It Is Always Darkest Before the Dawn
At the outset of the Chinese Cultural Revolution, Chairman Mao reportedly said, “It is always darkest before it becomes totally black.”[1] I confess to sharing that feeling with millions of other Americans when I woke up Wednesday morning in London to see the wreckage of the election.
But as Americans, we are wired to believe that “it is always darkest before the dawn.” There are silver linings (well hidden) in the election results. To begin with, as Peggy Noonan wrote last Friday, “All defeat carries a gift: You get to figure out what you’re getting wrong.” Democrats certainly have a lot to think about, and that won’t be finished overnight.
The other silver lining of the election, from the standpoint of Democrats though not of the country, is that President Trump almost certainly will be unable to solve the problems that he rode to victory upon. In some cases, he will be unable to implement his policy prescriptions. In others, the prescriptions will not only prove inadequate to fix the underlying malady, but actually make the problems worse. The crises of affordability and social alienation are a function of global technological change and social and cultural forces that are not easily susceptible to public policy solutions.
In any event, the dawn is a long way off. In the meantime, New York State and local governments will be on their own as they try to meet the challenges of modern life. The incoming Trump administration will make those challenges in the Health and Human Services sector even harder than they already are. This Commentary examines some of the risks for the Health and Human Services sector in New York under the Trump administration.
Picking up where the first Trump administration left off
The first set of health policy challenges New York is likely to face involve initiatives that were pursued in the first Trump administration, but which by and large were not implemented.
The repeal of the Affordable Care Act famously failed only because of the defiance of Sen. John McCain. Given President Trump’s and the MAGA world’s obsession with dismantling every visible accomplishment the Obama administration, we should expect that there will be a ceremonial repeal of the ACA while preserving the essence of the policy. This is essentially what happened with NAFTA in the first Trump term.
The question is the extent to which the new Trump administration will tinker with the fundamental dynamic of the ACA, which is to make insurance more expensive for most by making insurance more affordable for people who actuarially represent high risks. Those higher risks are not just among those with pre-existing conditions, but women of reproductive age and people older than 50. It is simply insurance 101 that when you make insurance less expensive for those with lower risk, you increase the cost of insuring everyone else.
Time will tell how the Trump administration, a Republican Senate and (it appears), a Republican House will manage those trade-offs. In any event, because there will be efforts to reduce spending wherever possible, the enhanced ACA subsidies that sunset in 2025 are unlikely to be renewed. At the margin, this will lead to more New Yorkers going uninsured and force others to accept less comprehensive coverage.
The bigger risk to accessing affordable healthcare coverage in New York would involve changes to the Essential Plan and the similar “1332 waivers” in many other states. The basic structure of these programs is to provide the states with an amount of funding equivalent to the ACA subsidy that covered individuals would have received and allow the state to use that funding to provide health insurance coverage that is more comprehensive and/or reaches populations (i.e., undocumented immigrants) who are otherwise ineligible for Medicaid or ACA subsidies.
The formula for funding the Essential Plan is quite favorable to New York, resulting in federal payments of more than $1 billion annually in excess of the actual cost of insuring Essential Plan members. This formula was challenged during the first Trump administration. New York reached a settlement that preserved the favorable formula, which is embedded in federal statute. However, if Republicans control the House, as well as the Senate and the presidency, the ACA statute could be changed in a way that reduces this significant financial benefit to New York. Roughly 1.5 million working-class New Yorkers receive comprehensive healthcare coverage under the Essential Plan at virtually no cost to them and very little cost to the State. So, any changes to this program would be very unfortunate.
After access to healthcare coverage, the next big risk New York may face involves administrative actions that significantly impact the amount of federal funding for Medicaid in New York. If the ACA statute is significantly revised, one target could be the enhanced match rate under the ACA that was designed to incentivize states to expand Medicaid eligibility. If this higher federal share was eliminated and the federal match for all Medicaid payments to New York was restored to a 50-50 split, the loss of federal funding would be significant.
