A United States government demand that New York pay back at least $1.3 billion is a credit negative for the state, Moody's said recently.
New York state officials disagreed.
In late July the U.S. Centers for Medicare and Medicaid Services told New York that it will demand $1.3 billion for excessive Medicaid spending in state facilities for the developmentally disabled in fiscal 2011. A $1.3 billion repayment would be 1.5% of the fiscal 2015 state operating budget and would be "an unwelcome drain on the state's cash balances," Van Wagner wrote.
CMS may make demands for similar amounts of money for fiscal years 2012 and 2013, Moody's vice president Marcia Van Wagner wrote in a credit outlook.
The Office of the Inspector General of the U.S. Department of Health and Human Services is still reviewing New York's Medicaid funding in fiscal 2012 and 2013, "but given that the same rate structure was in effect in other years, it is reasonable to assume the HHS OIG will find similar, if not larger, disallowances," Van Wagner wrote.
A New York Division of Budget official said the state was in a good position to handle CMS demands, even if they go beyond $1.3 billion.
In the first quarter of the state's current fiscal year, the state got about $4 billion in settlements that it had not anticipated, the official said. Also in the quarter, revenues were better than expected and expenses were less than expected.
The state is appealing the CMS decision, the official said. The appeal will not be resolved until the end of the current fiscal year. The state feels it has a good chance in its appeal.
If it loses, the state would be able to pay the money back over several years and the first payment would not be due until the next fiscal year, he said.
