How to Fix a $6.1 Billion Budget Hole? Attack Health Care Spending

New York’s Medicaid program costs about $75 billion, with more than $20 billion shouldered by the state, a figure that has increased in recent years as Cuomo and the Legislature approved increases in the minimum wage, enrollment has grown and the governor pushed through an increase in reimbursement rates to health care providers.

All told, Medicaid, a state and federal program that provides health care to low-income residents, accounted for a third of the state’s projected $6.1 billion budget gap.

In releasing his 2021 executive budget proposal, however, Cuomo promised to address that gap by reconvening a Medicaid Redesign Team — first empaneled in 2011, when Cuomo took office and faced a $10 billion projected deficit — to identify $2.5 billion in savings, suggesting that New York City, in particular, would need to rein in costs.

“The Medicaid system has to be fiscally sustainable,” said Cuomo, a third-term Democrat. “And if it is not financially sustainable, then we accomplish nothing.”

The plan quickly drew a sharp rebuke from officials in New York City, which makes up the bulk of the state’s Medicaid recipients and spending.

“Whether it’s moms turning to our public hospitals for lifesaving breast cancer screenings or first graders learning to read in our public schools, New Yorkers should not be held responsible for the state’s Medicaid gap,” said Freddi Goldstein, a spokeswoman for Mayor Bill de Blasio. “We’re ready to fight to protect New Yorkers.”

Specifically, Cuomo’s proposal would reward counties that hold Medicaid cost increases to 3% or less, something that could, for instance, make for more strict rules governing who qualifies for “in-home” care, which has ballooned in recent years.

Conversely, Cuomo’s plan would effectively punish counties that overshoot that bench mark, saying that the state would no longer cover costs over budget by 3%, though the governor insisted that there would be no negative impact on localities or beneficiaries.

The state’s Medicaid costs in New York City grew by 7% in 2019. If there had been a 3% growth cap in place last year, the city would have been on the hook for almost $650 million, Goldstein said.

Cuomo administration officials, however, said that the city is expected to receive a total net benefit of $315 million in the coming budget.

Some analysts said such a cap could be both politically and practically improbable, since health care rates usually rise faster than inflation. The cap could also face opposition from some lawmakers, particularly New York City Democrats who rule the state Assembly and might side with de Blasio.

“The Assembly’s whole theory on this is it’s not a spending problem, it’s a revenue problem,” said Bill Hammond, the director of health policy at the Empire Center, a conservative think tank. “The whole idea that you would use a carrot and stick to control Medicaid costs, I think it’s a nonstarter.”

Asked about the governor’s proposal, Carl E. Heastie, the speaker of the Assembly, said there was concern from local governments about increased costs, though it was somewhat encouraging that they would not share costs “right off the bat.”

But the governor seemed ready to line up supporters: In a joint statement issued shortly after his address, Greater New York Hospital Association and 1199SEIU, the nation’s largest health care union — both major backers of Cuomo — voiced measured support for the plan, saying they would “work closely” with the redesign team.

A little later, Kenneth E. Raske, the hospital association’s president, specifically endorsed the 3% growth rate in a statement — circulated by the governor’s aides — saying it would “ensure that Medicaid survives for generations to come.”

The governor’s proposal for a $178.6 billion budget — one of the nation’s largest — included predictable increases in education, another gargantuan spending category, which would rise by 3% to nearly $30 billion. The governor emphasized that he would focus on curbing the funding disparities between wealthier and poorer schools.

In presenting his agenda two weeks ago, Cuomo had leaned into a variety of low- or no-cost social programs, including ideas from past sessions like legalizing gestational surrogacy and banning Styrofoam containers.

The governor revisited many of these proposals Tuesday as well, in a wide-ranging speech touching on domestic terrorism, infrastructure projects, paid sick leave and importing prescription drugs from Canada.

Cuomo said he would seek to ban repeat sex offenders from the subway and would push for legislation that would ban flavored e-cigarettes. He also proposed leveraging $3 billion in bonds to address environmental issues around the state, including flood risks around Lake Ontario.

The governor also outlined a handful of possible new revenue streams, including closing a loophole surrounding the sale of tobacco products and selling permits to sell alcohol in movie theaters. At the same time, Cuomo would like to reduce the state’s film credit for productions in the state to 25% from 30%, and require more than $1 million to be spent in the city or its suburbs to qualify.

Robert F. Mujica, the governor’s budget director, said there were no new taxes proposed in part because the top 5% of taxpayers already account for about 62% of the state’s personal income tax revenue.

Revenue also played a part in the debate over perhaps the year’s most significant criminal justice proposal: legalizing recreational marijuana use and possession, something that could also create lucrative tax income for the state, though initial projections for the coming fiscal year are only $20 million. Proposed tax rates on cultivation of the plant would range from 14 cents a gram (for “wet,” or freshly cut, marijuana) $1 for per gram of dry cannabis flower.

The governor’s budget needs to be passed by midnight on April 1, when the state’s fiscal year begins. The Legislature will review and present its own budget proposals in coming weeks, but the governor has outsize influence in the process: The Legislature is not paid if the budget is late, and it often becomes the vessel for a raft of non-budget items backed by lawmakers.

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Last year, for instance, the Democrats who control the Legislature used the budget bill to pass a bevy of long-neglected liberal priorities, like reforming cash bail, a panel to enact a public campaign finance system and congestion pricing in Lower Manhattan.

And even as the Legislature began its 2020 session this month, some mop-up from 2019 continued.

On Tuesday, the governor announced a deal to legalize electric scooters and electric bikes less than a month after vetoing a bill that would have done exactly that. Cuomo had safety and implementation concerns, and under the new deal, scooter riders between ages 16 and 18 would be required to wear helmets, according to Assemblywoman Nily Rozic, one of the bill’s sponsors.

By the same token, left-wing activists, who helped propel Democrats to election wins in 2018 and celebrated a series of policy achievements in 2019, came to Albany on Tuesday to demand more spending and higher taxes on the superrich, an idea that Heastie has also floated.

The Working Families Party, a progressive political party, said the state was “not lacking for mega-millionaires who can afford to invest more in our communities’ well-being.”

Mujica, the governor’s budget director, said that although budget officials do not foresee an economic downturn in the next year, a cap on federal deductions that President Donald Trump approved in 2017 was continuing to hurt wealthy high-tax states like New York, which has driven high-income residents to leave the state, hurting the state’s coffers.

“If a few or small portion of them leave, it disproportionately impacts the overall tax base,” Mujica said. “There is income leaving New York state.”

This article originally appeared in The New York Times .