Hochul says federal Medicaid probe won’t impact health care coverage

As health insurance for over a million New Yorkers lies in the hands of a combative federal administration, Gov. Kathy Hochul’s Department of Health has found itself twice in the crosshairs of the federal government. But Hochul expressed confidence that neither a new probe by the Center for Medicaid Services into New York nor a reported impending Department of Justice lawsuit over alleged bid-rigging will have an impact on a crucial federal decision that could decide the future of the state’s public health care option.

In a Medicaid double whammy, the Center for Medicaid Services first sent a letter to Hochul and top Department of Health officials on Tuesday alleging widespread abuse and fraud in the state’s Medicaid system. In an accompanying video, CMS Administrator Dr. Mehmet Oz gave New York 30 days to reply with a plan to remedy the identified issues. “This isn’t about politics,” Oz said. “It’s about protecting patients and protecting taxpayers.”

Just one day later, the New York Post reported the federal Department of Justice is expected to file a lawsuit against the DOH over alleged bid-rigging involving a controversial change to the Consumer Directed Personal Assistance Program, a popular Medicaid home care program. In an attempt to save money, Hochul reduced the number of fiscal middlemen in the state from hundreds to just one, with Public Partnerships LLC winning the lucrative contract to run payroll for the program. Evidence suggests state officials and PPL spoke about the change before the bidding process even began. 

Meanwhile, CMS is weighing a request from the state that will impact thousands of New Yorkers who rely on the state's Essential Plan for health care. The plan currently covers 1.7 million people with incomes below 250% of the federal poverty line. The state wants to lower the income eligibility threshold and use existing federal dollars lying dormant in a trust fund to fill in the gap after changes in President Trump’s H.R. 1 tax and spending plan passed last year disqualify most legal noncitizens from receiving federal aid for health care. But it needs permission from the feds to do that.

The governor said New Yorkers shouldn’t worry the multiple federal probes into Medicaid may negatively impact the decision on the Essential Plan. “No, that should not be a connection to any of this,” Hochul said Wednesday at an unrelated event in Albany. “Looking at Democratic-only states and questioning what we do for their own political reasons, I will have to stand up and show them the truth and show them the facts that they’re wrong.”

The governor said she didn’t know about the likely lawsuit, but brushed off the federal threats as the Trump administration has also waged politically charged legal battles against state Attorney General Letitia James, off-shore wind projects and congestion pricing – a challenge that was ruled unlawful this week. “This is just another list of areas where they’re just trying to use their power to go after blue states,” Hochul added.

The state put in the request to CMS last fall to revert to a previous waiver in order to ensure New York can tap into a sizable federal trust fund to continue coverage for over 450,000 legal noncitizens it is required to cover. “We're all adults in the room, and we know that even if we disagree with the policies, we will follow the law, and we just need maybe a bit of time to grow into those,” Hochul’s budget director Blake Washington told City & State last week. “So that's the level of engagement we have with the CMS.”

The state executive budget currently reflects the “worst possible outcome” that has the Essential Plan effectively zeroing out after a few years. “You have the worst possible scenario baked in so that we're able to build from there,” Washington said, before either the CMS probe or DOJ lawsuit became publicly known. “So we don't expect it to go to zero.”

Hochul said her administration has worked to cut New York’s surging Medicaid budget, which is up 11% in her $262.7 billion executive spending plan. “When there is fraud, I will help them fight it,” the governor said. “I already have.” Hochul’s administration claims its CDPAP reforms have saved over $1 billion. 

State Sens. James Skoufis and Gustavo Rivera have probed the changes for months, and released evidence last summer showing Hochul’s administration had proposed draft legislation that explicitly named PPL as the chosen contractor before lawmakers ever approved the bidding process. During last summer’s hearing, a PPL official testified the company had not communicated with the DOH prior to the start of the bidding process, but later amended that testimony to acknowledge “general” conversations did take place.

“It is no secret that I’ve held deep concerns regarding PPL’s bidding for this multi-billion dollar state contract,” Skoufis said in a statement to City & State. “Every indication points to an award that was pre-determined from the start. I will have more to say if and when formal action is taken by the federal government.” The lawmaker has proposed a state constitutional amendment that would require approval from the state comptroller for high-dollar contracts.

CMS, DOJ, PPL and DOH did not immediately return requests for comment.