Another risk for New York would involve pending administrative actions that the State has been counting on for fiscal relief. One of the most vulnerable of these administrative actions involves the State’s recent application for approval of an “MCO Tax”, which would be worth approximately $1.4 billion of additional federal funding annually. Blue states that have pending applications such as the MCO Tax are likely besieging the Biden administration for approval of these actions in its remaining months in office. This is going to be like catching the last helicopter out of Saigon and not everyone will make it aboard.
Among the many worrisome positions set forth in The Heritage Foundation’s notorious Project 2025 report is this statement, which seems targeted at financing arrangements like the MCO Tax and the ACA enhanced match rate. The report states:
“The current funding structure for the Medicaid program rewards expansions, lacks transparency, and promotes financing gimmicks. CMS should: 1. End state financing loopholes… [and] 3. Replace the enhanced match rate [under the ACA] with a fairer and more rational match rate.”[2]
Project 2025 effectively became a banned book during the Trump campaign not because it distorted the programmatic objectives of the intellectual wing of the MAGA movement but rather because it described those objectives all too clearly. Positions staked out in the 922-page Project 2025 report highlight the risks of healthcare policies in a Trump administration, even if some of the proposals may be a bridge too far for the political wing of the MAGA movement.
CMS waivers have generally been respected for terms that cross administrations, as was the case with the DSRIP Medicaid waiver that was in place when President Trump took office in 2017. However, there is other language in the Project 2025 report that contemplates reopening these waivers. The report states:
“[R]eform would include adding [to] Section 1115 waiver requirements in some cases (such as imposing work requirements for able-bodied adults) while rescinding requirements in others (such as non-health care benefits and services related to climate change).”[3]
Providing federal financial participation under Medicaid for “non-healthcare benefits” – a.k.a. “health-related social needs” – is the centerpiece of the State’s recently approved New York Health Equity Reform (NYHER) 1115 Medicaid waiver.
A more existential threat to Medicaid in New York involves block grants to the states. As noted by the Kaiser Family Foundation:
“The [1st] Trump Administration and other Republican proposals…aim to significantly limit federal Medicaid spending by restructuring Medicaid financing into a block grant or a per capita cap where states would receive a pre-set amount of funding for Medicaid in total or per enrollee….[that] would be less than what is expected under current law. Program costs in excess of the total or per enrollee caps would not be matched by the federal government, leaving states to cover these costs or reduce Medicaid spending….The Trump Administration FY 2020 budget proposed to convert federal Medicaid funding to a per capita allotment; this change along with other health care adjustments totaled $1 trillion in spending reductions relative to estimated spending under current law over 10 years.”[4]
Because per capita Medicaid spending in New York is higher than any state in the nation and is currently growing at a rate of roughly 10% per year, New York is particularly vulnerable to any type of block grant or per capita spending cap program. Such a fundamental change in the structure of Medicaid financing would require Congressional approval. It remains to be seen whether Republicans from competitive House districts in New York and other Blue states would support such a change or take the more parochial position they maintain on SALT reform, of placing the financial interests of constituents above ideological purity.
Robert F. Kennedy, Jr. and other barbarians at the public health gates
The new risk from a Trump administration, which arose only at the end of the first Trump term with the onset of the Covid-19 pandemic, is an assault on traditional public health policy that animates much of the MAGA movement and which is exemplified by Robert F. Kennedy, Jr.
RFK Jr.’s call in the closing days of the campaign to motivate localities through the threat of legal liability to stop adding fluoride to the public drinking water supply may be a harbinger of what is to come in public health. “Normal” Republicans have long called for streamlining (i.e., shrinking) the Medicaid program. But the assault on many core principles of public health, including questioning the safety of vaccines, challenging the FDA’s regulatory processes for the approval of pharmaceutical drugs and food safety, and promoting unproven therapies instead of generally accepted medical practice, is a new phenomenon that has arrived on the wave of the MAGA movement’s skepticism of science and expertise. Although RFK Jr.’s agenda is consistent with mainstream Democratic policies on reproductive health, the ideological wing of the MAGA movement also poses a threat to access to family planning services and reproductive health care.
