Medicaid Takeover Is Complicated Business

A couple of months ago, the state Senate approved legislation that would have cut county property taxes in half by removing the burden of Medicaid payments from counties.

Sponsored by state Sen. Catharine Young, R-Olean, the legislation was fairly straightforward. Two companion pieces of legislation would have required the state to assume the local share of Medicaid payments by cutting the local Medicaid contribution by 20 percent a year over five years for all counties outside New York City, with the counties then required to enact a dollar-for-dollar decrease in their property taxes.

The legislation was largely symbolic; the legislation went nowhere in the state Assembly and wasn’t likely to have been signed by Gov. Andrew Cuomo given the state’s somewhat shaky financial status; Thomas DiNapoli, state comptroller, recently reported the state has far less in its reserve funds than is recommended.

Outside of New York City, Chautauqua County would likely be one of the biggest beneficiaries of a Medicaid takeover. Medicaid costs, when calculated on a basis of cost per $1,000 of personal income, ranges from $1.68 for Putnam County residents to $6.83 for Chautauqua County residents, while Chautauqua County pays the fifth-highest cost per capita for Medicaid in the entire state, according to an Empire Center for New York State Policy report released earlier this week.

“The distribution of Medicaid costs among local governments is generally regressive, in that counties with proportionally higher Medicaid payments also tend to have higher poverty rates and lower median incomes,” the report explained.

NOT A NEW DISCUSSION

A state takeover of Medicaid isn’t a new discussion. The Empire Center report, “Shifting Shares: The Costly Challenge Of A State Medicaid Takeover,” includes several such efforts dating back more than 50 years. Gov. Nelson Rockefeller proposed a takeover in 1967, one year after the launch of the Medicaid program. Governors Hugh Carey and Mario Cuomo also made Medicaid takeover proposals. The issue blew up again in 2017 when U.S. Reps. John Faso, R-Columbia County, and Chris Collins, R-Buffalo, proposed federal legislation to eliminate the local share of Medicaid for counties outside New York City and then included similar amendments in bills to repeal and replace the Affordable Care Act.

This year saw proposals by Assembly Republicans and Young’s efforts in the state Senate. Another piece of legislation in the Assembly has been proposed by Crystal Peoples-Stokes, D-Buffalo, and is co-sponsored by Phil Steck, D-Albany County, and Republicans Joseph Giglio, R-Gowanda, and Andrew Goodell, R-Jamestown. And, the issue has been raised by Marc Molinaro, Republican candidate for governor, and Stephanie Miner, a Democrat trying to run as an independent for governor; neither has released a plan, though.

It won’t be surprising to hear candidates on the campaign trail say they favor eliminating the local share of Medicaid, so what are some of the issues preventing such policy?

A COMPLEX ISSUE

Of course, the first issue is cost. The state would be adding $8 billion onto its budget in order to provide for local property tax relief. The idea didn’t sit well with Gov. Andrew Cuomo when the issue was being pushed onto the state by Faso and Collins, and it’s worth noting DiNapoli’s recent analysis that the 2018-19 state budget has spending that will exceed revenues over the next three years with potential cumulative gaps totaling $17.9 billion.

“The state ended the last year with the largest General Fund balance in recent years, but continues to face real fiscal challenges,” DiNapoli said on July 2. “New York’s growing out-year gaps, shrinking debt capacity and the lingering threat of federal funding cuts cloud the horizon. Yet, there are no plans to add to our reserves, leaving the state with little cushion in the event of an economic downturn.”

New York City is another complicating factor, according to the Empire Center’s report. The city accounts for 70 percent of local Medicaid spending. Legislation pending in the state Legislature has different ways of handling the New York City problem by phasing out parts of its share while eliminating the local share entirely for the rest of the state. The Empire Center report notes that it would be unfair to limit benefits for New York City residents as well as Connecticut and New Jersey residents who commute into the city for work, while at the same time making those people pay their already large share of state taxes that are redistributed throughout the rest of the state.

One would think that proposal wouldn’t fly with the powerful New York City legislators, particularly in the state Assembly.

The idea of a sales tax swap was popular in the past, but now would end up with counties losing money because sales taxes are going up while Medicaid costs are fixed. The swap made sense in the 1990s, it makes less sense now.

And, simply levying more in state personal income taxes to make up the difference is difficult to do in a way that doesn’t add to New York’s standing as a high-tax, business unfriendly state.

AN ELECTION YEAR ISSUE

Chautauqua County pays roughly $600,000 a week to the state for its share of the Medicaid program, a check that represents about half of the county’s property tax rate. Such a decrease in county taxes could make the county even more attractive to new businesses or homeowners.

That local benefit is contrasted by the case the Empire Center report makes about the difficulty of achieving a Medicaid takeover. Paying for the move by simply finding all of the waste and fraud in the program — as has been documented in past audits by DiNapoli’s office — wouldn’t generate enough savings. Simply cutting state spending is a difficult answer since Medicaid is one of the two largest areas of spending in the state budget along with school aid – and we all know how difficult even freezing state aid is. Simply cutting Medicaid, likewise, is probably a political non-starter because any change to cut spending will result in angry calls to state legislators from people in their district who use the service that is being eliminated.

Candidates are likely to say they support a Medicaid takeover when they’re on the campaign trail this fall. Keep this bit of the Empire Center report in mind when they do.

“Regardless of how approached, such a takeover would represent a major change in a program affecting the lives and livelihoods of millions of New Yorkers,” the Empire Center wrote. “The cost and complexity of the task should not be underestimated, and all options would require difficult trade-offs.”

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