Cuomo Loots A Catholic Charity
Gov. Andrew Cuomo has a disturbing new way to raise revenue: using government muscle to squeeze private organizations into “voluntarily” writing billion-dollar checks. That’s what he did to Fidelis Care, a nonprofit health plan affiliated with the Catholic Church, and its would-be buyer, Centene Corp.
In a murky deal announced on Good Friday, Fidelis and Centene agreed to pay the state $2 billion over four years. The payments are not technically required by law. But Fidelis and Centene agreed to them after a three-month pressure campaign by Mr. Cuomo, including overt and implied threats to seize the funds, block the sale or both.
Fidelis would seem an odd target for a gubernatorial money grab. Founded in 1993, it specializes in health coverage for the poor. With 1.6 million members, it is the largest purveyor of state-sponsored programs such as Medicaid managed care, Child Health Plus and the Essential Plan, as well as Medicare Advantage and commercial ObamaCare coverage. It has played a big role in reducing the state’s uninsured rate, and it has not been publicly accused of wrongdoing.
What sparked Mr. Cuomo’s campaign was Fidelis’s pending sale to Centene, announced in September, for a price of $3.75 billion. The bishops planned to put the money into a charitable foundation in support of health care for the needy. Mr. Cuomo argued that the state was entitled to $3 billion of the proceeds because Fidelis earned most of its revenue from state programs. By that logic, the state could skim the savings accounts of public employees when they retire.
He also cited the precedent of Empire Blue Cross Blue Shield, which yielded billions to the state when it converted to for-profit status in the mid-2000s. But that was a unique transaction under a narrowly tailored law that applies to no other company.
Despite lacking a legal claim to the money, Mr. Cuomo pursued it aggressively. Bills he submitted to the Legislature would not only have seized 80% of the proceeds from the sale but also raided Fidelis’s reserve accounts if the deal were canceled. The bishops would have paid either way. The sale needed regulatory approval from two state agencies, the departments of Health and of Financial Services, leaving it vulnerable to delay or rejection by Mr. Cuomo’s appointees.
In the face of a three-way bind, and with no meaningful support from either party in the Legislature, Fidelis and Centene agreed to give up $2 billion over four years, including $1.35 billion this year. The bishops’ charitable foundation is left with $3.2 billion, including both sale proceeds and surplus cash, and Centene salvages an expansion that has been well-received on Wall Street. But the state’s end of the deal creates the ugly appearance that regulatory approval of the Fidelis-Centene sale has been bartered for a 10-figure sum.
A final disturbing twist is where the state’s $2 billion is destined to go: into a “health care transformation fund,” into which the governor’s budget director can dip without even notifying the Legislature (or the public) for 15 days. So Mr. Cuomo is diverting money otherwise meant for charity to furnish himself with $1.35 billion to spend as he wishes in an election year. What innocent but deep-pocketed organization will be next?
Mr. Hammond is director of health policy at the Empire Center.