Highlights of Governor Hochul’s Budget Proposal
On Tuesday, January 21, 2025, Governor Hochul and State Budget Director Blake Washington presented the State Fiscal Year 2025-2026 Executive Budget Proposal. During the presentation they discussed proposals related to healthcare and hospital funding. In fact, Mr. Washington made remarks on more than one occasion highlighting the fact that he has been having conversations with healthcare associations as they developed the budget. Overall, the budget totals $252 billion. A year-over-year increase of 3.6%. It does not increase taxes and adds funding for hospitals and healthcare.
Revenue was stronger than projected with receipts being $6.5B more than anticipated, providing a $5.3B surplus.
In addition, the State’s Rainy Day fund is at a record-high $21.1B and New York maintains its AA+ bond rating, which reduces borrowing costs.
The IHA team is reviewing all of the budget documents and will have additional details to share once review is complete and details become clear.
At a high level we can report the following:
Strengthening Our Health Care System
- $35.4 billion for New York’s Medicaid program, including $1.6 billion this year in federal funding generated through an assessment on Managed Care Organizations (MCOs)
- $1.3 billion to support the Safety Net Transformation Fund to support hospitals serving at-risk New Yorkers
- $800 million for improvements to SUNY hospitals’ facilities
- $694 million to implement workforce development programs to support healthcare workers, behavioral health workers and social care workers
- $50 million to support abortion access and protect providers from violence or harassment
Supporting Mental Health Care
The Governor is proposing new investments to strengthen mental health care including:
- $160 million to create 100 new forensic inpatient psychiatric beds on Wards Island in New York City
- $53 million in new funding to support minimum wage increases for mental health care providers, disability service providers and addiction services providers licensed by the Office of Mental Health (OMH), Office of People With Developmental Disabilities (OPWDD) and Office of Addiction Services and Support (OASAS)
- $27.8 million to support individuals with serious mental illness through improving Assisted Outpatient Treatment (AOT), expanding Safe Options Support (SOS) teams and launching new 24/7 shelter sites in the New York City subways
- $14 million to expand clubhouses, maternal mental health care and youth mental health services
- New legislation to strengthen New York’s involuntary commitment laws and Kendra’s Law, to deliver compassionate care to those who need it most
More Details in the Healthcare and Hospital Policy Arena:
The Governor’s briefing book observed that currently, 75 of 261 (or 29 percent) of New York’s hospitals are financially distressed, and overall distressed hospital spending has increased over 600 percent since FY 2017.
While reforms supported by the 1115 Waiver and Safety Net Transformation program mergers may help support some of these facilities, need has continued to grow at unsustainable levels. As you know, many providers are struggling to remain solvent, impacted by many of the same cost pressures that are impacting businesses in other sectors.
PROPOSED FY 2026 HEALTHCARE BUDGET ACTIONS
The FY 2026 Budget includes actions in the following areas:
Safety Net Hospital Transformation Program
The FY 2025 Enacted Budget established the Safety Net Transformation Program (SNTP) and made available up to $800 million in operating and capital resources to encourage partnerships between Safety Net hospitals and established healthcare facilities. In its initial year, the SNTP generated widespread interest from healthcare facilities with DOH receiving several letters of interest intended to form potential partnerships. The FY 2026 Budget invests an additional $1 billion in capital support and $300 million in operating resources to expand the existing Safety Net Transformation Program, which will accommodate the demand beyond current resources, support additional partnerships, and enable longer term commitments to awarded applicants.
Managed Care Organization (MCO) Tax
In December 2024, the State secured CMS approval to implement a new Managed Care Organization (MCO) tax to leverage additional Federal resources. The Budget will include language to codify the structure of the proposed tax and establish a plan for spending tax receipts over the next three years. The Financial Plan conservatively assumes only two years of MCO tax revenue, totaling $3.7 billion in net State Share benefit. The FY 2026 Budget includes $1.4 billion State-share, which represents the first-year installment of targeted investments, including:
- $500 million to support the remaining Global Cap deficits, to ensure that the State does not need to make significant provider reimbursement or service reductions;
- $305 million to support investment in hospitals, including increases to hospital outpatient rates, support for new investments in hospital quality, continued support for the hospital maternal quality programs, and additional assistance to critical access and sole community hospitals;
- $300 million to expand operating support under the Safety Net Transformation Program to ensure that resources are available to support additional transformative projects;
- $200 million for investment in nursing homes, assisted living programs, and hospice programs;
- $50 million to support an increase in the Medicaid physician fee schedule to bring Medicaid reimbursement closer to the Medicare level;
- $50 million to continue funding for the Mainstream Medicaid Managed Care Quality Program; and
- $10 million to support enhanced rates for clinics and Federally Qualified Health Centers.
