Institutional Federal Compliance Report 2021

102 • Notes to Basic Financial Statements _________________________________________________________________________

the federal government $1.15 billion and accordingly, has reported the remaining liabilities of $800 million in the governmental activities. In 1977-78, the State required that reserve funds held by insurance companies that underwrite the State employee health insurance programs be paid to the General Fund. The State is liable to replenish these reserve funds if needed to pay insured benefits or if the contracts with the insurance companies are terminated. Accordingly, based on actuarial calcula- tions, the State has recorded a liability of $192 million, which is reported as accrued liabilities due in more than one year on the government-wide Statement of Net Position. Generally, the State does not insure its buildings, contents or related risks and does not insure its State- owned automobiles for bodily injury and property damages, but the State does have fidelity insurance on State employees. A liability is estimated for unpaid automobile claims based on an analysis of property loss and claim settlement trends. Routine uninsured losses are recorded as expenditures in the General Fund as paid, while significant uninsured losses usually are the result of litigation that is discussed further in Note 11. Insured losses incurred by the State did not exceed coverage for any of the three preceding fiscal years. Litigation losses are estimated based on an assessment of pending cases conducted by the Office of the Attorney General. Workers’ compensation is provided with the State Insurance Fund acting as the State’s administrator and claims processing agent. Under an agreement with the State Insurance Fund, the State pays only what is necessary to fund claims. Based on actuarial calculations, discounted at 0.57 percent as of March 31, 2019, the State is liable for unfunded claims and incurred but not reported claims totaling $3.8 billion, which are reported as accrued liabilities in the gov- ernment-wide Statement of Net Position. Changes in the State’s liability relating to workers’ compensation claims, litigation and incurred but not reported loss estimates related to medical malpractice claims (Note 11), and auto claims in fiscal years 2018 and 2019 were (amounts in millions):

would cover the debt service costs for one hospital which had its debt service obligation discharged in bankruptcy, a second hospital which closed in 2010 and a third hospital that is currently delinquent in its payments. The State has estimated an additional expo- sure of $7 million annually if all hospitals fail to meet their terms and available reserve funds are depleted. In order to provide additional inducement to investors to purchase the obligations of certain public benefit corporations, the legislation creating these corporations authorizes the State to make up any defi- ciencies in their debt service reserve funds, subject to legislative appropriation (effectively, a “moral oblig- ation” debt to back the corporations’ credit). Such “moral obligation” debt does not constitute a full faith and credit obligation of the State. As of March 31, 2019, approximately $155 thousand in moral oblig- ation bonds were outstanding. During the year, the State was not called on to make any payments. Health care providers have a right to appeal Med- icaid reimbursement rates. Based on an analysis of appeals, a liability of $264 million has been recognized in the government-wide Statement of Net Position. Settlements were reached between the State and the majority of nursing home providers in 2016 for $850 million in rate appeals. The settlements are being paid in five annual payments of approximately $170 million each, starting in the fiscal year ended March 31, 2016. To date, $678 million has been paid. Accord- ingly, the State has reported the remaining liability of $172 million, which is reflected in the $264 million amount noted above. The Centers for Medicare and Medicaid Services (CMS) disallowed Medicaid claims for services pro- vided by the New York State Office for People with Developmental Disabilities in fiscal years 2011, 2012 and 2013. The State and CMS reached a settlement agreement on March 20, 2015 on this matter, whereby the State agreed to pay a total of $1.95 billion to CMS. The agreement called for the State to adjust the federal and State shares of Medicaid costs over 12 years to yield repayments of $850 million in fiscal year 2016, and $100 million in fiscal years 2017 through 2027. Through March 31, 2019, the State has reimbursed

Payments and Decrease in

Claim Liability Beginning

Increase in Liability Estimate

Liability Estimate

Claim Liability End of Year

Fiscal Year

of Year

2017-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2018-2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

5,178 $ 5,400 $

961 $ 144 $

739 $ 922 $

5,400 4,622