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State health care costs rise amid report of pay-to-play allegations

New York State

New York's Medicaid budget is growing at a faster rate than the state can currently afford. That comes as a published report alleges a potential pay-to-play arrangement between a large hospital association and Gov. Andrew Cuomo's 2018 re-election campaign.

The report in theNew York Times said Cuomo's campaign asked the Greater New York Hospital Association to make a donation to the state Democratic Party, which the governor controls, during Cuomo's 2018 re-election campaign. The group gave $1 million, twice as much as it had donated to any political campaign for over a decade.

Shortly afterward, the Times reported, Cuomo's budget office authorized the first increase in Medicaid reimbursement rates since 2008, worth around $140 million.

The governor's senior adviser, Rich Azzopardi, said there's no connection between the two events.

"Yes, health care costs are increasing, and that is not a newsflash, but rather a well-documented national phenomenon that has nothing to do with politics, the weather or religion," Azzopardi said. "And the only news is how low our increases have been: 1.5% and 2% after flat funding for more than eight years."

Azzopardi said the reason the state finally raised what's known as the hospital trend factor for the first time in over a decade is increased labor costs.

Hikes to the minimum wage, as well as raises in public worker union contracts, have resulted in many health care workers earning more money, and hospitals and nursing homes have asked Medicaid for more money to help pay them. In addition, the state has added 2 million more New Yorkers to government-run health care programs under the Affordable Care Act.

The watchdog group Citizens Budget Commission said while it can't comment on any pay-to-play allegations, the group's David Friedfel agrees that the Medicaid budget is under a lot of pressure right now because the labor costs and other issues. He said that's a concern.

"At a certain point, you have to pay the piper," Friedfel said. "The bills are due and they have to be paid."

Citizens Budget Commission estimates the Medicaid shortfall could rise to over $7 billion over the next four years, if nothing is done.

Earlier this year, another fiscal watchdog group, the Empire Center, found that Cuomo's budget office had delayed a $1.7 billion Medicaid payment from the previous fiscal year into the current fiscal year. Because of the delay, the governor was able to keep within a self-imposed 2% yearly spending cap.

The Empire Center's health policy analyst, Bill Hammond, said at the time it was a fiscal sleight of hand.

"It's definitely a gimmick," Hammond said. "It's only three days, but it moves this big number from the balance sheet from one fiscal year to the balance sheet of another fiscal year." 

Hammond was traveling and unavailable for further comment Thursday.

The governor's budget office has not ruled out delaying the final Medicaid payment for the current fiscal year into next year, as a way of avoiding another shortfall.

There's also news that a deal with the health insurance company Fidelis Care, that would have funded $2 billion of state health care spending, is under reviewby the federal Health and Human Services Department.

Fidelis, run by the Catholic Church and serving 1.7 million low-income New Yorkers, was sold to a private company for $3.75 billion. The state of New York took $2 billion from that sale, reasoning that the state and its taxpayers had helped Fidelis pay for its health care services through the Medicaid program, so the state should share in the profits. The governor's budget office is counting on that money to help pay for health care.

Friedfel said his group generally frowns on arrangements like the one with Fidelis, which is essentially a one-shot revenue raiser.

"The impact could be significant on the state's financial plan," Friedfel said.

Azzopardi, the governor's adviser, said the Fidelis review is nothing to worry about, and he expects it to be approved.

Karen DeWitt is Capitol Bureau Chief for New York State Public Radio, a network of 10 public radio stations in New York State. WBFO listeners are accustomed to hearing DeWitt’s insightful coverage throughout the day, including expanded reports on Morning Edition.
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