Medicaid Savings Would Require Federal and State Action

The Mayor's preliminary budget for fiscal year 2000 proposes a $340 million reduction in city Medicaid expenditures based on actions that have not yet been taken by the federal and state governments.

At the federal level, the city is requesting that officials revise their current formula for calculating the Federal Medicaid Assistance Percentage (FMAP). The current formula, based on state per capita income, results in a 50 percent federal match for New York State, with the remainder split between the state and local governments. City officials have argued that it would be fairer to base the formula on total taxable resources available to a state. If granted, this change would increase the federal match to 52.5 percent of Medicaid expenditures in New York, resulting in a savings of $140 million annually for the city. However, the prospects for gaining federal approval of this change are doubtful since there are no proposals in Congress to do so.

The Mayor's budget also proposes saving $200 million annually through reduced Medicaid expenditures that require state approval. The bulk of these savings would result from rate freezes and other reductions in Medicaid payments to hospitals and nursing homes. Other proposals would reduce fraud or otherwise restrict claims for Medicaid reimbursements for pharmacy and transportation services.

The Mayor's proposed cuts in hospital and nursing home payments overlap with proposed reductions contained in the Governor's recently released executive budget for state fiscal year 1999-2000. However, intense opposition from health care providers will make it difficult for either the Mayor's or Governor's proposals to win the necessary approval in the state legislature.