Healthcare Advocates Urge Governor Hochul to End Chronic Medicaid Underpayments to Hospitals

January 10, 2024

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January 8, 2024

A small portion of New York’s huge, unprecedented reserves can close the Medicaid funding gap, save struggling hospitals, and protect low-income seniors, children, families and people with disabilities

More than 7 million New Yorkers rely on state-funded Medicaid for healthcare coverage, yet Medicaid pays hospitals and their clinics 30% less than the actual cost of care 

Albany, New York – Today, the New York Alliance for Healthcare Justice (NYAHJ)—a Healthcare Education Project initiative being led by 1199SEIU United Healthcare Workers East and Greater New York Hospital Association— called for Governor Hochul to raise the Medicaid reimbursement rate for hospitals during a rally at the New York State Capitol. 

Over seven million New Yorkers rely on Medicaid services, the majority of whom come from Black and Latino communities. Despite the fact that Medicaid provides vital coverage to these New Yorkers, the state pays hospitals 30% less than the actual cost of needed care. This system endangers healthcare providers and the low-income patients who rely on them. With the impact of COVID and cost-spiking factors, hospitals across New York State are struggling more than ever. Many have already slashed maternal care and mental health services, and dozens teeter on the financial brink.

“It is a grave injustice that healthcare for New Yorkers who rely on Medicaid—including half of our state’s children— is underfunded by 30%. This inequity exacerbates healthcare disparities and is threatening the viability of healthcare institutions who serve our most vulnerable communities. Albany must close this funding gap and ensure Medicaid equity, now, said George Gresham, President, 1199SEIU United Workers East.

“Our hospitals and their workers give every patient 100%, but New York pays hospitals 30% less than the cost of care they provide for Medicaid patients. These longstanding underpayments have created healthcare workforce shortages, longer wait times in emergency rooms, the scaling back of critical services, and entrenched health disparities in low-income communities. It doesn’t have to be this way. State budgets are about priorities and choices, and Albany has the opportunity and resources right now to increase Medicaid reimbursement to hospitals until it fully covers the cost of care. Only then can our hospitals and their workers truly tackle the daunting challenges they face and best serve their patients and communities,” said Kenneth E. Raske, President of Greater New York Hospital Association (GNYHA).

“Hospitals across New York State, especially those serving a high population of Medicaid patients, are facing significant financial barriers due to the low Medicaid rates paid by the State,” said State Senator Gustavo Rivera, Chair of the Senate Health Committee. “I am proud to stand with health care workers, hospitals, colleagues, and advocates to urge Governor Hochul to increase Medicaid reimbursement rates for hospital care so that they can invest in the resources needed to maintain, improve, and modernize their health services, and in that way, reduce our State's health disparities."

“I am supportive of the Medicaid Equity pledge and look forward to the Governor’s commitment to health care in the upcoming Executive Budget,” said New York State Assemblymember Amy Paulin, Chair, Committee on Health.

 Hospitals and health systems represent a critical lifeline in communities and regions across New York State. According to a report by the Greater New York Hospital Association, hospitals and hospital systems are often the largest employers in communities across the state and generate more than 9% of the state’s entire gross domestic product. 

Yet, despite their vital role, hospitals are confronting a financial tsunami. Low Medicaid rates have put New York’s hospitals in a fiscal vise. These hospitals already have among the lowest margins in the U.S. In 2022, the median operating margin for New York hospitals was -2.5%, and four out of five hospitals had an unsustainable margin. 

Without sufficient funding, many hospitals cannot invest in programs or infrastructure that benefit the patients and communities they serve, and instead are left to reduce services, cut services or even close their doors:

•  In 2023 Kingsbrook Jewish Medical Center (Brooklyn) and Beth Israel Medical Center (Manhattan) both announced that they are closing services. Eastern Niagara Hospital (Western New York) shuttered in June.

•  Over the past 15 years, nearly 30 maternity units have closed or reduced services.

• The New York State Office of Mental Health has also reported the closure of 850 inpatient psychiatric beds across the State. Chronic underfunding of psychiatric services makes operating and staffing these services extremely difficult.

Chronic underfunding has also contributed to health disparities in largely Black and Latino communities, particularly affecting low-income seniors, expectant mothers, young children from low-income families, and people with disabilities.

For example, while Medicaid covers 50% of births in New York, women covered by Medicaid accounted for 61% of pregnancy-associated deaths in 2018, with Black women experiencing significantly higher mortality rates than other races. Infant mortality rates for Blacks and Latinos are also higher than for whites. 

In another example, residents of the Bronx also experience higher rates of emergency department visits for asthma for adults and kids, and higher rates of hospitalizations for diabetes. These are just a few examples of the ongoing health disparities, worsened by the longtime underfunding of Medicaid.

By raising Medicaid rates to cover the cost of hospital services over the next four years, New York can eliminate the Medicaid funding gap and reduce the resulting care gaps and health disparities for the 40% of New Yorkers covered by the Medicaid program. This will not only stabilize hospitals across the state but also allow them to invest and grow critical services needed to treat the most vulnerable New Yorkers. 

“My community is suffering because the state refuses to pay the full cost of care for Medicaid patients while the state of New York sits on massive reserves that could be saving lives. Are my neighbors in Morris Heights 30% less valuable than people in other communities?” said Sandra Diaz, an 1199SEIU member from the Morris Heights neighborhood in the Bronx who works as a Certified Nursing Assistant. “I am calling on Governor Hochul to fix Medicaid underpayments in New York so Morris Heights’ residents and all New Yorkers can get the care they deserve.”