Continuing Implementation of the Medicaid 1115 Waiver Amendment
On January 9, 2024, the Centers for Medicare and Medicaid Services approved an amendment to New York’s Medicaid Section 1115 Demonstration vital to New York’s continuing efforts to build a health care system that benefits all New Yorkers. The Executive Budget continues implementation of this waiver to advance health equity, reduce health disparities, and strengthen access to primary and behavioral health care across the state, including the following major highlights. Addressing Social Needs to Improve Health Equity and Outcomes. The Executive Budget provides $500 million for screening and navigation for Medicaid members through the new Social Care Networks to a range of social care services, including enhanced benefits for certain populations. These services include housing support, food and nutrition assistance, transportation support, and navigation to other resources for education, employment, interpersonal safety, and more.
Build New Health Planning and Data Transparency Capacity
The Executive Budget includes $125 million to support new health planning and data infrastructure through a new Health Equity Regional Organization (HERO). Investments in the HERO will lay the groundwork for a new statewide data infrastructure that can be used to support the design and development of new policies, interventions, and targeted investments to improve outcomes, reduce health disparities, and help the State develop and evaluate metrics of success for existing and future programs, including extraordinary new investments in health-related social needs services.
Leverage Federal Support to Grow New York’s Health, Behavioral Health, and Social Care Workforce
The Executive Budget includes $694 million for implementation of two workforce programs to support training and education for new workers as well as support career advancement for existing workers through tuition payments and student loan repayment.
Ensure Access to Emergency Medical Services
The Budget will invest $5.6 million directly to counties to develop their individual EMS plans with oversight under the Statewide EMS task force.
Deploy State Funding to Support Healthcare Training Programs
The Budget will expand support for healthcare training programs under the Increasing Training Capacity in Statewide Healthcare Facilities grant program, with a distinct focus on nursing training programs. Encourage Swimming and the Prevention of Drowning. The Budget provides $5 million to create a new program to provide tens of thousands of free learn-to-swim lessons to children aged four and under. Working with community-based organizations, the Department of Health (DOH) will work with program participants to issue vouchers for swim lessons.
Opioids
Allow Paramedics to Administer Buprenorphine. In order to combat opioid use disorders, the Budget includes legislation allowing paramedics to administer buprenorphine. This will allow EMS providers to more effectively treat and save lives upon contact, especially in rural areas.
Allow Practitioners to Dispense a Three-Day Supply of Opioid Use Disorder Medication. Governor Hochul signed legislation this year to allow practitioners in the Emergency Rooms of hospitals without fulltime pharmacies to dispense a 3-day supply of medications for opioid use disorder to decrease likelihood of subsequent overdose. This year, Governor Hochul will introduce legislation to more fully align with Federal regulations by allowing all hospitals, including those with a full-time pharmacy, to dispense a 3-day supply of medications that a patient can take home with them while awaiting referral to treatment.
Independent Dispute Resolution (IDR) Medicaid Managed Care (MMC) Carveout
The IDR process determines if fees billed by providers in emergency settings and through surprise billing are reasonable. While claims that are paid on a fee schedule are excluded, surprise billing to MMC plans is authorized. The Budget proposes to align State law with Federal law that excludes Medicaid from the Federal IDR process.
Discontinue Public Indigent Care Pool (ICP)
The Budget proposes discontinuing the State share of the Public ICP payments to public hospitals in New York City as a technical adjustment since New York City Health & Hospitals is pursuing a State Directed Payment (DPT) that will result in the hospitals far exceeding their facility-specific Disproportionate Share Hospital (DSH) caps. The DPT is pending Federal approval.
Restructure the Managed Care Quality Pools
The Quality Incentive Pools are designed to incentivize quality care but are based on the availability of quality metric information. The Budget achieves necessary state savings by shifting the costs of the Mainstream Managed Care organizations (MMC) quality pools from the Global Cap to the Healthcare Stability Fund.
