Medicaid Legislation Would Cut County Tax Rate In Half

The state Senate has approved legislation that could cut county taxes in half — though the legislation faces the tough task of approval in the state Assembly and an unlikely signature from Gov. Andrew Cuomo.

The legislation, S.8411 and S. 8412, was sponsored by state Sen. Catharine Young, R-Olean, and would require the state to assume the local share of Medicaid payments. S.8411 reduces the local Medicaid contribution by 20 percent a year over five years for all counties outside New York City. The counties must then enact dollar-for-dollar reductions in property taxes, resulting in direct taxpayer savings of up to $451 million in the first year alone, and $2.3 billion when fully effective. S.8412 reduces counties’ contributions by 10 percent a year over 10 years and again requires that $2.3 billion in cumulative savings be returned dollar-for-dollar back to property taxpayers. In New York City, the contribution would also be reduced by up to $2.3 billion and returned to taxpayers in the form of a dollar-for-dollar reduction in the personal income tax. In addition, the city would be required to enact a two-percent property tax cap similar to what is already in effect in the rest of the state and which has already saved taxpayers $23 billion to date.

“Hardworking families, seniors and residents across the state continue to flee New York in record numbers to escape the oppressive property tax burden that is draining their wallets and preventing our state from being more economically competitive,” Sen. Young said. “Providing significant relief starts by having the state assume the local share of Medicaid costs, a move which will result in billions of dollars in direct, annual property tax savings for residents and businesses. New York is one of the few states in the nation that requires localities to assume a portion of Medicaid costs. Our local government budgets are straining under the weight of this mandate, which creates upward pressure on property taxes. County governments deserve better control over their own finances, and this bill represents a major step forward in that regard. State government can absorb these costs much easier than localities.”

County Executive George Borrello supports the legislation. Each week, Chautauqua County sends the state a $600,000 check to pay the county’s share of the Medicaid program.

“It accounts for about 50 percent of our property tax rate,” Borrello said. “That’s the case for many counties around the state. In some counties it’s higher. In the case of Erie County, 100 percent of its property tax rate goes to the local share of Medicaid. Literally, in Erie County, everything else they do is funded by the sales tax or a fee. The property tax goes almost solely to pay the local share of Medicaid. In the case of Chautauqua County it’s about 50 percent.”

Borrello said the county would have no issues with the dollar-for-dollar savings being returned to county taxpayers as long as the state didn’t begin keeping sales taxes or create another way to take money from the counties. One reason a signature from the governor is unlikely to happen even if Young’s legislation is approved in the Assembly is Cuomo’s reaction when U.S. Reps. Chris Collins and John Faso proposed a bill that eliminate a county share of Medicaid during discussions on a federal health care bill in 2017. Cuomo said the state would create a “Faso-Collins Federal Tax” to make up the difference.

“I believe Sen. Young and Andy Goodell would be champions for this as long as there is no other clawback somewhere else,” Borrello said. “There could be a trap door in the sense that the legislature passes this and then there could be an executive action that could cost us money somewhere else. Absent that we’d be able to get a 50 percent cut in the property tax rate.”

New York’s Medicaid program is the largest in the United States, spending more money each year than California and Texas combined. While Cuomo threatened hefty tax increases in the wake of the Faso-Collins, there was little mention of finding ways to cut Medicaid spending to bring costs down. And, a recent audit by Comptroller Thomas DiNapoli’s office uncovered the latest instance of improperly spent money within the Medicaid program. DiNapoli’s office found about $2.6 million in inappropriate payments over five years to providers that failed to use modifier codes properly. Roughly $2 million of the inappropriate payments were inappropriate because the cost of services was already included in Medicaid’s payment for surgical procedures but were billed separately under an incorrect code in the payment system. Another $517,492 was similarly inappropriately billed for post-operative services that were already included in the cost of the patient’s surgery but were coded incorrectly and thus billed twice.

In the past several months, DiNapoli’s office found $13.6 million in state Medicaid spending that could have been covered under the federal Medicare program; $7.6 million after finding Medicaid had paid for transportation services it shouldn’t have; and $21.4 million in payments for recipients no longer enrolled in Medicaid (though much of that money was recovered after the audit). Borrello said removing the county money from the Medicaid system may provide an incentive for those in charge of Medicaid to reform the program.

“One of the issues with this program is it’s the most expensive Medicaid program in the nation,” Borrello said. “That’s largely due to the fact they don’t have to pay for it themselves in Albany. They pay for a portion of it. They really never look at reforming it in any meaningful way because they don’t have to. This legislation would force Albany, in particular the governor and the executive branch, to take a closer look at waste and fraud that goes on in the Medicaid program because they wouldn’t have the funding that allows this bloated, corrupt Medicaid program continue on as is.”

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