In spite of a growing and healthy economy, New York is facing a multibillion-dollar budget shortfall, and concerned citizens deserve a straight accounting of what went wrong.
Gov. Andrew Cuomo has blamed a surge in Medicaid spending—but that was, at most, a contributing factor. What actually threw the budget out of balance was Cuomo’s own conduct over the past 18 months.
Instead of properly managing Medicaid, the state’s biggest and most important program, he subverted his own reforms, whitewashed official reports, withheld information from the Legislature and the public, flouted his constitutional duties and, worst of all, secretly delayed $1.7 billion in payments from one fiscal year to the next.
Those knowing and deliberate actions led directly to the state’s worst deficits since the Great Recession, including a $4 billion shortfall in the current budget and a projected gap of $6.1 billion for the fiscal year beginning April 1.
The blame for resulting crisis—and whatever pain is necessary to resolve it—belongs entirely to Cuomo and his administration.
New York’s version of Medicaid, a state-federal health plan for the poor and disabled, covers 6.5 million people. It’s notoriously unwieldy and expensive, with the highest per-capita spending rate of any state.
Cuomo pushed through significant reforms early in his term, including a “global cap” that limited the growth of Medicaid spending based on the medical inflation rate. His more recent management of the program, however, has been deceptive and reckless.
A big wrong turn came in the summer of 2018, when Medicaid spending began running hundreds of millions of dollars above expectations. Under the global cap law, the administration was obliged to issue a public warning about those overages and, if necessary, develop a cost-cutting plan to restore balance. The governor and his team did neither.
To the contrary, Cuomo went out of his way to make things worse. In a surprise order issued just before Election Day, his administration increased Medicaid rates for hospitals and nursing homes. That costly decision came shortly after an industry lobbying group, the Greater New York Hospital Association, donated more than $1 million to the state Democratic Party, which is under the governor’s sway.
Meanwhile, quarterly budget updates were showing that state Medicaid spending exceeded its cash-flow projections by $199 million through June 2018, $762 million through September, and $1.4 billion through December. Yet officials left the full-year spending total virtually unchanged, falsely signaling that they had the situation under control and expected to hit their budgeted targets.
Cuomo’s next opportunity to rectify the imbalance came during the state’s annual budget preparations. But the initial proposal he released in January—which the state Constitution requires to be balanced—pretended that the burgeoning deficit did not exist. It thus recommended an allocation for Medicaid that officials knew, or should have known, was much too low.
Cuomo and his team maintained their silence throughout the budget-making process, going so far as to postpone a month’s worth of Medicaid payments from late March to early April without public notice.
Thus, the Assembly and Senate debated and approved a budget that—unbeknownst to almost anyone—was $1.7 billion out of balance from the moment it passed. Plus, it failed to account for the higher rate of spending in the previous year, guaranteeing the deficit would mushroom further.
The administration finally disclosed the delay with a cryptic note buried in a budget report published in May, two months after the fact, which didn’t attract wide attention until July. The note confessed to having cooked Medicaid’s books in a similar manner, on a smaller scale, since 2015.
Even so, Cuomo and his budget aides did not come fully clean. They claimed that the payment delay “was done to limit spending to the global cap,” which was the opposite of its actual effect. They also failed to quantify the deficit they had manufactured or lay out a plan for correcting it.
The administration’s latest official statement puts the current-year deficit at $4 billion, a stunning 16 percent of the budgeted amount, which Cuomo says he will resolve by permanently “rescheduling” $2.2 billion in payments from March to April—a gimmicky move that sets a terrible precedent—and making $1.8 billion in yet-to-be-identified cuts.
Still, the misinformation keeps coming. Cuomo and his aides have recently attributed the crunch to changing federal aid formulas, the state’s rising minimum wage and increasing demand for long-term care—all of which is beside the point. Those long-term trends could and should have been addressed in the state budget, if only Cuomo hadn’t actively buried the truth for so long.
For its part, the Legislature so far has shown little grasp of what went wrong, let alone the stomach for holding Cuomo accountable. Leading Democrats are already bandying the idea of tax hikes to fill the hole, when the problem is entirely due to out-of-control spending rather than any shortage of revenue.
Closing the Medicaid deficit without undue harm to vulnerable recipients will require good-faith action based on an honest debate. Cuomo misled the state into this mess. He should stop trying to mislead his way out of it.
Bill Hammond is health policy director of the Empire Center for Public Policy, a nonpartisan think tank based in Albany.