For the fourth consecutive year, Gov. Kathy Hochul has described her Medicaid budget as “unsustainable.” Despite this acknowledgement, concerns remain regarding fiscal management, as the state’s share of Medicaid costs has increased by 60% over the past four years – a rate roughly five times that of inflation.
Novel York’s Medicaid Spending
The governor’s latest proposal would add another 10% to Medicaid spending. Total Medicaid spending for the next fiscal year, including federal aid, is projected to be $28 billion higher than when Hochul took office, and this figure doesn’t account for potential additions from the Legislature.
Despite the substantial financial investment, Medicaid enrollment is decreasing as the post-pandemic period continues. However, the quality of care in New York remains low, with hospitals averaging a 2.5 out of 5-star federal rating, placing the state 48th nationally.
The governor’s spending increases are, in part, attributed to securing political support from the health-care lobby and its allies in Albany. This approach, critics argue, prioritizes the interests of the health-care industrial complex, leading to higher fees, larger subsidies, and reduced accountability.
This year’s proposal includes $1.5 billion for hospital and nursing home fee boosts and another $1 billion for health-care capital grants. While Hochul claims these increases are necessary to offset potential cuts in federal funding, this argument is contested.
Changes enacted in President Donald Trump’s One Big Beautiful Bill Act merely slowed the growth of Medicaid spending, and some key provisions, including a work requirement, have not yet taken effect. Currently, New York’s federal Medicaid funding is expected to increase by $3 billion, or 5%, in the next fiscal year.
Impact on the Essential Plan
The Essential Plan, which provides coverage to individuals just above the income threshold for Medicaid, is expected to be affected. The OBBBA imposed stricter rules regarding health subsidies for non-citizens, a demographic that comprises nearly half of the Essential Plan’s 1.7 million enrollees. State officials anticipate a loss of $7.6 billion in federal funding previously allocated to the program.
Instead of replenishing these funds, Hochul is seeking permission from Washington to tighten eligibility requirements and utilize unspent federal aid reserves, potentially avoiding any state financial contribution. If approved, total state and federal funding for combined health programs could still exceed $130 billion – an all-time high.
Since becoming governor, Hochul has directed more new funding to Medicaid than to all other programs combined. Despite this, health-care lobbyists are expected to continue advocating for increased funding, even as the health-care sector experiences significant job growth – adding 71,000 jobs in New York City alone last year.
A Commission on the Future of Health Care was appointed in 2023 to provide guidance on Medicaid budgets, but its first report has not been released.
Frequently Asked Questions
What has happened to Medicaid spending under Gov. Hochul?
Over the past four years, the state’s share of Medicaid costs has increased by 60%, or roughly five times the rate of inflation. Her latest proposal would add another 10%.
What is the Essential Plan?
The Essential Plan provides taxpayer-funded coverage to people just above the income cut-off for Medicaid. Approximately half of its 1.7 million enrollees are legally present immigrants.
What is the One Big Beautiful Bill Act (OBBBA)?
The OBBBA, enacted during President Donald Trump’s administration, slowed the growth of Medicaid spending and imposed stricter rules regarding health subsidies for non-citizens.
Considering the substantial and increasing investment in Medicaid, what steps could be taken to ensure greater transparency and accountability in how these funds are allocated and utilized?
