Medicaid: The Rest of New York State (Re) Declares War on New York City

After the 1994 election, the one that saw the Republicans take Congress after decades of Democratic dominance, the New York Times published a “portrait of the electorate” based on exit polls. It showed that the 1960s generation was the one most likely to vote Republican that year. “Those hypocrites” I thought. They were “liberals” in their youth when they wanted to get out of serving in Vietnam, and now they are “small government” “conservatives” when they are at their earnings peak and they don’t want to pay taxes, but I’ll bet they’ll be “liberals” again when its time to collect on federal old age benefits. But they surprised me by being even worse than I thought. They still want even more tax cuts for themselves, and even more old age benefits for themselves, such as the Medicare prescription drug benefit. They want to borrow to pay for it. And to ensure our foreign creditors that the money will be paid back by someone else, they also want deep cuts in public services that younger generations need now, and drastic reductions old age benefits — not for themselves but for those to follow them – effective in the future.

With their aging, stagnant populations, the Downstate Suburbs and Upstate New York are now disproportionately occupied by, and almost exclusively represented by, members of Generation Greed. And back in the 1990s I had similar thoughts about their possible upcoming hypocrisy with regard to Medicaid funding, and specifically the local taxpayer share of it. But once again I’ve been surprised, because once again my cynicism was insufficient. They are even worse people than I thought. And it’s past time from them to be called to account for it.

First, for those who are not familiar with it, a quick primer on Medicaid. It is a federal health care program “for the poor” that was enacted in 1965 along with Medicare, but unlike Medicare it is administered by the states, and the states are required to share its cost. While there are some “mandatory” populations and services that have to be covered, moreover, there are also “optional” populations and services that can be added. New York State has long had the most extensive Medicaid program in the country, providing more services for more people.

It has also has the most graft, fraud, waste and inequity in the country. As early as the 1970s “Medicaid Mills,” which recruited patients for services they did not need and billed the program, were an issue in New York City, which was going bankrupt at the time.

That report is worth a read, because it documents the state of New York’s Medicaid program from the point of view of the U.S. Congress — in 1976.  Here is a news article on attempts to curb Medicaid fraud back then.

The fact that New York City’s budget was affected by New York State’s Medicaid program is a consequence of a unique feature it has in New York. The federal government covers a percentage of total expenditures, ranging from 50 percent in states considered “wealthy” such as New York to a maximum of 80 percent. (Certain categories of expenditures added later have higher federal percentages).

Federal Medical Assistance Percentage (FMAP) for Medicaid and Multiplier

While Medicaid spending is often higher as a percentage of the incomes of state residents in poorer states, generally the “Red States” that vote Republican and complain about big government, New York State’s low federal share of funding, its generous services, and its extensive waste, fraud and abuse multiply by each other to create an enormous tax burden. With health care growing ever larger as a share of the economy, that burden has continuously increased, with Medicaid becoming the largest category of state spending across the country.

The burden of Medicaid is one reason why taxpayers get a much better deal in North Carolina, where the federal government covers 67.6% of base Medicaid expenditures, than in New York, where it covers just 50.0%. The fact that many people from North Carolina have historically traveled to New York, got a cup of coffee while qualifying as New York residents for Medicaid, and then had expensive surgeries half paid for by New Yorkers in non-federal taxes, before returning to North Carolina when healthy, just adds to the burden.

And yet when it comes to state taxes alone, New York State’s Medicaid program has not historically not been more expensive than average. How? Unlike most states, New York requires local governments – counties and New York City — to pay for a large share of the Medicaid expenditures within their borders. The distribution of the cost was originally 50 percent federal, 25 percent state, and 25 percent local. The purpose is to shift the cost of Medicaid to the places with concentrations of Medicaid recipients and expenditures. And in 1965, when Medicaid was enacted, that meant shifting more of the cost to New York City. With the local share, the burden of Medicaid on the state budget was no higher in New York State than elsewhere. The entire excess burden was funded by local taxes.

At the time Medicaid was enacted and New York State’s program was created, the middle class was moving out of New York City, to the suburbs, and poor people from the south and Puerto Rico were moving in. Businesses and jobs followed the middle class across the city line, leaving many of the city’s new residents poor and unemployed. But it isn’t “poor” Medicaid recipients who were and are the real burden. It is “old” Medicaid recipients, including middle class beneficiaries. Not only do old people cost more because they require more actual health care, but custodial care (such as that provided by nursing homes) is not covered by Medicare. And it is so expensive that even for the middle class, need for nursing home and similar care generally pushes people onto the Medicaid rolls. That most Medicaid spending is on the old, not the poor is shown by chart.


