Gov. Andrew Cuomo released a $178.6 billion budget proposal Tuesday. In it, he detailed plans of how to deal with a $6 billion 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.
Cuomo, in his budget speech, focused on rising costs in the Medicaid programs administered by local county governments, which pay a share of the program. Since 2013, though, the state has paid for all cost increases incurred by the counties and New York City’s Medicaid programs.
The governor said because the state pays for the cost overruns, which he said 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 said the state will continue to cap the county government’s Medicaid costs, but he said there will be new conditions on that help. He said 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 said if counties can limit that growth, he’ll reward them by allowing them to keep a portion of any savings incurred.
The governor said he will reconvene a Medicaid redesign commission to trim $2.5 billion out of the Medicaid budget. But he said the cuts will not have an impact on Medicaid patients, and overall, he plans to increase health care spending by 3%.
Counties responded cautiously, saying in a statement, that they are willing to help the governor achieve his goals.
Bill Hammond, a health care policy analyst with the conservative-leaning fiscal watchdog group the Empire Center, said 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 said it’s unlikely the State Legislature would agree to penalize local governments if they don’t hold down costs.
The governor also wants to increase school aid spending by 3%, or about an additional $826 million. Cuomo continues to say that simply adding more money alone is not the answer, and he said he wants to target more of the existing aid to the state’s poorest schools. He predicted that it would cause a political battle, though, 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 said he still plans to stay 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 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 said she does not want all the health care decisions 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 said she supports the governor’s aim to reduce the growth in Medicaid spending without harming patients.
Assembly Speaker Carl Heastie said that before he decides whether to back the governor’s plan to legalize marijuana, he wants to see a plan to help communities that were adversely affected by the decades-long prohibition on cannabis.
“We have to send a social message that we know that was wrong,” Heastie said. “We have to make those communities whole.”
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 said he’d support the next phases of the pay increase if lawmakers agree to release their tax returns.
Heastie said he thinks financial disclosure forms that are already required are adequate.