State Medicaid cost shift could impact NYC by up to $1.1 billion

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New York City could face more than $1 billion of additional costs if the New York State budget is approved as it stands, according to First Deputy Mayor Dean Fuleihan.

“We have been looking through the state budget numbers and it’s now clear that the potential cost shift to the city could be up upwards of $1.1 billion,” he said.

Speaking with other members of the de Blasio administration on a conference call Wednesday, Fuleihan said the entire increase in the state-run program could be borne by the city if Gov. Andrew Cuomo’s budget is approved.

“We, along with the City Council, are talking to members of the state legislators in both houses. And we are making our concerns known,” he said. “This is not just a New York City problem — it affects local governments all across the State of New York.”
Cuomo in his $178 billion fiscal 2021 budget proposal said local governments must stay within a 2% property tax cap and limit Medicaid increases to 3%.

The state faces a $6.1 billion shortfall tied largely to a $4 billion increase in Medicaid costs. The city receives about $2 billion a year from the state in Medicaid reimbursement.

The governor said a locality that exceeds cost limits will be liable for its Medicaid cost hike. By contrast, the state would reimburse one-fourth of containment below 3%. The Medicaid spending cap would also reward localities for cost cutting — if spending is kept under 3%, the state would provide it with 25% of the savings.

The city says that by capping growth at 3% and shifting the rest to localities amounts to imposing a cut. The state's growth in the Medicaid costs in the city was 7% last year.

Earlier this month, Mayor Bill de Blasio unveiled his $95.3 billion fiscal 2021 budget plan, which detailed how the state’s projected $6 billion budget deficit could impact the city.

Fuleihan said that in addition to the cost shift to the city there was a second proposal for a soon-to-be-formed state Medicaid Redesign Team. Cuomo created the MRT in his budget message and charged it with identifying cost-containment measures aimed at finding $2.5 billion in budget savings.

This could possibly hit New York City’s Health + Hospitals, which is a major services provider to Medicaid recipients.

“That’s a process that hasn’t even begun,” Fuleihan said of the MRT's formation. “We don’t even know who the members are yet.”

The city is one of the largest issuers of municipal debt in the United States. As of the end of the second quarter of fiscal 2020, the city had about $38 billion of general obligation debt outstanding. That's not counting the various city authorities that issue debt. Moody’s Investors Service rated the city's GOs Aa1 while S&P Global Ratings and Fitch Ratings rate them AA. All three agencies assign stable outlooks to the GOs.

But city officials stressed it was not just money being affected by these changes, it was people’s lives.

“Behind these numbers both big and small are real live people. We want to help them and I know the state wants to help them, too,” said Steve Banks, commissioner of the city’s Department of Social Services.

Fuleihan agreed.

“I think we’ve made the point that this an incredibly large amount of money in a program that is completely run by the state,” he said. “And there are serious consequences — consequences to Health + Hospitals and to the people who rely on Medicaid. This is not what we stand for and it’s not what the state stands for.”

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Budgets State budgets City of New York, NY State of New York New York City Health + Hospitals