In the 1960s and 1970s the working- and middle-class families moving to the suburbs had left their aging parents behind in the city. Basically, the suburban generations left their parents behind to be cared for and paid for, in large part, by someone else. In the 1970s and 1980s New York City wasn’t just relatively poor, with a concentration of the disabled and troubled, it was relatively old. The local share of Medicaid shifted a tremendous burden to New York City taxpayers from the rest of the state. No wonder categories of services for which New York States Medicaid program were particularly generous were those for seniors, not (for example) children.

By the late-1990s, however, things were starting to change, and a thought occurred to me. With immigrants and other young workers flooding into New York City, and the city’s old left-behind White population dying off. Even as the suburban housing stock, which had essentially stopped growing, became increasingly occupied by aging empty nesters, and Upstate New York became increasingly occupied by the old and poor as young workers moved away. Eventually New York State’s Medicaid expenditures would become concentrated in the rest of New York State, not in New York City.

And when that happened, the fact that a large share of New York’s Medicaid burden is localized would actually help New York City taxpayers. The extra money NYC residents and businesses had to pay in local taxes for Medicaid within the city would be less than the state taxes city residents would save by shifting the some of the cost of Medicaid in the rest of the state to people who live there. The rest of the state would end up harmed by the very policy it had used to burden the people of New York City, back when it was the poorhouse and old age home of Downstate NY.

Those hypocrites, I thought. I’ll bet that at the very moment when the original deal starts to benefit New York City, they’ll change it to have the state government cover the entire non-federal share of Medicaid, as in the other states. But what the rest of the state is trying to do is far, far more unjust even than that.

In exchange for voting in favor of Trump’s Obamacare replacement,

“Rep. Chris Collins’ proposal to relieve counties of their Medicaid costs has been added to the Obamacare repeal bill the House is likely to vote on later this week. Collins’ plan, which would force New York to pick up the $2.3 billion tab that upstate and Long Island counties now contribute to the health care plan for lower-income state residents, was included late Monday in the last-minute package of amendments that House Speaker Paul Ryan put together to build support for the controversial Republican health care legislation. “This is a huge win for our constituents,” said Collins, a Clarence Republican who worked on the amendment with Rep. John Faso, R-Kinderhook. “Year after year, Albany’s leadership relies on counties to foot the bill for New York State’s out-of-control Medicaid costs. Enough is enough.”

So the local share of Medicaid would be gone, as I predicted?

Aides to Collins said he opted not to try to apply that provision to New York City because of the huge financial hit the state would take if it suddenly was forced to pick up the city’s $5 billion in Medicaid costs.

So New York City residents would continue to have a huge local tax burden to pay for Medicaid within New York City, but would also be further burdened in state taxes to pay for the entire non-federal share of Medicaid in other parts of the state, where local taxpayers would pay nothing. The unbelievable gall!

Collins is from the Buffalo area, where New York City residents are generously funding the “Buffalo $Billion” to revive that area’s economy, now driven primarily by disability fraud and state-funded local government employment. Basically, without money sucked out of New York City Buffalo and Erie County are Detroit and Wayne County, Michigan. But despite this dependence, evidently he and Faso believe that doing as much harm as possible to the people of New York City would be popular with their constituents. Others seem to agree. While Democrats, including Governor Cuomo, have condemned the deal, no one has dared to do so on the basis of the fact that the deal is unfair to the people and businesses of New York City. Instead they stress the potential harm to the rest of the state, the part where people actually matter.

“The cut is so severe that the majority of hospitals, nursing homes and assisted living facilities located in Upstate New York and on Long Island would be devastated,” Cuomo said.

These statements imply that this policy, as pushed by political representatives from other parts of New York State, fully reflects the selfishness of the people who live there, even as they become more and more dependent on funds transferred from the people of New York City.

Even the conservative Empire Center noted the unprincipled nature of the policy as it has been pushed by the rest of the state.

As proposed by U.S. Reps. Chris Collins and John Faso, the mandate carves out cities with a population of 5 million or more, a description that fits only New York City. Collins and Faso have justified this exception on grounds that the city has its own income tax, which better enables it to afford a share of Medicaid expenses.

