April 11, 2025

Last night we sent you information re: CMS having sent states a ‘Dear State Medicaid Directors’ letter (4/10/25) indicating that it is unlikely to approve federal funds matching assistance for new 1115 Waivers being submitted by states, or to approve extensions of existing 1115 Waivers. The letter from CMS (pasted below) included a link to the ‘Dear State Medicaid Director’ letter it sent, but it was broken!  We located the letter online.  See attached.  Again, while this does not have an immediate impact on New York’s recently amended and ‘in play’ 1115 HERO Waiver, it has significant implications for new 1115 waiver initiatives, it impacts unspent 1115 funds, and it appears likely that it will impact New York’s ability to seek an extension of the current Waiver.  More as we know it.

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FEDERAL BUDGET UPDATE

Yesterday the House passed a Budget Resolution that allows it to cut $1.5 trillion in overall federal budget funds while the Senate agreed to just $4 billion, with potential room for extra cuts.  Now, Congress will have to decide upon the exact contents of the bills, including whether to cut Medicaid funding.  

The House Resolution retains the instruction to its Energy and Commerce to find $880B (over 10 years) in savings in areas where the committee has fiscal jurisdiction including Medicaid, Medicare and Social Security.  In order to persuade House fiscal hawks and other conservatives to vote in favor of the resolution, Speaker Mike Johnson told the would-be holdouts that if they voted with him, he guaranteed the House would find a minimum of $1.5T (over 10 years) from the federal budget or they can vote him out as Speaker.  Apparently this was enough for the hardliners to cast a vote in favor of the resolution.  Nevertheless, some House and Senate Republicans remain concerned that these moves will blow the federal budget deficit out beyond all recognition, while others do not feel the current commitments to reduce overall spending are not sufficient.   

With the House and Senate in agreement on budget targets, Congress can move forward with the reconciliation process. If all goes to plan, reconciliation will allow Republicans to move forward legislative priorities without the support of Democrats. 

The budget resolution gives instructions to congressional committees on federal spending from their areas of jurisdiction. The committees are allowed to decide where the cuts will come from and will now work on specific legislation to meet the targets. 

Here’s more from The Bulwark, focusing on the federal budget deficit piece:

These Are Not Serious People

The party of deficit-busting is about to blow a multi-trillion dollar hole in federal revenues—and paper it over with a budgetary gimmick.

Fun with Numbers

by Andrew Egger

Trump’s “reciprocal” tariffs and the barmy calculations the administration used to devise them aren’t the only deeply fishy math the Republican party is indulging this week.

As they stumble toward a budget bill, GOP lawmakers are also working to renew the tax cuts package from the 2017 Tax Cuts and Jobs Act. As originally passed, those cuts were temporary—a necessity to make the budgetary math add up at the time. But because current law plans for them to expire, renewing them would (per traditional accounting rules) blow a brand new hole in the federal budget, spiking deficits by hundreds of billions of dollars a year. This will all come at a time when Republicans are trying to posture as though they’re finally ready to get serious—no fooling this time—about the debt.

So how do Republicans hope to surmount this messaging hurdle? By lying, mostly.

The current budget framework, approved by the Senate last week and by the House on Wednesday, takes an approach to assessing its impact on the deficit you might charitably call novel. Rather than scoring the framework on a “current law” baseline—as in, recognizing that the tax cuts are legally set to expire and being honest about the cost of renewing them in the budget framework—Republicans are using a “current policy” baseline: assessing the budget framework in contrast with tax levels as they stand today.

Why make this change? Because it gives them permission to pretend that permanently renewing temporary tax cuts—which, again, had to be temporary to make the math work when they were originally passed—comes with a price tag of zero. It’s free real estate.

It’s hard to find an appropriate metaphor for how ridiculous this is, but Manhattan Institute economist Jessica Riedl took an admirable stab in the New York Times back in March. “Last year, despite being deeply in debt, I bought a $100,000 sports car. So next year, buying another $100,000 sports car is not irresponsible because I am merely spending the same amount of money as the year before,” she wrote. “And if I purchase ‘only’ a $70,000 car, then I should be congratulated for reducing my annual spending by $30,000.”

This is amazing stuff coming from a Republican-controlled Congress that just spent the last few years repeatedly taking the nation to the brink of government shutdown or debt default, supposedly over its deep concern about deficit spending. Of course, that was before Trump roared back into office demanding a fresh new stack of revenue-obliterating tax cuts, promising an end to taxes on everything from overtime to tips. Republicans are already kicking the can down the road on where to find spending cuts¹ to solve for those changes; it’s far more convenient to pretend this other pile of cuts—which, again, I feel like I’m taking crazy pills, will amount to trillions in lost revenue over the next decade—don’t require dealing with.

