Budget Hole Seen After Loss of Aid
More than $1 Billion in Federal Medicaid Funding Could Be Lost After Costs Were Found Excessive
By Laura Nahmias Wall Street Journal January 25, 2013
New York state is drawing up plans for a budget shortfall almost twice as large as the $1.35 billion gap described by Gov. Andrew Cuomo on Tuesday, as the federal government seeks to reduce how much it pays for health care to some of the state's most severely disabled people.
Health-care officials in Washington and New York are negotiating a plan that would squeeze between $800 million and $1.1 billion out of federal Medicaid spending, potentially blowing a new hole in the annual budget Mr. Cuomo proposed on Tuesday. Much of that money is for the care of about 1,300 developmentally disabled people in nine state-run centers from Staten Island to Rochester, which get about $2 million a year from the federal government for each patient.
The state and federal government agreed on the program's pricing methodology in 1990, but a U.S. Department of Health and Human Services inspector general probe in 2012 found that the amount was excessive. The state has used some of the money each year for general spending, and a Republican-led congressional oversight panel accused New York of "fraud" last year, overcharging Medicaid $15 billion over two decades. New York officials have said the panel's conclusions were wrong but are negotiating a new pricing system.
"Correcting the overpayments to New York's developmental centers and establishing stronger financial safeguards to prevent this problem in the future is a high priority," said Alper Ozinal, a spokesman for the U.S. Centers for Medicare and Medicaid Services, which administers the programs. "We are optimistic that we will come to agreement on the correct rate in the near future and are working with New York through the regular state plan amendment process."
The looming deficit complicates balancing the budget for Mr. Cuomo, who called his plan to close a $1.35 billion deficit "simple" on Tuesday. That amount didn't include the loss of federal Medicaid funding, and New York officials said Thursday they were seeking new federal aid to offset the changes. Mr. Cuomo would have to decide to amend the state's budget to reflect a shortfall if there is no agreement on that money, officials said.
"We are in ongoing discussions with the federal government to resolve this and other revenue issues, and actively evaluating ways to manage any revenue loss," said the state's Medicaid director, Jason Helgerson.
New York's Medicaid program is the nation's most expensive, slated to spend more than $54 billion in the current fiscal
year on the state's poor and disabled. Mr. Cuomo's proposed budget would increase that spending to almost $58 billion - a mix of federal, state and county dollars.
One of the most expensive parts of the program pays for the severely disabled to live in state-run "developmental centers." One is in Brooklyn and two in Queens. The patients - whose diagnoses include severe autism, cerebral palsy and other disorders - live at the centers and receive round-the-clock assistance and training, intensive clinical and direct-care services and therapy.
CMS began investigating how much New York charged for the patients after the Poughkeepsie Journal published a series of articles about the extraordinary expense of the developmental centers.
New York has agreed to give up about $800 million in payments to the developmental centers but is still in talks with CMS over $300 million in additional cuts for other services for disabled people.
The state is considering several options to soften the blow.
One option is to shift some federal aid to other places in the budget. For example, New York is seeking approval to put high-needs patients into managed care, potentially saving money that could be used elsewhere.
The state could also seek federal reimbursement for emergency medical services for some immigrants who aren't yet eligible for Medicaid. New York is eligible to receive up to $1.9 billion per year for those services but hasn't asked the federal government for repayment since 2010. New York is also seeking about $200 million in federal funding to help move patients out of institutionalized settings.
While New York officials said they likely won't have to spend state funds to make up a potential $1.1 billion shortfall, there could be some pain for local health-care providers if all the federal funding they are seeking doesn't materialize.
Those who provide care to the developmentally disabled said they were nervous.
"There's fundamental concern because of how this is going to impact [the state's] developmental disability system as well as the entire state's finances," said Seth Stein, executive director of the Alliance of Long Island Agencies, an association of nonprofit groups that serve people with developmental disabilities. "It's not an insignificant amount of money."
Susan Kent, the president of the Public Employees Federation, said she worried the funding cut could lead to the closure of state-run facilities and lead to more patients being placed in private institutions.