No fiscal justification for Cuomo’s Medicaid cuts

In the latest episode of “Petty politics with Andrew Cuomo,” it appears that the final hurdle to an agreement on the state budget is the governor’s insistence that New York City shoulder a significant portion of Medicaid funding. Cuomo’s basic argument is that city residents take up the majority of Medicaid spending, and therefore should pick up part of the tab.

“It’s human nature, but when you no longer have any economic stake, are you still as judicious?” Cuomo told reporters on Tuesday. “Because now you’re basically writing checks on the state’s account.”

Well, yes governor, that’s generally how Medicaid programs work. Medicaid costs are not designed to flow through localities. Virtually every other state in the nation funds Medicaid, regardless of which municipalities or counties rely on the program the most.

“The state essentially does the overwhelming majority of the administration of Medicaid, so the city and the other localities don’t set parameters by which people can apply and receive benefits,” said David Friedfel, the director of state studies at the Citizens Budget Commission. “The localities pay a share, but they don’t have the power to clamp down on all of the costs.”

Simply put, there is no fiscal justification for the Medicaid cuts Cuomo is proposing, and a harder look at the numbers paints that picture even more clearly.

Putting aside the governor’s well-documented proclivity for undermining New York City Mayor Bill de Blasio, Friedfel notes that the governor’s $154 billion executive budget would not have fallen under the self-imposed 2 percent spending cap without the proposed cost shifts to the city. Those shifts included not only the Medicaid costs, but changes to the city’s STAR Personal Income Tax rebate, and cuts in the state funding of CUNY – the latter of which is apparently now off the table.

But even if we are abiding by Cuomo’s faulty premise that the city has no stake in finding Medicaid efficiencies, the way the Medicaid shifts are structured provide no incentive for the city to control its spending. There is no language in the executive budget proposal that would provide the city with any percentage of the Medicaid savings. Instead, the city would pay a set amount for Medicaid based on past expenses, not current costs. And there would be steep increase in future Medicaid spending beyond the additional $180 million the city would have to budget for this year – with a large spike to $476 million the next fiscal year and an increase of $130 million every year after.

The governor has earned widespread praise for the Medicaid redesign, winning the state an increase in federal funding and a more responsible model for controlling the local share growth of the program. Shifting Medicaid costs to New York City in a naked attempt at political one-upsmanship under the guise of fiscal responsibility is an exercise in poor budgeting.