If this thinking carries the day, the implications could be far greater than the financial issues of health insurance coverage and Medicaid’s support of the healthcare delivery system. For the moment, it seems that the focus of Kennedy’s iconoclastic approach to public health seems to be on persuasion rather than coercion. Undermining confidence in the safety of vaccines is bad enough, but federal prohibitions on states or localities from, for example, making vaccinations a condition of school attendance, would take matters to a different level. If the campaign is a guide, President Trump is too politically focused to give into the hardliners in his party on family-planning services and reproductive health, but this will always be a risk in a Republican administration.
While RFK Jr.’s agenda regarding vaccines and the public health regulatory agencies threatens important policies, other parts of his agenda might be at home in the progressive wing of the Democratic Party. In particular, his suspicion of Big Pharma and his belief that environmental factors and food-related policies play a significant role in the increase in chronic illness is a conviction shared by such progressives as Bernie Sanders, Elizabeth Warren, and AOC. Indeed, aspects of the agenda of RFK Jr. and his allies such as Calley Means and his sister Dr. Casey Means, could almost pass for being a progressive wish list in a Democratic administration.
This account from a health policy newsletter described a September roundtable that Sen. Ron Johnson held with notable Trump allies, including RFK Jr.:
“Dr. Means highlighted that 99% of farmland is sprayed with synthetic pesticides, but these chemicals are strongly linked to chronic health issues. She added that toxic chemicals, microplastics and heavy metals used in foods and water alter gene expression, the microbiome, gut lining and hormones. She also cited reports that each additional serving of ultra-processed food increases the risk of early mortality by 18%.
“Calley Means…and Dr. Casey Means, [have advocated to] remove sugary drinks and ultra-processed food from the Supplemental Nutrition Assistance Program (SNAP), cut federal funding for scientists with conflicts of interest, and split food and drug oversight into different agencies. Calley Means has also proposed an immediate end to direct-to-consumer pharmaceutical advertising, which could occur through an executive order (EO).”[5]
Much has been written about how populist policy positions of President Trump, JD Vance, and certain of their supporters conflict with long-standing views of the establishment Republican Party. It will be interesting to watch whether the populist aspect of RFK Jr.’s health policy agenda will survive the opposition of more powerful corporate stakeholders. If it does survive, it would be supremely ironic that these long-standing progressive goals were achieved by the reviled Donald Trump. But I would not hold my breath waiting for that outcome.
Elon Musk and the government efficiency commission
At a speech to the Economic Club of New York on September 5, 2024, President Trump announced that he would create a Government Efficiency Commission, led by Elon Musk, which would be “tasked with conducting a complete financial and performance audit of the entire federal government and making recommendations for drastic reforms.”[6] Musk has asserted that the exercise will identify savings of “$2 trillion,” although he did not specify the time frame over which the savings would be achieved. Musk acknowledged that the exercise “necessarily involves some temporary hardship, but it will ensure long-term prosperity.” He added that he envisioned going through all government expenditures “one item at a time, no exceptions, no special cases.”[7]
The odds that we will have a colony on Mars in 10 years are better than the chance that Elon Musk will succeed in eliminating $2 trillion in federal spending. Even the identification of meaningful proposals will be politically problematic given the insistence by both President Trump and congressional Republicans that they will not cut Medicare or Social Security. Any suggestions of cuts to Medicare or Social Security would become campaign fodder for 2026.
