With tens of billions of federal dollars on the table and an incoming administration bent on cutting health care spending, New York’s hospitals are bracing for a bitter winter and beyond.
Their leaders are looking anxiously into 2025, concerned about what the second Trump administration could mean for several large funding streams that prop up safety net hospitals, rural facilities and the high concentration of teaching programs across the state.
Donald Trump and his appointment of billionaire backers Elon Musk and Vivek Ramaswamy to cut the federal budget have spurred a flurry of conservative proposals to trim Medicaid spending and peel back the Affordable Care Act. Medicare and Medicaid make up the single largest funding mechanisms for New York hospitals, which are also banking on reimbursements from the Federal Emergency Management Agency for expenses incurred during the height of the pandemic.
There is little doubt among hospital insiders that cuts will be made, the question is where and how big.
“It is likely that those programs will experience some significant cutbacks. How they will express it is to be seen but it is almost inescapable that they will not be on the chopping block,” said Kenneth Raske, president and CEO of Greater New York Hospital Association, referring to Medicare and Medicaid.
Several mechanisms are up in the air, and a scramble is underway to secure as many of them as possible before Republicans take control of Washington next year.
Some of the biggest questions surround additional money for prescription drugs, teaching hospitals and costs incurred during the pandemic. A request to allow a federal waiver for telehealth to continue is tied to the reimbursements it will bring to health systems.
New York hospitals are set to receive a $1.8 billion annual cut under a program that provides additional Medicaid funding to hospitals with a large portion of uninsured and Medicaid-eligible patients, known as the Disproportionate Share Hospital program. Hospital groups are pushing for those cuts to be reversed before they take effect in January. Industry leaders also backed legislation to reduce federal caps on those payments for patients who are dually eligible for Medicare.
Hospitals are also worried about cuts to outpatient programs, which treat patients without admitting them. Outpatient programs have become a growing part of hospitals’ business models throughout the state and draw higher Medicaid reimbursements than traditional physician practices. That arrangement could change if a bipartisan proposal goes through. A similar bill has been proposed at the state level.
Industry insiders argue that more outpatient reimbursement is necessary to cover hospital overhead, which is higher in part because hospitals are open 24/7 and must take all patients regardless of their ability to pay. Opponents say the practice encourages hospitals to inflate the prices of mundane procedures.
Imposing so-called site-neutral cuts, which would bring those reimbursements in line with doctors’ practices, could throw a wrench in the financial calculus that has spurred a wave of hospital expansions into outpatient services. “It will increase their losses to the point where it doesn’t become economical for them to do,” Raske said, adding, “in which case, the consumer suffers because they will be facing a lack of options.”
One of the biggest questions for 2025 is how much the state will reap from a loophole that allows it to tax managed care organizations, health plans that administer Medicaid, and reimburse them using federal dollars. State lawmakers baked the windfall of as much as several billions of dollars into the budget last year despite concerns raised by the Centers for Medicare and Medicaid before it approved a similar maneuver in California.
If the proposal falls through now, hospitals would be on the hook, said Bea Grause, president of the Healthcare Association of New York State, another trade group representing New York hospitals and health systems.
“It leaves New York without a source of funding,” she said. “That would be the challenge and we would urge the administration to use other sources of revenue.”
Asked how the iconoclastic personalities padding Trump’s health cabinet bode for the status quo of funding to hospitals, Raske said, “It’s an opportunity for us to make our case.”
As for a potential anti-New York sentiment in the incoming Trump administration getting in the way, Raske demurred. “I know he lives in Florida but he’s a New Yorker. I’ll leave it at that.”
