Almost overnight, New York City's booming economy sent into chaos.

The Citizens Budget Commission estimated the city could lose $5 billion in revenue in the upcoming fiscal year, based on the prior two recessions.

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ALBANY — Recommended cuts and changes to the state’s Medicaid program are being met with resistance as hospitals grapple with surging numbers of coronavirus cases and the state takes drastic measures to flatten the curve of those being hospitalized for COVID-19, the respiratory illness caused by the virus.

The state’s second iteration of the Medicaid Redesign Team, tasked by Gov. Andrew M. Cuomo with finding $2.5 billion in Medicaid savings, approved a slew of recommendations to help cut New York's rapid growth in Medicaid costs.

Among the panel's suggestions that now go to Cuomo and the state Legislature are nearly $400 million in cuts to hospitals, $715 million in reductions to the state’s long-term care programs, and $71 million in reductions through changes to pharmaceutical practices.

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“We appreciate the amount of time and service that the members of the Medicaid Redesign Team devoted in developing (the) recommendations, particularly in the face of the significant public health crisis confronting health care providers, health plans, employers, consumers and the state,” said Eric Linzer, president and CEO of the New York Health Plan Association. “Given the significant impact that the coronavirus disease is having on all New Yorkers, this is the worst possible time to be adding to the cost of coverage and we are concerned that several of the provisions in (the) recommendations will increase health care costs for employers, consumers and union benefit funds without improving the quality of care.”

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Linzer said carving out the pharmacy benefit from Medicaid, as recommended by the redesign team, would actually increase costs to the Medicaid program. He lamented that the funding cuts fall “disproportionately on health plans” with more than $1.1 billion in reductions directed at health plans. It includes the $851 million in cuts for the 2020-21 fiscal year, Linzer said.

“By further slashing health plan rates, imposing new administrative costs on private coverage, and carving out the pharmacy benefit, these provisions will increase costs for employers and consumers and make it more difficult to protect the long-term viability of the Medicaid program and the millions of New Yorkers who rely on our member Medicaid plans,” he said.

Bryan O’Malley, executive director of Consumer Directed Personal Assistance Association of New York State, said any cuts to consumer directed assistance would be detrimental, particularly when seniors and the people with disabilities should stay home amid the pandemic.

“As we face a tremendous healthcare worker shortage, we need family members and community members stepping up to provide care to elderly and disabled when and where they can. Personal assistants are putting themselves in harm’s way to provide critical services, and they deserve the same wages for their labor,” he said in a statement. “This program will be an essential support in our healthcare fabric during and coming out of this pandemic. You don't cut spending from the fire department when the whole town is burning, and we should not cut Medicaid as our healthcare system is on the verge of collapse.”

The redesign team’s recommendations don’t meet the $2.5 billion in cuts either, coming up short by nearly $1 billion with the expectation the state will reduce costs by $850 million this year. State Comptroller Thomas DiNapoli has estimated that due to the pandemic revenues will be up to $7 billion below the $87.9 billion projected in the governor's Executive Budget.

The state had already been looking toward a difficult budget year, facing a roughly $6 billion budget gap mostly attributable to Medicaid overspending.


Citizens Budget Commission President Andrew S. Rein commended the team for focusing on the right areas, particularly long-term care and targeting the funds for supplemental payments and special programs. But, he pointed out that the recommendations lack improvements to transparency, don’t tackle the Global Cap’s accounting and design, and don’t meet the $2.5 billion target.

“The MRT’s own proposals only total $1.6 billion in savings,” Rein said. “Absent non-Medicaid savings being developed to offset the lower-than-expected Medicaid savings, this leaves a deficit in the state’s financial plan, notwithstanding the yet unknown impact of the current pandemic and associated economic upheaval.”

“The MRT’s recommendations focus on many of the right areas, particularly long term care and targeting the funds for supplemental payments and special programs," said Andrew Rein, president of the watchdog Citizens Budget Commission. "However, the proposals fail to meet the $2.5 billion savings target, leaving the state financial plan $851 million short."

The Citizens Budget Commission, a private watchdog group, has recommended that the legislature pass only a bare-bones budget to put off numerous contentious issues. State Comptroller Thomas DiNapoli (D) said Tuesday that the Covid-19 outbreak could blow a $7 billion revenue hole in the state budget.

Citizen Budget Commission president Andrew Rein applauded the panel’s efforts to find savings, but said a failure to address transparency and the overall design of the state’s Medicaid cap leave “the budget vulnerable to continued fiscal gimmicks that mask true Medicaid spending.”

“The budget director is correct to focus on the downside risk,” said David Friedfel of the independent Citizens Budget Commission. “It would be much easier to add spending later if this economic and financial decline turns out to be more shallow than projected,” said Friedfel. “If the past is prologue, you’d see a shortfall of approximately $8.5 billion between actuals and projections …”

THE CORONAVIRUS HAS quickly wreaked havoc on New York City’s economy, sending portions of the workforce into a tailspin and lurching the city budget into potential chaos. A leading financial watchdog, the Citizens Budget Commission, estimated the city could lose $5 billion in revenue in the upcoming fiscal year, based on the prior two recessions. Yet unlike recessions, this fiscal crisis was hastened by orders from the city government, suddenly bringing unprecedented challenges to the city’s economy.

The city does have a fairly robust well of reserve funding – nearly $6 billion – but Stringer and other watchdogs like the nonprofit Citizens Budget Commission have warned the de Blasio administration for years that those funds would be insufficient to survive a prolonged recession, which seems more likely by the day.

David Friedfel of the Citizens Budget Commission said the fiscal issues already incorporate enough complexities.

“Of all the years to have a bare bones budget that just focuses on finances, this is the year,” he said. “There are so many other issues at play just within the finances of the state, on top of the fact that the Capitol building is closed so the public has much less access than it used to… Those policy issues can wait for another day.”

Coronavirus has had an impact on the lives of every New Yorker. Today, David Friedfel, Director of State Studies at the Citizens Budget Commission, updated us on the impacts the virus will have on the state budget.

“Given the growing uncertainty, limited information available in the middle of the unfolding crisis and need to support the response, the governor and Legislature should adopt a crisis-response ‘bare bones’ budget for the fiscal year beginning April 1, 2020, recognizing that changes will be needed in the coming months,” according to a statement Tuesday from Citizens Budget Commission President Andrew Rein.

Andrew Rein, president of the budget watchdog Citizens Budget Commission, said the pandemic meant that Albany lawmakers and the governor should adopt a “bare-bones budget” that doesn't consider nonessential policy issues until a clearer fiscal picture emerges and doesn't increase taxes.

“Do not consider tax increases at this time. New York's already high taxes — including the repeatedly extended ‘temporary’ personal income tax surcharge enacted to weather the last recession — and the federal cap on state and local tax deductions risk New York's competitiveness,” Rein said.