Report: New York’s managed care tax will fall short of expectations
(The Center Square) — New York’s proposed tax on managed care organizations will generate far less in federal aid than projected by state budget writers, according to a new report by a fiscal watchdog.
The Empire Center’s report said data from the Hochul administration submitted to the Centers for Medicare & Medicaid Services as part of a request for a federal waiver show the tax would only generate about half the $4 billion that lawmakers had envisioned when they approved the plan as part of the state budget.
The proposal calls for establishing a Medicaid Investment Fund out of taxes on managed care organizations with the goal of roping in more federal funds and reducing health care costs for low-income New Yorkers.
But Bill Hammond, the center’s senior health care policy fellow, said the data shows it would generate gross revenues of $2.8 billion a year, beginning on Jan. 1, which would result in net proceeds ranging from an estimated $1.4 billion to $1.8 billion, after the state’s costs are deducted.
New York’s plan, modeled on a similar program in California, would primarily target MCOs serving Medicaid enrollees. Depending on their size, those plans would pay rates ranging from $25 to $126 per member per month, generating a total of $2.7 billion annually, according to the center.
“Those amounts would be reimbursed by Medicaid, with the state and federal governments splitting the cost,” Hammond wrote. “The state would pay itself back out of the tax proceeds – and keep the federal matching aid for itself. In effect, the state would be taxing the federal government.”
The MCO tax would also apply to fully insured commercial health plans, but at lower rates, he said. These plans would pay $1.50 to $2 per month, or $18 to $24 per year, for each of their 4.1 million enrollees, raising about $100 million, the state’s plan said.
“That amount would come out of the pockets of the plans and their customers, with no state or federal reimbursement,” Hammond wrote.
New York already has two Medicaid-related taxes under its Health Care Reform Act. One is a surcharge on hospital services of 9.63% for commercial patients and 7.04% for Medicaid patients, another is a per-enrollee assessment that varies by region.
A coalition of business owners, including the Business Council of New York State, wrote to Hochul earlier this year urging her to hold employers “harmless” from the higher costs of the new tax. They say it would hurt employers who are still struggling with higher costs from the Affordable Care Act and state health insurance mandates.
“Controlling rising health care costs is one of the very top issues for employers and New York’s health care taxes already far exceed national averages,” they wrote. “Adding a new tax on top of the already exorbitant HCRA assessments exacerbates the challenge employers, particularly small businesses, face to make high-quality, affordable coverage available, increasing premiums for every individual, family and employer buying a policy in New York.”
