NY faces billions in lost federal funding for Medicaid, food assistance

Jie Jenny Zou, The Press-Republican, Plattsburgh, N.Y.Press-Republican

New York’s top leaders will need to make tough decisions in the coming months as they confront billions in lost federal funding for the state’s largest and oldest safety net programs.

Last week, Congressional Republicans pulled an all nighter to narrowly pass the sweeping “One Big Beautiful Bill Act,” enacting a series of lucrative tax breaks for America’s richest at the expense of its poorest.

The fast-track budget deal, which was signed into law by President Donald Trump on Independence Day, lays out over $1 trillion in cuts to Medicaid and the Supplemental Nutrition Assistance Program (SNAP) over the next decade.

“It’s not a big beautiful bill, it’s quite a despicable bill,” said Ryan Healy, advocacy manager for Feeding New York State, a nonprofit that focuses on hunger relief and anti-poverty efforts. “When people say this bill is a death sentence, they’re not exaggerating. People could very well die as a result.”

New York would lose over $15 billion annually for Medicaid and SNAP, according to the Fiscal Policy Institute, a left-leaning think tank. Over 1.5 million New Yorkers could lose their coverage and up to a million could lose their SNAP benefits, likely resulting in foregone medical care and increased food insecurity. Many New Yorkers could wind up both uninsured and hungry, as a majority of Americans who receive SNAP are also enrolled in Medicaid.

Some changes would take effect in a matter of months, forcing the state to quickly pivot and either cover the shortfall or slash benefits. New York would also need to quickly build a new system for closely tracking benefit recipients, an undertaking that Governor Kathy Hochul’s office estimated could cost $500 million alone.

County social service departments — which oversee Medicaid and SNAP locally and are already short-staffed — will need to ramp up their hiring and training to comply with a host of onerous new paperwork requirements. Individual counties could also be on the hook for up to millions of dollars in annual SNAP administrative costs no longer covered by the federal government.

“This is beyond the capacity of the local tax base, this is beyond the capability of the local workforce,” said Stephen Acquario, executive director of the New York State Association of Counties. “We have not been briefed by the state and we don’t know what their plans are at this point in time.”

Hochul did not respond to Focus’s request for comment about how the state plans to move forward. Since Trump took office, Hochul has been insistent the state was not in a position to backfill federal cuts, and she has largely resisted calls from advocates and legislators to shore up state funding for a variety of social service programs.

Other states, like Oregon and New Mexico, took a more proactive approach — allocating additional funding for state healthcare initiatives, setting aside a surplus or trust fund to deal with decreased federal support, or launching special committees dedicated to addressing cuts.

Earlier this year, Hochul’s office was granted emergency powers to implement midyear budget cuts if federal rollbacks reached a $2 billion threshold. Michael Kinnucan, senior health policy advisor at the Fiscal Policy Institute, said that threshold will likely not get triggered due to the timing of the cutbacks, but urged state lawmakers to return to Albany to start working on solutions. The state legislature closed its doors for the year in June, but can call a special session to address urgent matters.

“We don’t think the legislature should let the state drift towards a cash crunch,” said Kinnucan. “We know these cuts are coming. The sooner we have that discussion, the more flexibility we have to find good — rather than bad — ways to handle it.”

State Senator Roxanne Persaud, who heads the chamber’s Social Services Committee, is supportive of a special session and expects legislators will convene soon.

“We cannot accept that New Yorkers should go hungry or lose their health coverage among other benefits,” she said. “These cuts will decimate an effective and efficient program that reduces hunger, supports work, and stimulates the economy. This legislation will impose exorbitant, unsustainable costs to the state.”

The single largest funding loss for New York is right around the corner. Starting in January, the federal government will eliminate $7.5 billion in annual support for certain legal immigrants enrolled in New York’s Essential Plan — the state’s free healthcare program for those who don’t meet the stricter income requirements for Medicaid.

That change will likely force the state to transfer the majority of those 1.6 million New Yorkers to state-funded Medicaid instead, a shift that could cost $2.7 billion more each year. But as many as 250,000 could have their coverage dropped entirely and become uninsured.

Kinnucan also anticipates a provision cancelling a special Medicaid tax on managed care organizations will take effect early next year, resulting in a $1.5 billion annual loss to the state. Revenue from this tax helps pay for increased hospital payment rates, as well as financial support for struggling safety-net hospitals.

All together, the changes to Medicaid would impact not only enrollees, but any New Yorker who goes to a hospital.

“If immigrants go uninsured, their health needs don’t disappear, they wind up in the hospital emergency room and the hospital takes care of them,” said Kinnucan. “It’s less a question of whether we’re paying, but how we’re paying.”

Hospitals across the state that rely significantly on Medicaid and federal support face a high risk of closure.

Kinnucan said the state can take action to lessen or avoid the pain of some of the cuts by raising revenue such as a tax hike on high-earners or expanding the sales tax to include the services sector. “The amounts of money involved are substantial, but in the context of the New York state tax base and economy and budget, they’re not ‘unmakeup-able,’” he said.

Hochul voiced her opposition to a tax increase on wealthy New Yorkers last month. “I don’t want to lose any more people to Palm Beach,” she said.

