President Trump’s domestic policy law, which extends federal tax cuts and slashes the social safety net, is expected to have a seismic effect on health insurance and health care in New York, with more than one million people in the state losing benefits, experts say.
In one key respect, the law’s impact will be felt more keenly in New York than in any other state — and it has nothing to do with Medicaid.
Instead, it is the result of an obscure federal funding mechanism that sends billions of dollars a year to New York and nothing to most states. That money, which started flowing as a result of the Affordable Care Act, will be reduced drastically under the new law, beginning next year.
That change is expected to leave more than 200,000 people statewide without insurance over the next two years. But in the long run, it could be eclipsed by other health care-related provisions in the law, known as the One Big Beautiful Bill Act, which Mr. Trump signed on Friday.
The law adds limits and reductions to Medicaid and other government health insurance programs. “The only thing we’re cutting is waste, fraud and abuse,” Mr. Trump has said. State estimates show that the law could eventually strip health insurance from 1.5 million people enrolled in Medicaid and other health coverage plans in New York, about 7.5 percent of the state population.
Overall, the state could absorb a $10 billion hit annually because of the policy law. That reflects a combination of increased state expenditures and cuts in federal subsidies that support health insurance and health care for people with lower incomes. Those cuts will reduce revenue for hospitals, with some responding by charging higher prices to middle class and wealthy patients, who are covered by private insurance, according to the president of the hospital industry’s main trade association in New York. Other hospitals might close.
Some of the consequences will be felt in the coming months; others, not for years. But New York hospital executives, health care advocates and public health officials were largely unified in their assessment.
In a memo to hospital executives, Kenneth Raske, the president of the Greater New York Hospital Association, described the bill as “the most destructive health care cuts in American history.”
“There is no candy-coating the bill’s impact on New York,” Mr. Raske wrote.
Changes in Medicaid, such as new work requirements, will lead to more than one million people in New York losing health insurance during the next decade, according to estimates by the New York State Department of Health. But those changes won’t begin until 2027 at the earliest.
Arriving sooner will be changes to New York’s Essential Plan, which is a federally funded insurance plan that has grown significantly in recent years. Through a quirk in the funding formula, that plan has become a spigot of billions of federal dollars for New York — a flow of health care money unrivaled nationally.
Bill Hammond, a health care policy analyst at the Empire Center for Public Policy, an Albany think tank, called the Essential Plan a “black swan” event.
“It’s the only health plan I’ve ever come across where there was more money than was needed to the point they were piling up billions in a trust fund,” said Mr. Hammond, who has written about the Essential Plan.
What Is the Essential Plan?
The Essential Plan is a federally subsidized health insurance program for people who earn too much to qualify for Medicaid but struggle to afford private health insurance. The Affordable Care Act gave states the option of creating an insurance program for residents who earn less than twice the federal poverty level — about $64,300 a year for a household of four.
While states split the cost of Medicaid with the federal government, the Essential Plan is almost entirely underwritten by federal dollars. It has another significant feature: Many people who were barred from receiving federally subsidized coverage under Medicaid because of their immigration status are eligible under the Essential Plan.
Only three states created health insurance programs under this provision of the Affordable Care Act: New York, Minnesota, and, more recently, Oregon. The federal funding formula was particularly favorable to New York.
As state health officials caught on, the Essential Plan expanded. Enrollment soared to more than 1.6 million people. Statewide, the program covers just under 9 percent of residents while insuring a far higher share in New York City, covering 13 percent of people in Brooklyn and the Bronx and more than 16 percent in Queens, according to the state comptroller’s office.
One sign of the program’s popularity: The number of people in New York lacking health insurance dropped to below 5 percent.
From the start, New York used the Essential Plan as a safety net health insurance program for noncitizens, enrolling hundreds of thousands of immigrants early on. (Those eligible include green-card holders, refugees, asylum-seekers and people covered by the Deferred Action for Childhood Arrivals policy, known as DACA.) The federal government was paying more than anyone anticipated, with subsidies that were linked to the cost of private health insurance, which is pricier in New York than elsewhere.
As a result, huge surpluses sat in a state-controlled fund that recently held $8.5 billion and was expected to grow to $11.6 billion by the end of the 2024-25 fiscal year.
As the surpluses grew, New York State used the money to pay higher rates to doctors and hospitals, who had long complained that they lose money treating Medicaid patients. They have argued that the reimbursement rates — sometimes just one-sixth of what private insurance pays — don’t cover costs. New York State directed that the Essential Plan pay more than twice the Medicaid rate. That means a hospital could earn more treating one patient covered by the Essential Plan than two equally sick Medicaid patients.
Mr. Hammond has called the plan “absurdly wasteful,” and an anomaly that was never going to last forever. “It didn’t seem to matter how many people they enrolled. They continued running a surplus,” Mr. Hammond said in an interview. “It was too beautiful to live.”
It’s not dead yet.
While the domestic policy law will greatly reduce the Essential Plan in New York, removing 730,000 people starting Jan. 1, about 500,000 of them will be able to secure coverage though a different program. This time, though, the state will be paying, at an estimated cost of $2.7 billion a year. That’s because a 2001 New York court decision requires the state to pay for health coverage for many immigrants disqualified from federally-funded Medicaid.
But about 224,000 immigrants who face the loss of Essential Plan insurance aren’t poor enough to be covered by the 2001 court decision and may not be able to afford health insurance on their own. State health officials expect that many will become uninsured.
Hospitals and Clinics
The impact on hospitals and clinics, especially those that mainly treat patients with lower incomes, will be profound.
Many poor people in the state receive primary care through community-based health care organizations that rely heavily on Medicaid. And those health centers are bracing for the coming years, when many Medicaid recipients will be required to work, volunteer or take classes at least 80 hours a month — and those who don’t will lose coverage. Even people who work enough hours could lose coverage because of administrative hurdles and paperwork requirements.
The result could be that more than one million New Yorkers — or nearly 15 percent of the state’s entire program — could lose Medicaid coverage, according to state estimates.
“I’ve seen a lot of ups and downs, but I don’t know if I’ve seen anything as disastrous as this,” said Anne Kauffman Nolon, who is the chief executive of Sun River Health, which runs a large network of community health centers across the Hudson Valley, New York City and Long Island, and has worked there for 48 years.
As patients lose insurance, revenue will drop. That could force her organization, which sees more than 200,000 patients a year, to cut back on more expensive specialties, such as pediatrics, obstetrics and gynecology, and behavioral health.
Hospitals would feel the same pressure. In the coming years, more patients are likely to be uninsured, meaning hospitals will treat more patients at a loss.
The effects could fall particularly hard on New York City’s public hospital system, called NYC Health + Hospitals, which operates Bellevue and 10 other hospitals and provides primary care to hundreds of thousands of New Yorkers.
Contemplating the looming cuts at a City Council hearing in May, Dr. Mitchell Katz, the chief executive of Health + Hospitals, said the answer was to offer fewer services, potentially cutting back on some specialty care such as cardiologists for primary care patients.
“You want to see a specialist?” he said, describing a primary care visit after the changes. “I’m sorry, I don’t have a specialist for you to see.”
Joseph Goldstein covers health care in New York for The Times, following years of criminal justice and police reporting.
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