Audit Raises Questions About New York Medicaid Financial Situation

Reuters published a story this week on the latest audit of the New York Medicaid system which has given leverage to those hoping to use financial worry to trim the system and the state budget overall.

We have previously discussed the audit by the Centers for Medicare and Medicaid Services which found that the federal government overpaid the state by billions of dollars in recent years. The actual audit is still not yet complete, but federal officials are set to conclude by the end of this month. It is only then that the full scope of the situation will be known and the effect considered. The story notes how the overpayment may ultimately wreck havoc on the state’s financial health just as some were hoping things were finally settling down.

All of this has placed a pall over the current work in Albany where legislators are working to approve the state’s next budget–around $140 billion.

The federal probe is on the radar of everyone working on the state’s budget, but it is of elevated concern to all those with a particular interest in the state’s Medicaid system. New York has the largest such program in the country, at about $54 billion annually. But it is unclear how a requirement to repay a significant portion of funds to the federal government will affect the state’s ability to maintain the program as it is now without changes.

One real concern is that the reports of overpayment thus far may only be the tip of the iceberg. The audit in the past focused only on services for developmentally disabled, with suggestions that the federal government overpaid the state by nearly $15 billion over the past twenty years. That number could rise if the probe is expanded.

On top of that, it is unclear what amount the state will actually have to return. Seemingly no one is suggesting that the entire amount overpaid from past decades be returned. But even looking only at a five year period, that might amount to $7-$10 billion in state obligations. Coming up with those funds will not be easy.

Budget officials in New York released issued a financial report where they acknowledged that federal reimbursements “claims could jeopardize a significant amount of federal financial participation in the State Medicaid program.”

The main preparatory step taken by officials thus far was cutting the budget by about $1.35 billion in anticipation of payment reductions from CMS officials which will take place at the end of this month. Yet it is unclear if those reductions will be enough to even the scales this upcoming fiscal year or if more changes will be needed to make up the difference.

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