Governor Andrew Cuomo released a $178.6 billion budget proposal Tuesday. In it he detailed plans of how to deal with a $6 billion dollar budget deficit largely caused by increased costs for Medicaid, as well as plans to legalize the adult recreational use of cannabis in New York.
The costs of Medicaid have been rising, partly due to more people receiving health care through the Affordable Care Act, or Obamacare, and increases in the state’s minimum wage, which has led to higher labor costs.
Governor Cuomo, in his budget speech, focused on rising costs in the Medicaid programs administered by local county governments, who pay a share of the program. Since 2013 though, the state has paid for all cost increases incurred by the counties, and the City of New York’s Medicaid programs.
Cuomo says because the state pays for the cost overruns, which he say run in the billions of dollars, the local governments don’t have the incentive to hold the line on costs.
“That’s the blank check syndrome,” Cuomo said.
Cuomo says the state will continue to cap the county government’s Medicaid costs, but he says there will be new conditions on that help. He says counties must stay within the state’s 2% per year property tax cap, and must not increase their year to year spending on Medicaid by over 3%, or the state will no longer help them with the extra costs. He says if counties can limit that growth, he’ll reward them by allowing them to keep a portion of any savings incurred.
The governor says he will reconvene a Medicaid redesign commission to trim $2.5 billion dollars out of the Medicaid budget. But he says the cuts will not have an impact on Medicaid patients, and overall he plans to increase health care spending by 3 percent.
Counties responded cautiously, saying, in a statement, that they are willing to help the governor achieve his goals.
Bill Hammond, health care policy analyst with the conservative leaning fiscal watchdog group the Empire Center, says the factors leading to the Medicaid overspending are not really the fault of local governments.
“Local governments did not cause the rise in Medicaid costs,” Hammond said. “Penalizing them or giving them skin in the game is not an effective way of reducing costs.”
Hammond says it’s unlikely the legislature would agree to penalizing local governments if they don’t hold down costs.
The governor also wants to increase school aid spending by 3 percent, or around $826 million more dollars. Cuomo continues to say that simply adding more money alone is not the answer, and he says he wants to target more of the existing aide to the state’s poorest schools. He predicts it will cause a political battle between richer districts and poorer districts.
“We need the guts to do it,” Cuomo said. “The current formula is designed to achieve political needs, not equity.”
Cuomo says he still plans on staying within his self imposed 2% spending cap, because he plans to limit spending in the rest of the budget to 1% or less.
The governor did not propose any major new revenues to help close the deficit, a financial analysis by his budget office predicts that increases in existing tax revenues will help close the gap.
One plan that could bring in $300 million dollars in additional revenue when fully implemented is the proposed legalization of adult recreational use of marijuana. The governor proposes a 20% tax on retail sales of the drug, along with a wholesale tax of $1 per gram of cannabis “flower”.
Democratic legislative leaders also responded cautiously to the governor’s plan. Senate Leader Andrea Stewart-Cousins says she does not want all the health care decisions though left to a commission.
“There’s no way that we won’t be involved,” Stewart-Cousins said. “Because it’s extremely important, obviously.”
Stewart-Cousins says she supports the governor’s aim to reduce the growth in Medicaid spending without harming patients.
Cuomo also made a case for another pay raise for lawmakers. The second phase of a planned raise has been delayed because a related requirement that lawmakers also forgo most outside income was thrown out in court. The governor say he’d support the next phases of the pay increase if lawmakers agree to release their tax returns.