, then why wouldn’t it work for pets? Other states have done it. If my cat requires oxycontin because he’s got cancer, there’s not special oxycontin for cats. It’s the same stuff they give you or me.
Staten Island is getting its first cannabis dispensary. You’ve said that people have turned to the black market if they’re too far from a dispensary. Do you see that as playing any role in the opioid crisis? Yes, absolutely. In the past five years we’ve seen an incredibly sophisticated underground illicit market where they deliver stuff to your house that looks remarkably like medical products. That’s what our competition is on the medical side, if we don’t handle the adult use. If not, we’re just going to be losing all of our money, it’s going to bleed back into the black market. And nobody feels bad, nobody sneaks into a back alley to buy marijuana anymore. You sit at home, you open a weed app, somebody brings it to your house.
you want to practice law for anybody, you need a license.”
The governor also had concerns about how the legislation would affect administrative costs, undermine market competition and invite scrutiny from general agencies like the U.S. Department of Justice. What is your take? The duties are to use reasonable care, professionalism and act in the best interest of your client. If that is an unfair burden, that is pretty scary. PBMs get big rebates from a drug company, don’t tell their clients, and instead pocket the money. I don’t understand how cracking down on that is anticompetitive and why that would offend the (Federal Trade Commission). The extent to which the governor tried to really gut the bill is pretty strange.
What comes next for the bill? We are reintroducing the bill with technical changes. We will work to pass the bill again and try to get the governor to talk with us. There will also be more advocacy by consumer groups and pharmacists. That may help things get worked out better.
Why replace it with healthcare run by Albany bureaucrats? NEW YORK IS ON THE VERGE OF UNIVERSAL HEALTH COVERAGE
The state has lowered its uninsured rate to under 5%, the lowest level in history. The New York Health Act would mean:
• Staggering tax increases: $250 billion in new taxes
• Delays in healthcare: 39 weeks for a hip or knee replacement
• Devastating job losses: Nearly 2 million jobs at risk—worse than the 2008 recession
• Government-run healthcare: Lose your private health insurance—let Albany decide your benefits
LET’S FIX WHAT IS BROKEN INSTEAD OF BLOWING UP THE ENTIRE SYSTEM AND REPLACING IT WITH AN EVEN MORE EXPENSIVE, EXPERIMENTAL, GOVERNMENT-RUN SYSTEM.
Members of the Realities of Single Payer coalition support universal healthcare coverage for all New Yorkers but believe Single Payer is the wrong approach.
Adana Veterinary Clinic Albany Associates in Cardiology American Property Casualty Insurance Association Associated General Contractors of New York State Benefit Design Services Corporation Big I New York Bond Benefits Consulting, Inc Buffalo Niagara Partnership The Business Council of New York State, Inc. Business Council of Westchester C & D Assembly, Inc. Canfield Machine & Tool LLC CAP COM Federal Credit Union Capital Region Chamber of Commerce Centers Health Care Century Benefits Group, Inc. Chemung County Chamber of Commerce Columbian Mutual Life Insurance Company Consiliarium Group, LLC Corning Area Chamber of Commerce Crisafulli Bros. Plumbing & Heating Contractors, Inc. Critical Link, LLC DiVirgilio Benefit Resources, LLC Dupli Envelope Eastwood Litho Employer Alliance EMS Financial Services, LLC EP Nevins Insurance Agency, Inc. FICS Incorporated Food Industry Alliance of NYS, Inc. Goetzmann & Associates Greater Binghamton Chamber of Commerce Greater Central NY Association of Health Underwriters Greater Niagara Frontier NY Association of Health Underwriters Greater Rochester Chamber of Commerce Hart Rifle Barrels, Inc. Health Options NY Hematology Oncology Associates of Central NY Hilliard Corporation HMS Infitec, Inc. Kaatirondack Benefit Planning, Inc. Lawley Insurance Long Island Association Matt Industries Merchants Insurance Group Mohawk Valley EDGE Multivista CNY, LLC National Association of Health Underwriters National Federation of Independent Businesses New York City Hispanic Chamber of Commerce New York City Uniformed Sanitation Officers Association New York Health Plan Association New York State Association of Health Underwriters NYS Building & Construction Trades Council NYS Conference of Blue Cross and Blue Shield Plans NYS Hospitality & Tourism Association NYS Professional Fire Fighters Association NYS Society of Plastic Surgeons North Country Chamber of Commerce Northeast Dairy Foods Association, Inc. Northern Tier Contracting Inc. Northeastern NY Association of Health Underwriters Northwest Bank NYC-LI-Lower Hudson Valley Association of Health Underwriters Partnership for New York City
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