Healy, from Feeding New York State, urged state leaders to carefully weigh their options as they figure out how to respond to the cutbacks. “We have a lot of poverty in the state, but we also have a lot of wealth,” he said. “If anybody needs to pay, it should be people who can afford to pay.”

He likened the forthcoming SNAP cuts to what happened to a former federal cash assistance program that was also targeted by Congress in the 1990s with similar work rule requirements. That program, Healy said, saw a steep decline in participation and was replaced by today’s Temporary Assistance for Needy Families program.

“This is an existential threat to SNAP as a program,” he said of a harsher time limit on food assistance benefits for households across the state, including those with children. Adults aged 18 to 64, including those with children over 14 years old, would need to provide proof of at least 80 hours of work, education, or volunteering monthly in order to receive SNAP benefits for more than three months in a three-year period.

SNAP’s new work rule requirements could be implemented in New York as soon as March, Healy predicted. Similar work rule requirements for Medicaid have been delayed to 2027.

These requirements will likely spell a logistical nightmare for county social service departments, which oversee eligibility for both Medicaid and SNAP and have been cited in recent years for failing to process applications in a timely manner.

“There’s no way we could do this with the existing workforce,” said Acquario, of the state county association. “We’re having a generally hard time right now recruiting.”

The kind of staffing positions needed under the new requirements would be “extremely difficult to fill,” Acquario said, requiring a lot of training and expertise.

Counties could be collectively on the hook for $168 million annually in SNAP administrative costs no longer covered by the federal government as soon as October 2026. Initial calculations suggest that some Upstate counties could be forced to kick in as much as $6 million per year to cover that gap.

It’s unclear whether counties could also be made to pay for a share of the actual SNAP benefits paid out to recipients monthly. Those benefits have been fully paid by the federal government since the current version of SNAP rolled out in 1964.

But the federal government will shift part of those costs onto the state as soon as 2027. It’s estimated that the funding gap would total at least $1.1 billion annually for New York.

“We need time to analyze this massive piece of legislation,” said Acquario. “It’s going to be extremely difficult to implement.”

Just The Facts Here’s a look at some of the changes coming to New York and how soon they might take place: Supplemental Nutrition Assistance Program $186 billion: the total amount of federal cuts to SNAP over the next decade, which amounts to 20 percent of the entire program. This is the largest cut in the program’s history, which dates back to 1964. New York received $6.5 billion in SNAP benefits in 2024, covering 18 percent of the state’s population. $1.1 billion: how much New York could pay annually in SNAP benefits. The federal government has historically covered 100 percent of food stamp benefits. The law would likely force New York to cover 15 percent of benefit costs as soon as October 2027, but could ultimately be delayed. 300,000: the minimum number of New Yorkers who will lose some portion of their SNAP benefits under expanded work requirements, according to estimates. Roughly 3 million New Yorkers used SNAP last year. Over half of SNAP households had children and 47 percent included seniors or a disabled individual. Work rule requirements are predicted to kick in for New York in 2026. 75%: the share of SNAP administrative costs that New York will cover, including the distribution of electronic benefit cards. Traditionally, the federal government and states have evenly split administrative costs. New York has been a hotbed for SNAP theft by criminal rings who exploit vulnerabilities in electronic benefit cards. As a result of skimming scams, thousands of New Yorkers have lost their SNAP benefits and the state has had to issue more replacement cards. This funding gap is expected to take effect October 2026. Freezing benefits: this change will affect every SNAP recipient by limiting future updates to the Thrifty Food Plan, a funding formula used to calculate monthly benefit rates. If enacted, recipients could see their benefit levels frozen despite record inflation and rising food costs. The average New York household received $376 in monthly benefits last year. Medicaid $1 trillion: how much the federal government will cut Medicaid spending over the next decade. Medicaid covers 6.9 million New Yorkers, or roughly 35 percent of the state. 17 million: the number of Americans who could lose healthcare coverage by 2034, according to analyses by the nonpartisan Congressional Budget Office. The agency had originally estimated 8.6 million Americans would go uninsured but upgraded those calculations as the legislation worked its way through Congress and cuts to Medicaid increased. 80 hours: the amount of time per month that “able-bodied” adults without dependents will have to work, spend in school, or volunteer in order to stay eligible for Medicaid. An analysis by the left-leaning Center on Budget and Policy Priorities found that 2 in 3 Medicaid enrollees already work and the remainder are either disabled, caregiving, or attending school. The law requires states to implement work rule requirements by no later than Dec. 31, 2026. $35: how much Medicaid recipients who make more than 100 percent of the federal poverty level will need to pay out-of-pocket for certain services per visit. This change takes effect October 2028. 6 months: how often states will need to reassess individuals for Medicaid eligibility for adults who make more than 138 percent of the federal poverty level. Currently, Medicaid recipients reapply for the program annually. This requirement would likely place an administrative burden on New York’s county social service departments which have struggled in the past with backlogs for benefit programs. This change takes effect in 2027. Eliminating the MCO Tax: the law cancels what’s called the “MCO tax,” an accounting trick that has allowed some states to temporarily generate billions in federal funds through Medicaid. New York just received federal approval for the tax and had factored in the projected revenue in its newly passed budget. The tax is cancelled starting 2026.