One of the more over-the-top reactions to the possibility of Medicaid budget cuts in Washington came from Gov. Kathy Hochul: “House Republicans have just voted to rip health care away from up to 1.8 million New Yorkers.”
Don’t let her specific-sounding number fool you. That claim has nothing to do with reality.
Hochul presides over the most expansive and richly funded Medicaid program in the United States, with per-capita spending 82% higher than the national average.
She could undoubtedly find enough waste and inefficiency in its $123 billion budget to make up for a rollback in federal aid without harming vulnerable recipients.
Unfortunately, neither she nor the Legislature have shown any stomach for prudent fiscal management of this massive and vitally important program.
To the contrary, they have made New York a poster child for why Medicaid reform is necessary in Washington.
In her four budget cycles since taking over as governor, Hochul has jacked up the state share of Medicaid by 59% — at a time when the economy was growing, unemployment was low and poverty was stable or declining.
The expansion was largely about politics — a fledgling governor building alliances with the politically influential health-care industry.
Yet under Medicaid’s financing system, federal taxpayers were obliged to match her spree, dollar for dollar.
Last year — following a dubious example set by California — Hochul and the Legislature found a new way to milk the system.
They levied a “tax” on managed care organizations that’s really a way to draw federal aid without putting up state money. By exploiting this loophole, Albany plans to pick Washington’s pockets for $3.7 billion over two years.
Although Medicaid’s original and most important mission is providing care for the disabled and indigent, less and less of its budget is spent directly on patients.
Billions each year are devoted to open-ended operating subsidies for chronically money-losing hospitals, which have lost patients to their competitors but failed to adjust the size of their facilities and staffing.
The state has further used Medicaid to pay off political allies. Over the past decade, a quarter-billion dollars have flowed to an “advanced training initiative” ostensibly meant to improve care in nursing homes. Instead, the money ended up subsidizing health coverage for members of 1199 SEIU, a politically influential health-care union.
The state also doles out discretionary grants for “distressed providers” — including $29 million that went to Somos Community Care, a Bronx medical group whose executives and affiliates had donated $400,000 to Hochul’s 2022 campaign.
Contrary to the traditional purpose of the program, a majority of New York’s recipients today are non-disabled and live above the poverty line. Total enrollment far exceeds the Census Bureau’s estimate of the state’s income-eligible population, suggesting that millions may have too much income to qualify.
In the context of this over-abundance, Hochul’s claim about 1.8 million losing coverage is absurdly exaggerated.
No one actually involved in overseeing the state Medicaid program generated that estimate; it came from the Center for American Progress, a Washington-based group that’s agitating against Medicaid cuts.
It’s based on an assumption that Congress will fully eliminate the feds’ 90% match for enrollees who qualified under the Affordable Care Act (which hasn’t been decided yet) and that all states will respond by yanking their eligibility.
That might be plausible in some states. But New York covered most of the so-called expansion population before the ACA was enacted.
If Hochul and the Legislature aren’t willing to put up the money to keep that commitment, why should taxpayers from other states?
The maximum Medicaid cut on the table in Washington would pare back the federal contribution by $880 billion over the next 10 years.
That’s a lot of money, but it only would slow the growth of that spending, not reduce it from its current level.
New York’s share of a hypothetical $880 billion “cut” over 10 years would be in the range of about $9 billion annually. That would be fiscally challenging, to be sure. But bear in mind that New York’s share of federal Medicaid funding has surged by $17 billion in the past four years.
Even if Washington pulled back $9 billion tomorrow, the state would still be receiving more federal aid than it did in 2023.
If Hochul were really concerned about potential federal cuts, she would start tightening the belt now. Instead, her proposed budget for fiscal 2026 would further increase state Medicaid spending by 17%.
If New York’s Medicaid program goes off a cliff, the blame will belong to her and the Legislature as much as anyone in Washington.
Bill Hammond is the senior fellow for health policy at the Empire Center.
