Join us for insights featuring Catherine Finley, Partner at Thorn Run Partners and Government Affairs Consultant for the National Council for Mental Wellbeing. Catherine will provide an update on the current state of policy, highlighting key developments and their implications for our industry.

Funding Freezes and Proposed Medicaid Changes: Impacts, Next Steps

1 p.m. ET, Thursday, Feb. 6, 2025

A members-only briefing on ongoing developments in federal policy and Q&A with Thorn Run Partner Catherine Finley.

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ALBANY, New York — As New York lawmakers gear up to begin budget negotiations this month, the state’s two legislative health committee chairs are grappling with how to proceed given unpredictable threats to federal funding.

So far, Sen. Gustavo Rivera and Assemblymember Amy Paulin, who head health committees in their respective branches of the Legislature, have settled on at least one way to do that and are imploring their colleagues to consider legislation that would delay consolidation of the state’s consumer-directed personal assistance program, pass the Medical Aid in Dying Act and indefinitely delay changes to the state’s school-based clinics payment model.

Central to their calculus is a memo President Donald Trump’s Office of Management and Budget released last week creating a sweeping freeze of federal assistance to states. Gov. Kathy Hochul predicted those cuts would cost New York $93 billion in federal funding. Days later, after a federal judge issued a temporary block, the memo was rescinded.But that doesn’t mean New York is in the clear.White House Press Secretary Karoline Leavitt said in a statement that the administration would “focus on enforcing the President’s orders on controlling federal spending” in the coming weeks and months.The ominous promise of cuts to what Leavitt described as “egregious” federal spending presents a unique challenge for state officials as they prepare to negotiate the state’s roughly $237 billion budget.The health care industry is of particular concern, given its reliance on federal funds to match state spending on vastly growing programs such as the state’s $123.8 billion Medicaid program.Paulin and Rivera sat down with POLITICO individually to discuss the state budget, federal action and the legislative session. Here’s what they had to say:These interviews have been edited for length and clarity. 

Gov. Kathy Hochul said the state cannot make up for the impact a loss of federal funds would leave in the state budget. How are you working through the unpredictability of the federal budget as you prepare to negotiate the state budget? 

Rivera: This administration thrives in chaos. It is my sense, particularly as it relates to funding from federal sources, that it’s going to dry up. We don’t know exactly the extent of this. It’s going to be kind of rolling, and it could be something as egregious as canceling everything and paying nothing.

There are things that we need to do to raise revenue in the state of New York to at least make up some of the shortfall. We needed to raise taxes on the wealthy before this moment so that we could make investments in different systems that would give us stability in the long term. But now it’s just to make up for some of the federal shortfalls with the recognition that we’re not going to be able to make up everything, but we can make up some of it.

Paulin: The damage will be done, if there is damage in the federal budget. We will have some advance warning of that direction. But it would be devastating to New York if they did what they could do. It would just be a dire situation, one I don’t know how we would deal with.There is going to be a federal proposal out there in advance of (our budget) when the federal government will adopt their final budget, so we’ll have some inkling. We’re in touch with our federal counterparts, but there’s no way to make it up.

This week President Trump signed an executive order aimed at ending gender-affirming care for minors. Is there action that can be taken at the state level to protect against these types of orders? 

Paulin: I hate to say I can’t answer that, but obviously if doctors are prescribing medication for someone, hopefully, that would be honored regardless of age. If we have to look at some state funding to make up those monies, we’ll have to look at that. It’s hard to know because we don’t know if we are talking about money, or a complete elimination by going to the FDA and saying this drug is no longer available.The discrimination is beyond words. He’s targeting poor people because anyone with private insurance — as long as he doesn’t take back FDA approval — is going to be able to get the medications that they are prescribed by their doctors.

The state’s overhaul of the CDPAP program has proven to be one of the most contentious debates this session. Many advocates for the program point to roughly a dozen pending legal battles and a slow start to the transition as justification for a delay to the April 1 transition deadline. Is this something that’s on the table for negotiation? 

