New York State Plans to Lighten Local Medicaid Burden

New York Gov. Andrew Cuomo is proposing lightening the burden of Medicaid expenses on New York City and the state’s counties.

Fitch Ratings is calling Cuomo’s proposal a credit positive for New York City and the counties.

In most states, localities pay nothing to support Medicaid. However, when Medicaid started in 1966, New York’s then governor, Nelson Rockefeller, required the counties and New York City to contribute 25% of the costs.

The federal government would contribute 50% and the state 25%.

In no other state do localities pay such a high proportion of Medicaid costs, according to Mark LeVigne, deputy director of the New York State Association of Counties.

In the early years of the past decade, New York county contributions were going up by double-digit percentages each year, LeVigne said.

In response to this burden, from fiscal 2005 to fiscal 2008 New York first capped the increase in local contribution for Medicaid to 3.5% and then reduced it to 3% a year in fiscal 2005.

From 1966 to the end of 2012, counties’ annual payments for Medicaid are expected to have increased by 852%, adjusted for inflation and based on figures from the association.

In response to the pressures, Cuomo proposed last week in his executive budget to systematically lower the Medicaid cap to 0%. There would be a 2% increase in fiscal 2014, a 1% increase in fiscal 2015, and a 0% increase in 2016 and onward.

New York’s unusual reliance on local governments to pay for Medicaid “places an inequitable burden on taxpayers in less affluent communities,” said a report on the topic by New York’s Citizens Budget Commission.

Essex County, in northeast New York, is one county struggling with Medicaid payments. It currently spends 43% of its tax levy on Medicaid, said county manager Daniel Palmer. An increase of 2% rather than 3% would save the county $60,000. Given that it is currently paying about $6.7 million, this is “not a huge amount,” Palmer said.

“Right now, [the proposal] doesn’t do a lot of good. … But 10 years from now, it will look like a pretty good deal,” Palmer said.

New York City pays $5.2 billion each year for Medicaid, LaVigne said.

The New York State Association of Counties supports Cuomo’s proposal, he said. They were hoping the state would take over all of Medicaid funding, but Cuomo has said the state cannot do this. However, “this is a good first step for Medicaid finance reform and mandate relief for county property tax payers,” LaVigne said.

The initiatives will save local governments nearly $1.2 billion over a five-year period starting in fiscal 2013, said Morris Peters, spokesman for the New York Division of Budget.

“The budget also proposes a phased takeover of local government administration of the Medicaid program, financed initially by capping local Medicaid administration spending at calendar year 2011 levels,” Peters said.

Cuomo is also proposing pension reforms and changes to funding for preschool special education that would also relieve the fiscal burden on localities.

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