So they want a local income tax in addition to the state income tax where they live too? Didn’t think so.  The local share of Medicaid absorbs half of all NYC personal income tax revenues.

A state takeover of local Medicaid costs that excludes New York City would tend to shift a greater share of the program’s financial burden onto the city and its taxpayers. But a takeover that encompasses New York City would tend to do just the opposite: shift the burden off the city and onto the counties of upstate and Long Island.

Perhaps in the past, and perhaps even now, but likely not for long.

The fate of Trumpcare, and whether this provision would survive a U.S. Senate version even if it were enacted, is uncertain. But the fact that this provision was supported by politicians from the rest of New York State virtually demands a full re-examination of the fairness of the entire fiscal relationship between New York City and the Rest of New York State, not only now but over time. And perhaps a change in the generous attitude city residents have traditionally had toward their fellow state residents, despite the scorn received in return. Because the “Buffalo Buyoff,” as it is now being called, would merely extend and maximize a ripoff that already exists.

Consider this table from the New York State Statistical Yearbook, 1997 edition, one I came across while I was working in the NYC Department of City Planning in the late 1990s.

NY Medicaid Funds 95

It shows that the local share of New York State Medicaid funding in 1995 wasn’t 25 percent of area expenditures. New York City local taxes covered 19.4% of the Medicaid expenditures in New York City. And local taxes in the rest of the state covered just 15.2% of the local expenditures in the Rest of the State. How? The local share of Medicaid was just 10 percent of expenditures for those categories of expenditures that were concentrated in the rest of the state, such as nursing home care and family health plus. But it was 25 percent for those categories that were concentrated in the city, such as hospital care and home health care. So New York City was being extra robbed even back then.

This became an issue when the tobacco companies settled a lawsuit with regard to the cost of Medicaid expenditures funded by their product. Some of the settlement money went to the states, which had shared the cost, and in states with local Medicaid funding, local governments were required to share in the settlement money as well. But the Pataki Administration wanted to send most of the settlement money to the rest of the state, even though New York City had covered most of the local share of Medicaid over the years. New York City sued.

Then guess what happened? Data on the share of Medicaid spending covered by local government in different parts of New York State disappeared from the New York State Statistical Yearbook, never to return. That was the first of many examples of suppressing real facts to help protect alternative facts I would come across over the years.

The best substitute I can come up with is data from the Governments Division of the U.S. Census Bureau on local government aid to state government in the “public welfare” category, which includes Medicaid. Code L67.

Medicaid Funds-Exp By Year

In FY 1997, according to this source, New York City somehow accounted for just 60.2% of total New York State local-to-state aid in the category. Which may have been a one-year fluke or error given what we know of Medicaid funding in 1995 based on the table above, with NYC covering 69.4% of local spending that year. But in 2007 New York City accounted for 69.6% of the statewide local government to state government aid in the category, and in 2013 it was up to 73.1%. And now, under the Trumpcare legislation, would increase to 100.0% of all the local tax money sent to the state for Medicaid in 2020.

And what about beneficiaries and expenditures?

For some reason the New York State Health Department stopped publicly reporting Medicaid expenditures by county after 2007, which is certainly a cause for suspicion, but the data for 2013 is available in the latest New York State Statistical Yearbook. New York City’s share of New York State Medicaid beneficiaries fell from 66.2% in 2007 to 60.9% in 2013. NYC’s share of New York State Medicaid expenditures fell from 64.4% in 1997 to 59.4% in 2007 before rising to 61.4% of expenditures in 2013.

In 2013, therefore, New York City accounted for 73.1% of the local taxes paid for Medicaid, with just 60.9% of eligibles and 61.4% of expenditures.  Meanwhile, full-year NYC residents paid about half (50.0%) of the New York State income taxes paid by full-year New York State residents.  And commuters to NYC paid even more taxes to the state.  Since more people move into and out of the NYC more frequently than in other parts of the state, if the total income taxes paid by residents of different counties were tabulated including part-year residents NYC’s share of total state income tax payments  would presumably be even higher.  But best as I can determine the NYC Department of Taxation doesn’t report total NY State income tax payments by county including part year residents.

As the “welfare generations” of the 1960s to early 1990s continue to die off in New York City, and Generation Greed ages to the point where more and more of its members require custodial care in the suburbs and Upstate New York, what will New York City’s share of those on Medicaid and their expenditures be in 2020? In 2030? It’s going to go down, and the share for the rest of New York State is going to go up.  And New York City’s share of New York State tax revenues is going to go up and up too.

