A record number of New Yorkers relied on Medicaid for health care in 2021, with monthly enrollment exceeding 7 million for the first time, according to a new report by New York State Comptroller Thomas P. DiNapoli. While enrollment has grown by about 5% per year over the last 15 years, increasing from about one in seven New Yorkers in 1998 to one in three in 2021, state budget projections rely on expectations for significant enrollment declines that may not materialize.
“Federal and state Medicaid policy changes over the past decade have contributed to a steep decline in the number of New Yorkers without health care coverage, ranking New York eighth lowest in the United States for uninsured residents. This is good news,” DiNapoli said. “However, if current enrollment trends continue, the state could face billions of dollars in unbudgeted costs. State policymakers should closely monitor program enrollment and spending trends and take steps to ensure that New Yorkers continue to have access to the health care they need.”
Medicaid is a federal, state and local government-funded program that provides a wide range of medical services to economically disadvantaged populations, including low-income children and their families, low-income seniors, and low-income people with disabilities. The Division of the Budget (DOB) estimates the state share of Medicaid will be $27.8 billion in State Fiscal Year (SFY) 2021-22, representing the second largest category of state spending, exceeded only by education.
The share of New Yorkers without health care coverage has fallen from 11.4% in 2008 to 5.2% in 2019, thanks in part to the expansion of Medicaid. The pandemic and resulting economic recession swelled Medicaid enrollment in New York to record levels in 2021, with the monthly number of individuals covered by the program reaching seven million for the first time in February 2021. Adults accounted for two-thirds of enrollment growth, rising by 356,677 to a monthly average of more than 3 million enrollees for the first three months of 2021. The Mid-Year Update to the SFY 2021-22 Enacted Budget Financial Plan expects monthly enrollment to remain above 7 million at least through March 2022, but decline by nearly 17% by March 2023 and return to pre-pandemic levels of just over 6 million by March 2024 as the economy recovers, unemployment rates decrease, and individuals temporarily enrolled begin to decline.
The federal share for most Medicaid services is determined by the Federal Medical Assistance Percentage (FMAP), which is based on a formula that provides higher reimbursement to states with lower per capita incomes relative to the national average. New York’s FMAP is the statutory minimum of 50%, reflecting the state’s relatively high per capita income. As part of its response to the pandemic, the federal government increased its share of funding for most Medicaid services, including a 6.2 percentage point increase for New York for each calendar quarter during the public health emergency.
Specific Medicaid spending trends include:
- Prior to the pandemic, from SFY 2007-08 through SFY 2019-20, total Medicaid spending (including the federal, state and local shares) grew by 5.4% per year, increasing by nearly $30 billion to reach $75.9 billion.
- During the pandemic, in SFY 2020-21, total Medicaid spending in New York declined by about $650 million or less than 1% compared to the previous year, reflecting what may have been a decrease in utilization of non-COVID medical care, particularly early in the pandemic. State spending decreased by more than $4 billion, reflecting the 6.2 percentage point FMAP increase.
- DOB expects total Medicaid spending will rise to $83.8 billion in SFY 2021-22, remain relatively flat through March 2024 and increase to $85.8 billion in SFY 2024-25.
Risk to the Financial Plan
DiNapoli’s report estimates the risk to the Financial Plan should enrollment remain at elevated levels:
- If enrollment remains steady at approximately 7.6 million, unanticipated, additional total Medicaid costs (federal, state and local shares) of $20.5 billion – including $8.1 billion in unbudgeted state costs – could accrue by March 2025.
- If enrollment declines by 500,000, a third of the Financial Plan expectation, unanticipated costs of $13.5 billion – including $5.3 billion in state costs – could accrue by March 2025.
- If enrollment declines near one million by March 2024, a slower pace than the Financial Plan expects, unanticipated costs of $6.5 billion – including $2.5 billion in state costs – could result.
To ensure the long-term viability of the program, DiNapoli recommends state policymakers:
- Closely Monitor Enrollment Trends. As the state economy continues to recover from the pandemic, Medicaid enrollment levels are difficult to predict due to the historic circumstances. While DOB forecasts a reduction of more than one million enrollees, there is no precedent for such a reduction in the program. To mitigate the impact of any shortfall in the forecast of enrollment declines, policymakers must actively monitor monthly enrollment and costs per enrollee.
- Engage Stakeholders in Developing Strategies to Protect Quality of Care and Contain Costs. Two comprehensive efforts to identify cost containment measures were completed under the Medicaid Redesign Team (MRT) process in 2011 and 2020 that were estimated by DOB to generate savings of $2.7 billion and $2.2 billion, respectively, for each year and to restrain future spending growth. However, the MRT could have benefitted from a more timely and deliberative process with wider engagement of stakeholders.
DiNapoli also supports the extension of the federal enhanced FMAP rates, currently set to expire in March 2022, until the pandemic’s health care or economic impacts are fully resolved.
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