ALBANY — New York could be forced to make more than $1.5 billion in drastic cuts to Medicaid spending over the next five months as the state grapples with unplanned health care costs.

An October report from the state Division of Budget acknowledged that the state’s Medicaid spending is on track to exceed statutory limits by more than $3 billion for the fiscal year that ends March 31. In response, Gov. Andrew M. Cuomo is “expected” to delay as much as $2 billion in Medicaid payments and make up the rest of the shortfall in savings, including “across-the-board reductions in rates paid to providers and health plans and reductions in discretionary payments,” according to the report.

On Tuesday, Freeman Klopott with the Division of Budget said the state is developing a plan to “fix the structural imbalance” in the program and continue to deliver quality care for the more than six million New Yorkers who rely on Medicaid.

The time to act, though, was when the problem first presented itself years ago and the state began delaying Medicaid payments to skirt the cap on spending, according to Bill Hammond, a health care policy analyst for the fiscally conservative Empire Center for Public Policy.

“The shorter time you have to make the cuts, the more severe they have to be,” Hammond said, noting that any spending reductions could effectively be doubled if they jeopardize matching federal funding.

A report from Comptroller Thomas P. DiNapoli’s office has urged the governor to “clarify” his response to the fiscal challenge as soon as possible. The state’s plan for addressing the imbalance could be revealed in the mid-year financial plan update that was due at the end of October and is about a week overdue.

The situation is largely a product of a self-imposed restriction on the growth of the state’s Medicaid spending that was championed by Cuomo, but hasn’t reflected the reality of New York’s need in recent years. The underestimated expenses have been driven by increased Medicaid enrollment, the cost of programs such as managed long-term care and the phasing out of federal funding streams, according to the administration.

In order to stay under the Medicaid cap, the administration has “super powers” it can unilaterally invoke to cut costs, but has so far declined to use.

“They are finally starting to come to grips with this, and better late than never. … It sounds like they’re going to invoke their super powers for at least part of the problem,” Hammond said in reference to the anticipated cuts. “But it never should have gotten to this point.”

Additionally, if the state doesn’t address the underlying factors that contribute to the rising Medicaid budget, the challenge of unforeseen costs could resurface next year, according to a fiscal watchdog, the Citizens Budget Commission.

CBC Director of State Studies David Friedfel warned that this would be in addition to paying for the delayed Medicaid payments, which he said have the potential to “snowball.”

Asked Tuesday about the ramifications of the Medicaid shortfall on next year’s budget, Cuomo said: “It is going to be a major financial issue for the state next year.” – 518.454.5427 – @poozer87

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Unplanned Medicaid costs present tough choices for state – Times Union