Gov. Cuomo with top health and budget aides (photo: Kevin P. Coughlin/Governor's Office)

Governor Andrew Cuomo has been floating the idea of a special legislative session to address federal cuts to the state’s health care programs, as well as other concerns that have developed, since the state budget was agreed to in April.

In that budget, Cuomo pushed to include and won a provision granting him nearly unilateral power to adjust the state’s financial plan mid-year in the event of at least $800 million in federal cuts to the state. In April, the governor said the provision would ensure that “we do not overcommit ourselves financially” and indicated it allowed him to sign off on a budget that did not otherwise account for likely federal cuts. But, it appears as if Cuomo may call lawmakers back to Albany -- likely with agreement from the legislative majorities to an agenda -- regardless of whether the threshold has been met.

When the state Legislature finished its legislative year in June with a brief special session to pass mayoral control of schools as well as several smaller measures, such as $55 million in state aid for businesses and homeowners impacted by flooding around Lake Ontario, unknowns surrounding President Donald Trump’s promise to “repeal and replace Obamacare” loomed large.

As chatter of a special session to address two lapsed federally subsidized health care programs escalated this week, so did a feud between Cuomo’s administration and that of New York City Mayor Bill de Blasio over $380 million that was earmarked to reimburse New York City Health + Hospitals, the city’s public hospital network, for expenses incurred treating uninsured and indigent patients over the last two years.

In recent weeks, Cuomo has sounded the alarm over four essential funding streams to New York health care systems that are being threatened by Trump and a Republican-led Congress. While the federal Graham-Cassidy bill -- a replacement to the Affordable Care Act that would have cost New York $16.9 billion by 2025, according to projections -- was defeated, and parts of Trump’s sweeping tax plan that target blue states are on shaky ground, the federal government failed to renew the Disproportionate Share Hospitals funds, known as D.S.H., by October 1, creating a potential $2.6 billion shortfall that is expected to disproportionately hit New York City’s public hospital system over the next year and a half.

If they remain in effect, the cuts will place a $330,000 burden on Health + Hospitals for federal fiscal year 2018, but the city says the state is also unlawfully holding $380 million in federal funds owed to city hospitals for federal fiscal year 2017, which just ended, for services already provided.

This federal funding, which passes through the state, is allocated for municipal and state-run hospitals that treat high volumes of uninsured and indigent patients.

While it is unclear whether the cut would justify a budget adjustment by the executive branch given the April budget provision, Cuomo appears to be courting lawmakers to return for a special session that could address D.S.H. and other looming health care deficits.

Also lapsing earlier this month is the federal Child Health Insurance Plan (CHIP), which subsidizes New York’s Child Health Plus plan, putting New York in a $1.1 billion hole and potentially jeopardizing the health coverage of 330,000 lower-income New York children, according to Cuomo’s office, though it seems likely a federal deal over the children’s health program may soon be reached. Still, the state has been placed in a precarious position.

In a letter sent Wednesday to Eric Hargan, acting secretary of the U.S. Department of Health and Human Services, New York State Health Commissioner Howard Zucker warned that New York will not be able to continue the current Child Health Plus program if Congress fails to renew $1 billion in federal funding, and he said that Governor Andrew M. Cuomo will “have no choice but to call a special session of the Legislature.”

On Tuesday, Cuomo had dangled the special session idea before 13 upstate lawmakers, and in reality a much wider audience, suggesting in a letter that an extraordinary legislative session could also be used to amplify and speed up relief funding for Lake Ontario flood victims.

“I would support a special session of the legislature to return and appropriate an additional $35 million for this program to fund all eligible applicants in a time frame that recognizes the urgency of the situation,” Cuomo wrote. “There are other pending issues that could also be addressed at a special session, including the financial hardship the State will face from potential federal cutbacks.”

In addition to the 11 public hospitals in New York City’s Health + Hospitals system, the D.S.H. cuts directly impact the state-run SUNY Upstate Medical Center in Syracuse and SUNY Downstate hospitals in Brooklyn, Westchester County Medical Center, Nassau University Medical Center and Erie County Medical Center.

None of these facilities will receive payments until adjustments are made, according to Cuomo’s office.

The state has retained an outside consultant, KPMG, to figure out how to help health care facilities manage the cuts and Cuomo has repeatedly suggested that the Legislature may be forced to reconvene Congress signals that the money will not be restored by December 31. In a press conference on the topic last Tuesday, the governor suggested that local governments step up to offset some of the cuts.

“Nassau needs to help their public hospitals, New York City -- with a $4 billion surplus -- needs to help H+H, and SUNY will need to help Downstate and Upstate hospitals,” he said.

The cuts and Cuomo’s approach to dealing with them have ignited another episode in the feud between the governor and de Blasio and on Friday, the de Blasio administration announced its intention to sue New York State for D.S.H funds which administration officials say were expected by the city’s cash-strapped public hospital system for the federal fiscal year that ended on September 30.

City officials say they had budgeted with the expectation that $380 million would come through and Health + Hospitals Interim President and CEO Stan Brezenoff revealed that that the hospital system had begun to cut back on hiring to account for the deficit and was prepared to take other undesirable and risky measures.

“Our ability to deliver on our mission also relies on all levels of government. Unfortunately, the State is showing a shocking disregard for our mission and appears to have confirmed in public statements that they will not be releasing the $380 million Disproportionate Share Hospitals (DSH) funds that we need and deserve for serving more than one million Medicaid, uninsured and immigrant New Yorkers who relied on our care last fiscal year,” Brezenoff wrote in a letter to staff members last week.

