After an almost two-month delay, New York State has finally passed its FY26-27 Budget. For healthcare providers, there’s a lot to unpack – especially within the Medicaid funding included in the Health and Mental Hygiene portion of the budget.
The good news: the final budget includes meaningful investments across several provider types, including hospitals, safety net providers, nursing homes, assisted living programs, and Federally Qualified Health Centers (FQHCs). But not all of this funding is created equal. Some is new. Some is prior year funding expected to be paid this year. Some is spread over multiple years. And some is dependent on Healthcare Stability Fund dollars and MCO tax revenue.
That distinction matters. Providers will need to look beyond the headline numbers and understand what actually hits, when, and what still depends on state or federal approvals.
Hospitals
Hospitals received one of the largest funding packages in the final budget, with nearly $1.4 billion in combined new and recurring investments supporting infrastructure, rate increases, and quality programs.
The funding includes:
- $606 million for inpatient rates
- $100 million for outpatient rates
- $94 million for capital rate restoration
- $290 million in additional outpatient rate investment supported by MCO tax resources
- $20 million for a Rural State Directed Payment Program enhancement
- $250 million for a new quality pool
The budget also eliminates proposed cuts to the Vital Access Provider Assurance Program and continues significant supportive funding programs for financially distressed providers.
Safety Net Providers
The budget continues the State’s focus on financially vulnerable providers through the Safety Net Transformation Program. In total, this includes approximately $1.3 billion, made up of:
- $1 billion in capital funding
- $330 million in operating support
There is also additional operating funding planned in future years, reinforcing that this is not a one-year investment.
Nursing Homes
Nursing homes also saw a meaningful investment.
- $480 million in new Medicaid rate funding beginning April 1, 2026.
- $385 million in MCO tax-related funding from the prior budget expected to be paid in FY26-27.
- ~$57 million tied to restoration of previously reduced capital reimbursement (although a 5% capital reduction remains in place)
In total, that’s more than $920 million tied to FY26-27. That said, the details still matter – especially around methodology, timing, and how funds are ultimately distributed at the facility level.
Assisted Living Programs
Assisted Living Programs (ALPs) received more modest, but still notable funding:
- $20 million in new Medicaid rate funding
- $15 million in prior-year MCO tax-related funding expected to be distributed separately
The budget also restores prior funding levels for:
- EQUAL Program: $3.26 million for capital + $3.26M aid to localities
- Enriched Housing Program (EHP) Subsidy: $380K
- Adult Care Facility (ACF) Respite: $7.2 million
One thing that did not happen: no increase to the Supplemental Security Income (SSI) State Supplemental (beyond the federal COLA pass-through).
Federally Qualified Health Centers (FQHCs)
The budget includes an $80 million investment in FQHC rate funding, critical support for providers serving a large share of uninsured and underinsured patients.
Why the Funding Source Matters
A major part of this budget depends on MCO tax revenue and the Healthcare Stability Fund. The State is expected to pursue changes to how the MCO tax is structured, but that will require federal approval. If approved, beginning January 1, 2027, the State would replace the current structure with a uniform tax on total premium revenue across all health plans.
The revised tax structure is expected to generate less revenue than the current tax structure, so providers will need to keep watching for CMS approval, DOH guidance, and payment timing.
Final Thoughts
Overall, the FY26-27 Budget is a positive step. There is real Medicaid funding across nearly every major provider type. But this isn’t as simple as a single funding increase. Providers should be focused on:
- what is actually new vs. continuing
- what is tied to prior year dollars
- what depends on MCO tax revenue and federal approval
- and how/when payments will flow
There is real investment here, but also a lot that still needs to play out.
If you have any questions or are interested in learning more, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