“There’s no question that New York’s Medicaid costs are totally out of whack with the rest of the country,” said Westchester County Executive Rob Astorino, who ran against Cuomo in 2014 and may do so again in 2018. “And this will force the governor to get a hold of this in New York and make tough choices.”

New York’s Medicaid program isn’t all waste. It’s the reason that, according to American Community Survey data, the share of New Yorkers who lack health insurance is below the U.S. average, even though the share of New York workers who get health insurance from their employers is also below average. And perhaps it is part of the reason that, according to research by Angus Deaton and Anne Smith, New York is one of only three states (the others being New Jersey and California) where the life expectancy of non-Hispanic Whites is not going down. Despite Upstate New York sharing many economic characteristics with the worst-affected states. Those other states don’t have a New York City to suck money out of.

No doubt there is a lot of Medicaid waste and fraud in New York City, part of a deal that also includes turning the public schools into a jobs program with excessive costs and non-instructional employment in Upstate New York – on New York City taxpayer’s dime. I myself have questioned why Home Health Care employment is going through the roof in NYC, and New York’s high share of total U.S. Medicaid expenditures in that and the “personal care” categories. Particularly given that many of the non-profiteer agencies that provide those services are owned and operated by the friends, relatives and supporters of state legislators from New York City, some of whom have ended up going to jail.

But the biggest Medicaid boondoggle in the state took place almost entirely outside New York City, with excessive charges for state-run institutions for disabled adults who had been transferred elsewhere, operated as a job program for politically connected people in places such as Faso’s Hudson Valley.

Gov. Andrew Cuomo is confronting a multibillion-dollar problem that will result in a substantial loss of Medicaid funding for a variety of hospitals and providers. While the impact on the health care industry’s workforce could begin as soon as April, the complications for state budgets might linger for years.

The fiscal predicament rises from the federal government’s finding that for 20 years New York overcharged Medicaid an estimated $15 billion for the care of developmentally disabled people in what federal investigators described as a system of massive waste and illegal billing. A new audit by a team of federal health agency officials is about to begin, according to state and federal officials.

Effective April 1, the federal Center for Medicare and Medicaid Services has cut reimbursement rates for spending on the 1,000 patients in the state’s 11 development centers such as O.D. Heck in Niskayuna, and for the 99,000 patients not in institutions. Those cuts will result in $800 million less for institutional costs and $300 million less for the non-institutional population -— but the $1.1 billion in reduced funds will likely be spread among the non-related providers within New York’s sprawling health care industry.

In a separate interview, state Medicaid Director Jason Helgerson said it is likely that the loss of up to $1.1 billion in annual Medicaid funding will require adjustments in aid to an array of recipients, not just those associated with the care of the developmentally disabled.

That’s right. To pay for this boondoggle in the rest of the state, actual health care to legitimate recipients in New York City was cut.  And how has that “Buffalo $Billion” turned out? Not so well with regard to private sector activity, but health care is growing there. Funded by Medicare and Medicaid.

The Trumpcare local Medicaid funding outrage just brings to mind 100 other things like it.

Consider New York State’s AIM (municipal aid program). Taxpayers throughout the state pay in state taxes, and the state government kicks back money to their local governments to provide services. Except for New York City, after the state legislature voted to cut off assistance just to NYC a decade or so ago while keeping it for every other locality in the state.

That $71,187 going to the Village of Great Neck on Long Island, the $14,828 going to East Hampton, and the $138,178 going to Scarsdale last year? The $6,803 for Kinderhook and $89,544 for Clarence? The $403, 671 for Rockville Center? The $86,471 going to the Town of New Castle, which includes Chappaqua?  (What an aptly named town from the point of view of the serfs).  New York City residents paid for half of it in state income taxes. But the City of New York got nothing.

Then there is New York State school aid. For decades New York City’s children were cheated, with the city’s share of state school aid far below its share of the city’s school children despite its relatively needy population. To game the formula to make it come out “right,” at one point it included a provision that a New York City child counted for less than one child. This robbed me as a parent.

Chart Long Term School Aid

When this was finally changed after a lawsuit, the state at the same time passed retroactive pension enhancements for New York City teachers, many of whom lived in the suburbs, sucking far more out of the city’s classrooms than the fairer state aid formula put it. Robbing me as a taxpayer to benefit those cashing in and heading for Florida.