Discontinue Prescriber Prevails
The Budget removes the prescriber prevails provision, which mandates that Medicaid approve prior authorization for a prescription drug, regardless of whether the clinical criteria are met. Eliminating this provision will reduce inappropriate prescribing, reduce the influence of pharmaceutical companies in influencing prescribers, and improve the State’s ability to provide the highest level of pharmaceutical care to Medicaid members.
Support Maternal and Child Health Expand Access to Nutrition Programs for Mothers and Children
The Budget will invest $9.5 million to support new enrollees in the State’s Women, Infants, and Children (WIC) program to meet the growing need for food and essential services.
Expand Access to Infertility Treatments
Medicaid members in New York undergoing treatment for cancer or other medical conditions lack coverage for fertility preservation services, and so must pay out of pocket or go without care. The Budget includes nearly $5 million to extend coverage for fertility preservation services to Medicaid members undergoing medical treatments that may lead to infertility, and expand eligibility for the Infertility Reimbursement Program.
Expand Lactation Support Services
Evidence indicates that breastfeeding can improve child health, lowering rates of chronic diseases, infections, and autoimmune disorders. Medicaid members have lower breastfeeding rates than other New Yorkers, in part due to lack of breastfeeding support. To help promote breastfeeding in the Medicaid program, the Budget includes policies allowing certified lactation consultants to enroll as Medicaid providers directly and coverage for breast pump supplies.
Ensuring Access to Abortion Sustain the Reproductive Freedom and Equity Grant Fund
The Reproductive Freedom and Equity Grant Fund was created by Governor Hochul in May 2022 to enhance abortion access and was codified in the State Fiscal Year 2025 budget. This initiative addresses the need for expanded reproductive healthcare services in New York. The budget continues $25 million in funding to support reproductive health providers and critical support programs, to ensure equitable access to abortion care across the state.
Reproductive Health Care Improvement Funding
The Budget includes a capital investment of $5 million to provide grants to eligible abortion care providers in support of capital projects that promote expanded reproductive health infrastructure, modernization of facilities and enhanced safety and security. This funding will contribute to Governor Hochul’s ongoing mission to affirm abortion rights in New York State and ensure that all New Yorkers are able to access these critical services.
Increase Reimbursement for Providers of Abortion Services
For many years, reproductive health providers have struggled with the cost of medication abortion care and other abortion service. The Budget provides a new $20 million flexible funding stream to support these critical services and to protect the network of reproductive health care providers.
Safeguard Abortion as Emergency Medical Care
The Federal Emergency Medical Treatment and Labor Act (EMTALA) mandates that hospitals provide stabilizing care for patients with emergency medical conditions, regardless of their ability to pay. However, abortion is not explicitly defined as emergency medical care under New York law. To address this gap, the Budget includes language to codify abortion as protected emergency medical care, and to require hospitals to provide stabilizing emergency abortion services when they are medically necessary.
Protect the Identity of Medication Abortion Prescribers
Medical providers in New York who prescribe medication abortion to patients in antiabortion states face risks if their identities are disclosed. To address this, the Budget includes language to allow prescription labels to avoid displaying the provider’s name, protecting the identities of these providers.
Require Access to Trained Forensic Medical Examiners at All Hospitals
The budget includes legislation requiring all hospitals to provide access to trained medical forensic examiners for sexual assault survivors, including pediatric cases. The Budget includes $2 million to strengthen DOH’s capability to enforce this requirement and potentially expand telehealth capacity in hospitals that have legitimate challenges securing their own trained examiners.
Excess Medical Malpractice Reform
The Budget includes a change to reconfigure the timing of payments under the program, splitting payments over two years, as well as reducing State funding for excess medical malpractice insurance coverage by requiring a 50 percent copay from covered physicians.
Allow Healthcare Providers to Do More
The Budget includes legislation to allow New York to join the Nurse Licensure Compact, which will make it easier for nurses licensed in other states to practice in New York, either physically or virtually, and make it easier for New York providers to offer virtual care to their patients who travel to other states.
The budget expands the scope of practice for CNAs to administer routine medications in nursing homes and allow physician assistants to practice more independently.
Expand Access to Dental Care
The correlation between dental care and overall health is well established, yet many New Yorkers face substantial barriers to accessing essential oral health services. The Budget will create minimum standards for dental plans available on the Marketplace, while also exploring the use of Federal 1332 Waiver funding to subsidize the costs of purchasing dental plans. The Budget will also introduce legislation to allow dental hygienists to practice in more settings and direct health plans to reinvest funding into initiatives that improve the availability of dental care.