Gov. Kathy Hochul is offering to increase the rates Medicaid pays hospitals and nursing homes for their services by 5% in the coming fiscal year, even as New York is slated to lose some federal subsidies for the public insurance program.

But nursing home reps said the offer is barely a fraction of what’s needed to adequately staff their facilities. Many rely on Medicaid, which provides health insurance to low-income New Yorkers, for a significant portion of their funding.

Hochul included the spending boost in the executive budget she released on Wednesday, despite some uncertainty about how state Medicaid costs will be affected in the coming years by the rollback of policies linked to the federal public health emergency around COVID-19. The White House announced this week the emergency declaration wouldn’t be renewed, slating its termination for May 11.

New York got a 6.2% increase in matching funds for Medicaid from the federal government as a result of legislation responding to the COVID-19 pandemic. That will be wound down to 1.5% by the end of the calendar year.

The result is that Medicaid spending could decrease as some of those who signed up during the pandemic lose eligibility. And the state's share of Medicaid costs is also slated to rise as enhanced federal subsidies that were put in place during the pandemic are phased out.

Hochul is proposing to increase the overall Medicaid budget about 2% in fiscal year 2024, to $94.4 billion – spending that’s split among the state, federal and local governments. State spending on the health program would increase 7.7% under Hochul’s proposed budget.

The governor’s proposed 5% Medicaid rate hike would cost the state an estimated $379 million in fiscal year 2024, with $157.5 million going to nursing homes “to provide high-quality care to residents,” according to the executive budget. Improving staffing levels in nursing homes and hospitals – and bolstering the health care workforce overall – has been a stated priority for Hochul since she took office.

But nursing home groups and the health care union 1199 SEIU wrote Hochul a letter ahead of the budget announcement stating they need a 20% increase in the rates they get from Medicaid to meet new staffing requirements that took effect last year.

A law passed by the state Legislature in 2021 requires nursing homes to hire enough staff to provide each resident with an average of three-and-a-half hours of clinical care per day. Nursing homes are also required to spend at least 70% of their revenue on direct patient care.

Amid a declared workforce shortage, Hochul issued several executive orders delaying implementation of the laws last year, but finally allowed them to take effect in April 2022.

“To meet the staffing standards, many providers must significantly increase their workforce, and all providers are competing for workers who have options to earn similar wages in far less stressful environments,” nursing home advocates wrote in the letter to Hochul, which was shared with Gothamist. They went on to say that nursing homes face major financial challenges “caused by essentially flat Medicaid funding for the past 15 years, despite rising costs.”

Hochul is still offering a more significant rate increase than that provided in recent years by her predecessor. Former Gov. Andrew Cuomo lowered New York’s Medicaid rates during the pandemic in fiscal year 2021. The following year, Hochul reversed Cuomo’s 1.5% rate cut and increased rates by another 1%. She also raised the cap on the overall growth in Medicaid spending that Cuomo had put in place early in his tenure.

“Gov. Hochul’s proposed budget creates a strong foundation to build upon to address the hospital community’s ever-ratcheting revenue needs,” Kenneth Raske, president of the Greater New York Hospital Association, said in a statement on the executive budget.

Still, the hospital group noted that medical centers are facing “skyrocketing” labor costs, which may increase at some facilities as a result of new contract agreements that were recently reached with nurses.

Greater New York added that revenue problems could be exacerbated by a state plan to overhaul the way that hospitals and clinics serving low-income patients are reimbursed for pharmacy costs. According to Hochul’s budget, the state will funnel any savings from this overhaul back into those health care facilities. But the hospital group said the change would still “significantly” reduce revenue.

Medicaid costs represent about 15% of the total state budget proposed for fiscal year 2024. Hochul has inherited the struggle to keep spending on the program under control – particularly as the state’s population ages and more people require long-term care. But the funds from the massive public insurance program are also critical to health care providers that serve a large number of low-income New Yorkers and maintaining the care that those patients receive.

Although state officials are planning to review New Yorkers’ eligibility for Medicaid in the coming months and anticipate that some people’s coverage will not be renewed, the executive budget also acknowledges that enrollment is unlikely to return to pre-pandemic levels. Meanwhile, it’s possible that some recent arrivals could become eligible for public health benefits as their applications for asylum are approved.