As of Tuesday night, a spokesperson for the mayor’s office said the lawsuit would be filed “in state court,” but could say when it would be filed, or who would be named in the suit. De Blasio himself has said that the state’s withholding of past D.S.H payments designated for H+H, "is not normal and there is no excuse for it.”

Cuomo’s administration maintains that it is withholding its final payment to New York City’s public hospitals for the 2017 cycle in September because it is still unclear whether the federal government will renew the D.S.H. program.

“There’s no way to fund the public hospitals with a $1.1 billion cut unless it is rolled back,” the governor said during a press briefing last week. “In the meantime, we have made no D.S.H. payments to any public hospitals since October 1, which is when the law went into effect. You can’t distribute funding until you know how much you have to distribute.”

Cuomo officials say city hospitals should have anticipated the cut, noting that the program, which is associated with the Affordable Care Act, was always intended to be phased out as more New Yorkers became insured.

“The federal cuts to DSH have been pending for seven years and we are sure that all responsible CEOs of the state’s public hospitals have been accounting for these potential shortfalls in that time,” said Jason Helgerson, New York State Medicaid Director, in a statement. “The suggestion that the state is somehow in a position to reverse federal cuts is willful political ignorance and a distortion of reality -- only the federal government can possibly restore cuts they’ve enacted. Save for the federal government restoring these funds, there is no way the remaining DSH dollars can reimburse all hospitals at 100 percent.”

Cuomo’s office says that it has been in contact with city hospital officials and shared a letter Helgerson sent Brezenoff on September 29, referencing a meeting of healthcare providers to discuss the potentially imminent demise of D.S.H.

“While we implored Congress to act, as the October 1 deadline approaches, it is clear they are failing to do so,” the state Medicaid director wrote. “The Governor convened health care providers on September 19 to discuss the possibility of these cuts and held a press conference with the group outlining how harmful they will be.”

City officials claim that they have been singled out, and that all the state-run public hospitals have received their payments for the past fiscal year.

Regarding the potential lawsuit from New York City, Cuomo spokesperson Dani Lever called the threat “political theatre.”

“A more productive action would be to sue the federal government since they are making these devastating cuts, or if it actually cared about patient care, to use its funds to improve the hospital network that it owns,” said Lever.

One strategy -- requiring a legislative fix enacted through a special session -- would be to disperse the initial $380 million burden across hospitals throughout the state, most of which do not treat a large number of uninsured patients, state budget director Robert Mujica said in an interview with NY1 last week.

“The way the federal law interacts with the state law presently, is the first year of the cuts really impacts H+H first, under the law,” said Mujica. “So does that mean trying spreading the pain across all of the hospitals? That’s something we really have to look at. But always, redistributing is going to be very challenging. We hope it doesn’t come to that. We hope that the feds restore restore the cuts.”

U.S. Senate Democratic Leader Chuck Schumer of New York, who told State of Politics he’s been leading the charge to restore the hospital funding, described the battle in Congress as “neck-and-neck.”

The expiration of CHIP appears less dire; while the funding ended on September 30, states will not run out of the money for several months, and protecting children’s health is an issue that has bipartisan appeal. Schumer, who has been pushing to attach the renewal of CHIP funding to an Obamacare fix intended to stabilize markets and lower premiums, said he is working with his Republican colleagues to find a way to pay for the program.

About one-third of patients at the city’s public hospitals are uninsured and the network currently receives the largest D.S.H share. However, divvied up across state health care institutions, the $380 million burden would only account for less 1 percent of all hospital revenue, according to Bill Hammond, director of health policy at the Empire Center for Public Policy, a think tank.

"The lost money, if you look at just the federal losses, it’s about $330 million and that grows to $500 million in the second year, so it grows more and more every year. Spread across all the hospitals it would not be such a big deal, but right now it’s concentrated among 11 H+H hospitals, which is a problem,” Hammond said.

The ongoing federal health care crisis has also breathed new life into the debate over whether New York State would be well-served by a single-payer healthcare system, which Cuomo recently signalled tepid support for in an interview with WNYC radio’s Brian Lehrer.

A state-level universal health care bill, which guarantees health coverage to all New Yorkers regardless of ability to pay or immigration status, has repeatedly passed the Democratically-controlled Assembly, but has been defeated in the Republican-led state Senate by a sliver of a margin.

Assemblymember Dick Gottfried of Manhattan, who sponsors the bill, acknowledged that even if a version of his legislation was enacted tomorrow, it would take several years to fully implement, but said it warranted a second look given the uncertainty coming from Washington.

"It would not provide immediate relief, but the cuts that are likely to come from Washington will not come all at once, they will like snowball over the next couple of years," said Gottfried. “If we recognize health care as a right and provide health care coverage to every single New Yorker…Under a single-payer system, safety net hospitals and public hospitals would make out much better than they do today.”

Hospitals would save millions of dollars in administrative costs and the state would be in a much better position to bargain with drug companies, as it would represent 20 million patients, Gottfried added.

“Those savings are about the only way, realistically, that we can fill the gaps from whatever federal cuts are coming, without significantly damaging other programs or raising taxes,” he said. Critics, including Hammond, have said that Gottfried’s single-payer plan would be far costlier to the state that the Assembly member suggests.

When reached for comment on the health care cuts and whether the Assembly is prepared to return to Albany to deal with the situation, Mike Whyland, spokesperson for Assembly Speaker Carl Heastie, said, “We care deeply about these hospitals and are closely monitoring it.”

A spokesperson for Senate Majority Leader John Flanagan did not respond to a request for comment.