Gov. Kathy Hochul had one of the most outspoken reactions to the possibility of Medicaid budget cuts in Washington: “House Republicans have just voted to rip health care away from up to 1.8 million New Yorkers.”
Do not be fooled by her specific-sounding number. That claim is not based on reality.
Hochul oversees the most expansive and well-funded Medicaid program in the United States, with per-capita spending 82% higher than the national average.
She could undoubtedly find enough waste and inefficiency in its $123 billion budget to compensate for a reduction in federal aid without negatively impacting vulnerable recipients.
Unfortunately, neither she nor the Legislature have demonstrated the stomach for prudent fiscal management of this massive and critical program.
On the contrary, they have made New York the poster child for why Medicaid reform is required in Washington.
Hochul has increased the state’s Medicaid share by 59% in four budget cycles since becoming governor, despite the fact that the economy was growing, unemployment was low, and poverty was stable or declining.
The expansion was primarily about politics, with a new governor forging alliances with the politically influential health-care industry.
However, the Medicaid financing system required federal taxpayers to match her spending spree dollar for dollar.
Following California’s dubious example last year, Hochul and the Legislature devised a new way to milk the system.
They imposed a “tax” on managed care organizations, which is essentially a way to receive federal aid without putting up state funds. Albany intends to steal $3.7 billion from Washington over the next two years by taking advantage of this loophole.
Although Medicaid’s original and most important mission is to provide care to the disabled and impoverished, less and less of its budget is spent directly on patients.
Every year, billions of dollars are spent on open-ended operating subsidies for chronically underperforming hospitals that have lost patients to competitors but have failed to adjust the size of their facilities or staffing.
The state has also used Medicaid to pay off political allies. Over the last decade, a quarter-billion dollars have flowed into a “advanced training initiative” ostensibly aimed at improving nursing care. Instead, the funds were used to subsidize health insurance for members of the 1199 SEIU, a politically influential health-care union.
The state also awards discretionary grants to “distressed providers,” including $29 million to Somos Community Care, a Bronx medical group whose executives and affiliates contributed $400,000 to Hochul’s 2022 campaign.
Contrary to the program’s traditional purpose, the majority of New York recipients today are not disabled and live above the poverty line. Total enrollment far exceeds the Census Bureau’s estimate of the state’s income-eligible population, implying that millions may earn too much to qualify.
In light of this overabundance, Hochul’s claim about 1.8 million people losing coverage is absurdly exaggerated.
That estimate was generated by the Center for American Progress, a Washington-based group opposed to Medicaid cuts, rather than anyone involved in overseeing the state Medicaid program.
It is based on the assumption that Congress will completely eliminate the federal government’s 90% match for enrollees who qualified under the Affordable Care Act (which has yet to be decided), and that all states will respond by removing their eligibility.
That could be plausible in some states. However, New York covered the majority of the so-called expansion population before the ACA was implemented.
If Hochul and the Legislature are unwilling to make the necessary financial commitment, why should taxpayers from other states?
The maximum Medicaid cut proposed in Washington would reduce the federal contribution by $880 billion over the next decade.
That is a lot of money, but it would only slow the growth of that spending, not lower it from its current level.
New York’s share of a hypothetical $880 billion “cut” over ten years would be approximately $9 billion per year. That would undoubtedly be financially challenging. But keep in mind that New York’s share of federal Medicaid funding has increased by $17 billion over the last four years.
Even if Washington withdrew $9 billion tomorrow, the state would still receive more federal funds than it did in 2023.
If Hochul was truly concerned about potential federal cuts, she would begin tightening her belt immediately. Instead, her proposed budget for fiscal year 2026 would increase state Medicaid spending by 17%.
If New York’s Medicaid program collapses, she and the Legislature will bear equal responsibility as anyone in Washington.
