New York’s newly approved state budget dramatically increases healthcare spending while doing little to control long-term costs, according to a new analysis from the Empire Center for Public Policy.
The report argues that Gov. Kathy Hochul’s emphasis on affordability did not extend to the healthcare portions of the budget, pointing to a double-digit increase in Medicaid spending, the continuation of a tax on health insurance plans and limited reforms to the state’s medical billing dispute system.
The think tank said the state share of Department of Health Medicaid spending is projected to rise 16.2% to $40 billion in the 2027 fiscal year. According to the report, that represents a $5.6 billion increase over the previous year and the largest percentage jump since 2012.
While state officials have attributed part of that growth to accounting transactions tied to the managed care organization, or MCO, tax, the Empire Center contends the overall cost trajectory remains significant. The report notes that total Medicaid spending, including federal, local and other state funding, is expected to reach $120 billion or more once a full financial accounting is released.
The analysis also focuses on the future of the MCO tax, which was originally designed to generate additional federal matching funds. Rather than allowing the tax to expire, lawmakers approved a replacement structure beginning in 2027 that would apply a flat 0.35% tax on health insurance premiums.
According to the report, the revised tax is expected to generate substantially less revenue than the current version but could create future budget pressures because this year’s spending commitments exceed the long-term revenue the tax is expected to produce.
The Empire Center also highlighted the state’s Essential Plan, which received a record $14.9 billion appropriation despite an expected decline in enrollment. The report suggests the funding level could indicate that the financial effects of recent federal policy changes may be smaller than initially projected, though it notes the state has not yet released a detailed financial plan.
Another area of concern identified in the analysis involves New York’s “no surprises” medical billing law. The final budget exempts Medicaid from the state’s independent dispute resolution process and tightens rules for the state employee health plan, but leaves the existing system in place for most commercial insurance plans.
The report argues that limiting those reforms to government-operated plans means private employers and consumers will continue to face rising healthcare costs driven by disputed out-of-network claims.
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