Paulin: The deadline is in statute, and we adopted that into the budget. The contract between Public Partnerships LLC and the executive office says they must do it by April 1. Clearly, if there is a problem with that, we will have to delay.(Sen. Rivera and Assemblymember Al Stirpe’s bill) includes a lot of other provisions, and I doubt very much that those provisions would be included. We would delay if we need to, and as you pointed out, we might need to.

Rivera: There’s a reasonable alternative – it’s my bill. And that reasonable alternative would be providing a timeline — that’s not April 1 of this year. I’m not trying to be combative for the sake of being combative. I think that the evidence points to the fact that this transition is not going well, and that’s not a transition that we’re going to be able to get done by the time that the administration insists they can get it done.So let’s be thoughtful about this, if the governor wants to take my bill, make it her own and put some of it into the budget language, and take credit for it, I don’t care. It creates a more thoughtful and reasonable two-year timeline, and it creates standards so that bad actors can be identified and weeded out of the system.

Looking at Hochul’s executive budget proposals, what are your thoughts? Are there areas you’re hoping to improve on? 

Rivera: First, it’s not as bad as some prior years, which is a good thing. So we are in a much better place. We don’t have to fight her on so many cuts as we did in years past, which is a good thing. There are however a lot of details that are still lacking, but that’s the nature of the budget at this point.We’re still going through the process. But there are a lot of things in the health space that have a high level of uncertainty because they require federal approval.

Paulin: Like last year, the executive budget proposed cuts to public health, I’m sure the Assembly as a conference is going to want to restore many of those initiatives. Right now, we are hearing from stakeholders to see what’s necessary to change.

The data, which the city was required to release by law, is the first in-depth look at the volume of removals under Mayor Eric Adams’ directive to ramp them up in 2022. Under the order, the city instructed police and outreach teams to involuntarily transport individuals who appear to have a mental illness and are unable to meet basic needs to a hospital. The policy has been the backbone of Adams’ approach to addressing mental illness among homeless New Yorkers but has operated with little sunlight until now.

According to the report, 7,060 of the involuntary transports were initiated by police, and just 661 came from a clinician or mobile outreach team. The number of clinician-initiated removals is likely larger as data from November and December are not included in the report. The numbers at first glance reflect the heavy emphasis the mayor has placed on law enforcement’s involvement in the city’s mental health response, where police vastly outnumber the city’s smattering of outreach and co-response teams.

The largest number of removals occurred in Manhattan, with a concentration in Midtown. The highest number went to Bellevue Hospital, part of New York City Health + Hospitals, which received 755 individuals in 2024. In Brooklyn, the borough with the second-highest number of involuntary removals, the district with the most removals was Precinct 75, a police precinct that covers East New York and Cypress Hills and has the highest number of abuse-of-authority and use-of-force complaints in the city.

Of those involuntarily taken to a hospital, only 58% were admitted for treatment at a public hospital, where the largest number of people were taken against their will.

This is the first time the administration has issued a report on the removals so comparisons to past years is not available. The report acknowledges that some of the data is incomplete.

Despite the focus of the policy being on unsheltered individuals in the subway system, about half – 3,660 – took place in private dwellings, with only 1,558 happening in the transit system or another public place. Two thousand removals happened in “unknown” locations, according to the report, which also notes that data from the health department is missing.

The reported transit numbers do not differ greatly from the volume of involuntary removals that took place in the subways the year before the directive was announced. At an Oct. 2022 press conference on subway safety with Gov. Kathy Hochul and MTA brass a month before Adams announced the new policy, the mayor said police had removed 1,500 people from the transit system so far that year.

About half of all involuntary removals were perceived to be Black and a quarter were thought to be Latino. The report notes that police and clinicians are often unable to obtain demographic information from individuals during removals, leaving gaps in the data.