At the beginning of the Cuomo administration in 2011, I was tasked with leading a Spending and Government Efficiency (SAGE) commission. One of the threshold decisions we made was to focus exclusively on the 20% of State Operating Funds spending that was dedicated to government operations, as opposed to program spending on Medicaid, School Aid, and the like. The SAGE commission was able to identify a significant number of operational improvements in State government, many of which were implemented, while other recommendations ran aground due to bureaucratic or stakeholder opposition.
The implications of President Trump’s commission (which Musk describes as the Department of Government Efficiency, or “DOGE”) for New York is that DOGE will catalyze efforts to find “efficiency” in government spending programs. There is little doubt that the operational efficiency of the federal government could be improved – and perhaps DOGE will make smart recommendations in that area. But the real money involves programmatic spending, in which one man’s efficiency is another man’s income or benefits. Medicaid, which accounts for approximately $460 billion of federal spending in FFY 2024, will almost certainly be a target of the DOGE initiative. It is hard to believe the program will emerge unscathed.
***
Along with the proverb that “it is always darkest before the dawn,” Democrats and elected officials in New York should embrace the maxim that “a crisis is a terrible thing to waste.” The second term of the Trump administration could easily become a crisis for New York – and in many different respects that go beyond Health and Human Services policy.
The response of Democrats and elected officials to the broader crisis that led to the Republican sweep this election must begin with a recognition that the economy simply doesn’t work for most people. The cumulative effect of special-interest protections, over-engineering against risk, and a prioritization of protecting the status quo instead of embracing change in areas such as local zoning, have dramatically disrupted economic mobility. Our flawed economy contributes, even though it is far from the sole cause, to social and cultural alienation, which in turn increasingly leads to a sense of civic disorder. This whole constellation of issues must be addressed before we can be confident that the dawn will arrive.
The challenge is narrower for policymakers in New York. Federal funding in the New York State budget has increased by 20% since FY 20, while a roaring economy and a surtax on corporations and high-income New Yorkers have enabled State Operating Funds spending to increase by 30% since FY 20 – with State Operating Funds spending increasing by 9.4% in the current fiscal year alone. The Trump administration will likely accelerate the ultimate day of reckoning for programs in New York that reflect the generosity of New Yorkers, but which are financially unsustainable. Any austerity imposed by the Trump administration will reduce some of the options for addressing our deeper underlying problems, but austerity also creates the opportunity for new thinking and the necessity for politically uncomfortable decisions.
When President Trump was elected in 2016, the cold open of Saturday Night Live had Kate McKinnon at a piano singing Leonard Cohen’s song “Hallelujah.” When she finished singing, she turned to the audience and said, “I’m not giving up, and neither should you.” It’s a mantra that got me through President Trump’s first term and we should remember it in the years to come.
Errata: In the Commentary “Year Two for the Step Two Policy Project,” we incorrectly identified VillageCare as a for-profit MLTC. Our apologies to VillageCare, which is a high-quality not-for-profit MLTC plan led by the estimable Emma DeVito. Our apologies for the error.
Paul Francis is the Chairman of the Step Two Policy Project. He served as the Director of the Budget in 2007 and as the Deputy Secretary for Health and Human Services from 2015-2020, among other positions in New York State government, before retiring in May 2023.
[1] https://www.azquotes.com/quote/360095. Like many of our favorite quotations, this may be apocryphal, although it is often cited to make a point.
[2] Project 2025 at page 467.
[3] Ibid. at page 469
[4] https://www.kff.org/medicaid/issue-brief/what-the-outcome-of-the-election-could-mean-for-medicaid/#financing
[5] https://www.bhfs.com/insights/alerts-articles/2024/trump-s-alliance-with-rfk-jr-indicates-realignment-of-priorities-for-hhs-in-second-term-
[6] https://singjupost.com/full-transcript-trump-speaks-at-the-economic-club-of-new-york/?singlepage=1
[7] https://www.nbcnews.com/business/economy/economy-if-trump-wins-second-term-could-mean-hardship-for-americans-rcna177807