Supposed budget hardliners in the House folded en masse this week after Trump told them Tuesday night to “close your eyes and get there.” The sole exceptions were Reps. Victoria Spartz and Thomas Massie. Spartz—not exactly a typical voice of reason by reputation—hit the nail on the head here: “The instructions we voted on today,” she said, “are still setting us up for the largest deficit increase in the history of our Republic, & opening up a ‘pandora’s box’ by changing accounting rules to hide it.”

Massie was even more biting: “If you were trying to hasten financial collapse of our country and bribe voters to go along with it, the strategy wouldn’t look much different than what Congress is doing today. The big beautiful bill cuts taxes while keeping spending on an increasingly unsustainable trajectory.”

The shamelessness here would be astonishing if it wasn’t so typical. Elsewhere in Washington, Elon Musk and DOGE are leaving the federal bureaucracy a smoldering ruin, slashing and burning and tearing the wires out of the walls of the government. At a cabinet meeting yesterday, he proudly unveiled his total anticipated savings: $150 billion for fiscal year 2026. When I talk to Republican friends and family about DOGE, they point to these savings as a crucial step in finally getting a handle on our national debt—one well worth the destruction. But even if that number weren’t massively overinflated, which it absolutely, definitely is—all while being significantly smaller than the $2 trillion in savings Musk originally promised—its gains would be washed away many times over by the financial cost of this single congressional budgetary gimmick.

That Congress is trying it anyway speaks to their confidence that Republican voters don’t actually care about reining in the debt—or at least that they will be too distracted with other stuff going on to bother kicking the tires on their work. And, well, there is a lot else going on—a difficulty Riedl herself acknowledges. She told The Bulwark that “I would usually be lighting myself on fire outside the Capitol” over the current-policy gimmick “if we weren’t in the middle of tariffs right now.”

“There’s so much chaos going on right now that you just can’t hit all of it,” she added.

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STATE BUDGET 
(Politico, 4/10)

DAYS THE BUDGET IS LATE: 10

ROLL THE TAPE: In honor of the state budget being late — and the governor’s approach to it — we thought it might be nice to take a trip down memory lane.

When Gov. Kathy Hochul served as the state’s lieutenant governor, she had a lot to say about getting a budget done on time.

“On-time budgets are a bigger deal than people realize,” Hochul said on X while campaigning for reelection in 2014, a year when the budget was passed two days early.

“If you judge successful indicators — by getting a budget on time and balanced — those are two things we take for granted now, but couldn’t six years ago,” she bragged the following year during a conversation with Utica’s Observer-Dispatch editorial board — even though the 2015 budget was technically a few hours late.

And three years later, while she was fending off a primary challenge from Jumaane Williams, her campaign stressed that budget punctuality was at the top of Hochul’s mind:

“With Washington on offense, we need to be protecting New Yorkers and delivering an important, on-time budget this year. That’s her main focus right now,” a spokesperson for Hochul said in 2018.

As lawmakers prepare to go home for a Passover vacation — which will be interrupted by the need to pass more budget extenders Tuesday and beyond — the budget deal remains far away.

Legislative leaders met with Hochul today as she continues to try to hash out a deal away from the press.

They’re making “slow progress,” one source close to negotiations said. They had last met on Saturday.

Until this afternoon, Hochul was hunkered down, hashing out the spending plan privately as she sends the Capitol’s press corps a daily parade of surrogates to vouch for her budget priorities — the celebrity status of Hochul defenders waning with each passing day.

On Monday, she dispatched Alvin Bragg and Darcel Clark, district attorneys from Manhattan and the Bronx, respectively, to vouch for her embattled discovery reform proposal to reporters. The following day, out came Brooklyn DA Eric Gonzalez and Albany DA Lee Kindlon. On Wednesday, there was Queens District Attorney Melinda Katz and Westchester DA Susan Cacace, with Hochul Budget Director Blake Washington also answering questions.

And at noon today she sent Albany County Executive Dan McCoy and Office of Mental Health Commissioner Ann Sullivan to promote her push to lower the standard for involuntary commitment of the mentally ill, a measure that has remained “close” to reaching the finish line for at least three days.

Later this afternoon, the governor spoke to the Capitol’s reporters for the first time since last Thursday.

“I’m not going to compromise my principles over a date,” she said. “We were late once 32 days; we’re late 20 days. I don’t embrace that, but I’m not going to back down from a fight.”

A spokesperson for Hochul, Avi Small, said the governor’s past statements on budget deadlines are irrelevant.

“This ridiculous fixation on decade-old palace intrigue is a distraction from the real issue: Governor Hochul is fighting to crack down on recidivists and keep New Yorkers safe, and that’s why the budget is delayed,” he said. “The vast majority of New Yorkers want safer streets, stronger schools and lower middle-class taxes — and Governor Hochul won’t compromise on those key priorities.” — Jason Beeferman