By Dave Lucas, Director of Finance and Intergovernmental Affairs, New York State Association of Counties

Over the years, a series of Governors, in collaboration with the State Legislature, have created a complicated scheme of “off-budget” financing to pay for Medicaid. The largest source of off-budget financing is derived from local property taxes in most counties (New York City uses a different combination of local taxes to support State mandated Medicaid costs). Because the State Legislature and successive Governors have used county property taxes to pay the State’s Medicaid bills, it has enabled them to build the largest Medicaid program in the nation by designing program benefits, eligibility standards and reimbursement mechanisms that the State could not afford to offer on their own.

State policymakers have complete control over the design of New York’s Medicaid program, but have asked property taxpayers to pay the bill for their decisions. The promises of generous benefits, reimbursements and eligibility have built the most expansive and expensive Medicaid program in the nation. Governor Cuomo has begun the process of rightsizing Medicaid in New York State and has directed the State toward a more fiscally sustainable path by limiting the annual growth in Medicaid expenses.

First Priority is to Align Program Control with Fiscal Accountability

New bi-partisan legislation introduced in the State Legislature,S.5889-B can help lower New York’s highest in the nation property taxes. The bill’s passage would ensure New York’s Medicaid program becomes fiscally sustainable over the long run and would hold State lawmakers accountable for their program decisions to expand the size and scope of Medicaid.

The legislation, S.5889-B, will require State policymakers to take full fiscal responsibility for New York’s largest in the nation Medicaid program, by implementing an eight (8) year gradual State takeover of county Medicaid costs. State lawmakers will no longer be able to promise unaffordable benefit expansions using the county property taxpayers’ credit card. By placing full fiscal responsibility with State policymakers, they will have to make the appropriate decisions regarding the appropriate mix of Medicaid program reforms, State-derived savings and other spending controls to sustain the program for future generations.

The State takeover of county Medicaid costs will lead to lower property taxes. This will directly enhance New York’s economic competitiveness and improve economic opportunities for all New Yorkers.

Financing the State Takeover of County Medicaid Costs

Holding State policymakers accountable for their programmatic decisions will increase accountability to property taxpayers. Last year, State leaders enacted proposals to close a $10 billion State budget gap. Taxpayers are now demanding the Legislature and Governor build on this success and ensure these reforms, which also included a property tax cap, can be successfully implemented by giving counties the necessary tools to not only manage the property tax cap, but actually reduce property taxes. Removing counties from the financing of Medicaid is the single most important thing the State Legislature can do to lower property taxes for New Yorkers. It will be up to State lawmakers to determine the mix of reforms and State revenues to support Medicaid and numerous options are available.

Apply MRT reform savings to mandate relief. Continuing to build upon Governor Cuomo’s Medicaid Redesign Team (MRT) efforts will generate tens of billions of dollars in general fund savings over the next decade compared to the historic growth in Medicaid. A significant portion of these savings can be directed to eliminating the county portion of financing the State’s Medicaid program.

Pursue a federal Medicaid waiver to leverage savings that can be applied to property tax relief. The MRT reforms will also generate similar savings for the federal government. The State should pursue a broad-based federal 1115 Medicaid waiver to leverage these federal savings and thereby reduce State spending for public health insurance programs. Some of these savings can be used to support the State takeover of county Medicaid costs.

Apply future revenues to lowering property taxes. While the current economic downturn has been prolonged, State revenues will eventually recover and county officials believe the State Legislature should prioritize reducing property taxes in New York. Removing counties from financing State Medicaid costs can achieve this goal and a portion of these future revenues should be designated for this purpose.

Allow federal health care reforms to cover New Yorkers. The Affordable Care Act (ACA) provides opportunities for State lawmakers to modify the size and scope of our current Medicaid program. State lawmakers should allow the federal expansion of health care to be the primary source of health insurance coverage for all New Yorkers. In conjunction with higher federal matching rates for certain populations in Medicaid and SCHIP, the federal expansion will also eliminate the need for some Medicaid spending
the State already does and/or allow New York to scale back portions of its publicly financed health programs, health insurance subsidies or grant programs that can be supplanted by new federal subsidies or grants.

Our State leaders have pledged to focus on mandate relief. For counties, true mandate relief starts with reforming the way we finance Medicaid. This bill provides that mandate relief, and it does so in a way that does not break the State’s bank. There are more than ample savings and revenues available to fund this State takeover of county Medicaid costs. The choice before our State leaders is clear. If they are committed to property tax relief, then they will pass this legislation.