In Tuesday’s budget proposal, Governor Kathy Hochul proposed two key changes to New York’s Medicaid program, the state’s primary means of providing insurance to low-income New Yorkers, continuing a departure from her predecessor’s approach to Medicaid.
One measure would raise the statutory cap on Medicaid spending, enacted during the first months of Andrew Cuomo’s tenure as governor. Progressives have long pushed for entirely repealing the cap, but some suggested that Hochul’s proposed cap would make that goal less of a priority.
The other would boost the rates that most health care providers are paid for Medicaid enrollees, reversing a 1.5 percent cut that Cuomo imposed in 2020 and providing an additional 1 percent raise. That could lead more providers to offer care to Medicaid enrollees, though it would still leave New York with some of the lowest Medicaid reimbursement rates in the country.
In the State of the State address, delivered on January 5, Hochul also announced an expansion in Medicaid eligibility for senior and disabled New Yorkers, raising the income eligibility level and eliminating an asset cap. Her administration estimated those changes would enable an additional 200,000 New Yorkers to access Medicaid coverage.
The cap on Medicaid spending, formally known as the Medicaid Global Cap, limits the year-to-year growth in Medicaid spending to an amount tied to the overall rate of increase in the cost of medical care. In recent years, that has meant the cap limits Medicaid growth to mid to low single digits—if only on paper.
Overall Medicaid spending increased at rates above the cap during Cuomo’s time in office, in part due to enrollment growth driven by the federal Affordable Care Act and the economic downturn caused by the pandemic.
The discrepancy was swept under the rug by Cuomo’s frequent practice of placing large categories of Medicaid spending outside the cap. That made it a cost control mechanism in name only, argued Bill Hammond, senior fellow for health policy at the right-leaning Empire Center.
“From what I understand of the cap, it has become largely irrelevant,” Hammond said. “Just over one quarter of the state share of the Medicaid budget is outside the cap, and that number has been getting bigger.”
Under the cap’s enforcement mechanism, the state health department commissioner can make unilateral cuts to the Medicaid program if spending exceeds the cap. But since the cap was instituted, the commissioner has never done so.
Still, Assemblymember Richard Gottfried (D-Manhattan), chair of the Assembly health committee, said that the cap has given the governor a powerful tool to exert control over the Medicaid program.
“Moving expenditure outside the cap has been a gimmick that enables the governor to increase spending on things the governor wants, but it still limits what the legislature can do,” he said.
Under Hochul’s proposal, the cap would no longer be tied to the rate of inflation. Instead, it would be based on cost metrics used by the federal Medicaid program which account for the number of people enrolled in Medicaid, as well as factors like age and disability status.
This change would address two central complaints that Medicaid advocates have lodged against the cap in past years: that it does not adjust for increases in enrollment during economic downturns, and that it does not reflect the growing cost of providing care to Medicaid enrollees, an aging population.
Last year, for the first time, both houses of the legislature proposed eliminating the cap. But if Hochul’s proposed reform takes effect, that may be a lower priority.
“Eliminating the cap still makes sense, but is nowhere near as urgent,” Gottfried said. “Adopting a definition of the cap that accounts more for changes in enrollment and costs and intensity of services hits on the major reasons for eliminating the cap.”
Gottfried lauded the increase in the Medicaid payment rate, which the administration estimated will cost $318 million in the next two years, as “long overdue.”
“Medicaid will still not fully compensate providers for the cost of care, but it will bring the program a lot closer to providing full reimbursement,” he said.
Hochul’s announcement of the increase claimed it will help Medicaid providers “compete in the market to attract qualified workers.”
Hammond was skeptical that it would have a noticeable effect on labor markets. “Is she really arguing that this is going to solve the healthcare workforce shortage?” he asked.
As of 2016, New York reimbursed Medicaid providers at one of the lowest rates of any state in the country, leaving many providers unwilling to provide care for Medicaid beneficiaries. That would remain the case even with the planned increases, said Naomi Zewde, a professor of public health at the City University of New York.
“This doesn’t fundamentally change that and still leaves New York as one of the worst Medicaid reimbursement states,” Zewde said.