Allowing New York City public employees to basically cheat New York City taxpayers and service recipients is a constant pre-occupation of New York State legislators from the city and suburbs alike. Take State Senator Marty Golden, who blocks automated traffic enforcement in New York City because the Patrolmen’s Malevolent Association wants to force New York City to hire more cops to, supposedly, do the traffic enforcement work they aren’t doing now despite NYC having 2.8 times more officers relative to population as the US. average. Or else be killed in traffic.

Is the donut shop industry that hard up that it needs even more customers hanging around?

Golden and fellow state legislators also want to restore full disability fraud rights to New York City police officers and firefighters.

Many of whom live on Long Island, the grifter capital of the New York State.

By New York State law, New York City is not allowed to limit its city government jobs to New York City residents, who might care a little bit more about the city and its people. The best paid among them have therefore typically lived in the suburbs, or perhaps in Staten Island, and drove everywhere so they wouldn’t have to use the mass transit that the serfs have been left with. But local governments in the rest of the state are allowed to enact residency requirements, excluding New York City residents from taking government jobs there.

Then there is the MTA. When it was formed the City of New York turned the Triboro Bridge and Tunnel Authority, and all the toll revenues from the toll bridges and tunnels the city had built, over to New York State. New York City Transit received 67 percent of the surplus toll revenues, under a formula that gave the city a fixed amount plus half the surplus toll revenues in addition. Over the years, with inflation, the city’s share has fallen from 67 percent to closer to 50 percent. And in some years its actually below 50 percent despite the formula from five decades ago, all to fund the waste, fraud and abuse on the LIRR, etc.

The MTA also promised New York City extensive transit improvements as part of a “Program for Action” when it was formed in 1968, in exchange for the city’s toll revenues.

If East Side Access is ever finished (and the fact that it isn’t is yet another ripoff), the suburbs will have ended up getting virtually everything they were promised, with New York City getting very little other than the 63rd Street tunnel and a stubway here and there.

Are there any counter-examples? Only a couple that I can think of. Earlier in the decade the state legislature passed a funding program for the MTA Capital program a year or two earlier than a similar program was passed for the state’s roads and bridges. That wasn’t right. And in the early 1990s, in an absurd budget ruse, New York State “sold” the NYS State Thruway to the New York State Thruway Authority, which borrowed money to “buy” it, diverting toll revenues for 30 years to a budget crisis 25 years ago. That wasn’t right either. But for the most part, no.

Why does this keep happening?

In part because ripping off the rest of New York State would not be popular in New York City, whereas the evidence suggests that cheating the people of New York City is popular with the rest of New York State. Although we do have Wall Street and the real estate industry here, and they might start looking closely at the state taxes they have to pay in light of the “Buffalo Buyoff.”

But New York Cithy has been ripped off mostly because New York City residents and businesses don’t have any representatives in the New York State legislature.   Those allegedly representing the city are actually there representing their own interests, their associates, special interests in the city and elsewhere, those in on the deals.

They don’t care about the rest of us. And as long as they are getting help to collect signatures to get on the ballot despite New York State’s draconian ballot access rules, and campaign contributions to be used for lawyers to keep challengers off the ballot, and thus do not face actual elections, they never will care. And so you, the people of New York City, do not count as people. Or as less than a person, as under New York State’s school aid formula of the 1990s.

What are they getting in exchange for New York City being cheated? Perhaps the city’s share of some of that Medicaid waste, fraud and abuse.

The Faso-Collins provision of Trumpcare may never become law, but even if it doesn’t I’m not prepared to say “no harm, no foul.” Because there is plenty of existing harm.

With regard to Generation Greed and its suburban and Upstate members “teachable moments” never seem to occur. The fact that their communities are now riding on New York City’s back (and most of them were even back when NYC was down in the dumps) doesn’t change the attitude of entitlement and contempt. All that changes is the rationalization. When NYC was down, the low-life “welfare city” didn’t deserve a fair shake. When the NYC economy is booming, as it has been for a decade, then NYC is flush and doesn’t need a fair shake. When a recession hits, and that could be soon, sorry our money comes off the top, and we don’t have any left for you.

If what they do can’t be changed, at least it should be thrown back at them, with the assertion that what you do is who you are.