Hochul warns of 'draconian cuts' to New York's bottom line with OBBBA

ALBANY, N.Y. (NEXSTAR) — The federal budget bill—the "One Big Beautiful Bill Act"—has sparked alarm across New York, with warnings of devastating impacts on health insurance, food assistance, and the state's economy. The legislation, signed into law by President Donald Trump on July 4, passed the House by a narrow 218-214 vote, with all New York Republican representatives supporting it.

Opponents like Fiscal Policy Institute Director Nathan Gusdorf argue the cuts will cost the state billions every year to fund tax breaks for the wealthy that would have expired at the end of 2025. But supporters like Assemblymember Ari Brown, a Republican from Cedarhurst, champion the bill as a masterstroke of conservative reform that strengthens the economy and secures borders.

The bill does include provisions—backed by U.S. Congressmember and Dean of the New York Republican Delegation Elise Stefanik—to expand Pell Grants and develop skilled American labor in high-demand fields. The OBBBA bans Medicaid funding for abortion providers who receive $800,000 or more in Medicaid funds. It also includes a 2.5% payment increase for physician services under Medicare, effective January 2026.

Still, on Friday, Governor Kathy Hochul released data that her office said details OBBBA's "draconian cuts" to Medicaid and SNAP benefits. "No state can fully undo the damage in this bill or backfill cuts of this scale," she said.

Billions in healthcare cuts, coverage losses

New York's healthcare system and budget face an estimated impact of almost $13 billion per year from the OBBBA, according to Hochul. Over 2 million New Yorkers could lose their current insurance—including about 730,000 legal non-citizens from the Essential Plan and another 1.3 million from Medicaid—because of new eligibility and verification hurdles.

This could drive up uncompensated care costs for hospitals and providers by about $3 billion annually. It would also return the state to levels of uninsured not seen in 15 years, since the Affordable Care Act took effect.

The OBBBA doesn't extend enhanced ACA marketplace subsidies that expire at the end of 2025. The state estimated that this subsidy cliff could lift insurance premiums 38% and lose the state over $1 billion.

The Greater New York Hospital Association and the Healthcare Association of New York State estimated an $8 billion annual cut to New York's hospitals and health systems. That would force hospitals to reduce maternity care or psychiatric treatment, downsize operations, or even close, leading to longer wait times and less access to medical care statewide.

One Hudson Valley health system, Garnet Health, already reported laying off 42 employees because of uncertainty surrounding OBBBA. Opponents of the bill said 63,000 healthcare-related jobs could be cut in New York—34,000 lost in hospitals, and 29,000 more in other medical settings.

On Thursday, New York State Budget Director Blake Washington called the situation "destabilization." He explained that the system-wide overhaul will give New Yorkers who need medical attention fewer options while overwhelming providers. Washington also argued that a $3 billion impact projected for the next fiscal year alone obscures the broader point for people losing health insurance or hospitals whose cash flows disappear.

Still, the Rockefeller Institute of Government released an analysis on Thursday. It teases out how OBBBA revises the definition of "qualified immigrant" for Medicaid and Child Health Plus to exclude refugees, asylees, parolees, and anyone in temporary protected status—with pregnant women and children exempt. This takes effect in October 2026 for Medicaid and CHP.

Medicare eligibility for these groups fully ends by January 2027. The bill excludes most non-naturalized immigrants from ACA tax credits and New York's Essential Plan, a Medicaid-like program, starting in 2027. Hochul's office estimated that this would lose $7.6 billion in for the the Essential Plan and uninsure 730,000 of its 1.7 million enrollees. The OBBBA also blocks the federal government from reimbursing states for emergency care for noncitizens, which had once been offered in the case of life- or organ-threatening situations.

That shift could cost the state $256 million every year. The governor also said that a 2001 court ruling, Aliessa v. Novello, forces the state to continue covering about 500,000 of lower-income New Yorkers knocked off the Essential Plan, costing about $2.7 billion. But the net loss to the healthcare industry from this provision is closer to $5 billion, according to The Empire Center's Bill Hammond.

OBBA added work requirement for non-disabled adults on Medicaid. They have to demonstrate at least 80 hours per month of community engagement—paid employment, education programs, or community volunteering—to maintain their benefits. Hochul's office estimated that this would uninsure 1.2 million people, more than half of those enrolled. Hammond suggested that a decline in coverage for 1.2 million could manifest as $9 billion in Medicaid savings: $7.6 billion for the feds and $1.4 billion for New York.

The bill also tightened restrictions on "provider taxes," a newly-implemented strategy New York uses for matching Medicaid funds. The governor estimated this would cost the state $1.6 billion in lost revenue, though Hammond argued that this option would have been phased out anyway.

OBBBA also includes a national Rural Transformation Fund of $50 billion over five federal fiscal years, beginning October 2026 and ending in FY 2030. But Hochul's office questioned whether these funds would actually trickle down to any hospital in the Empire State.

On Wednesday, three Democratic U.S. Congressmembers from New York held a press event to share their perspective on the budget bill. Rep. Ritchie Torres challenged the idea that cuts target waste, fraud, or abuse. "Why would it be necessary to set up a $50 billion fund to stabilize hospitals in rural America?" he asked.

Rep. Joe Morelle called the bill a betrayal of working families, saying that Republicans are "willing to slash Medicaid, Medicare, and other essential services just to give billionaires tax breaks." He warned that the bill could trigger sequestration, a law that could take hundreds of millions of dollars out of Medicare to reimburse health care providers, throwing off the entire healthcare system.

And freshman Rep. Laura Gillen called it "the largest erosion of our health care system in history." She warned that rising costs would impact New Yorkers with private insurance in addition to Medicaid recipients.

They made the case that what the bill does falls short of beautiful, pointing to defunding health care as a means of bankrupting the future of the state and its workforce. "The notion that there are masses of welfare kings and queens who are gaming the system is a figment of the right wing imagination," Torres said, arguing that New York spends most of its Medicaid money on people who are disabled and elderly, not scammers.

SNAP reduced, costs shifted to state

And indeed, research from the U.S. Department of Agriculture’s shows that every $1 spent on the Supplemental Nutrition Assistance Program generates about $1.54 in economic activity. New York issues over $7 billion in SNAP every year, which translates to over $11 billion in economic activity generated statewide.

The OBBBA also cuts those food stamp benefits, used by almost 3 million New Yorkers. For the first time in history, the law requires states to pay for SNAP, with New York State having to fund 15% starting in October 2027—about $1.15 billion each year.

The federal share of SNAP administrative costs also drops from 50% to 25%, increasing state costs by another $266 million per year as of October 2026. Plus, that move also increases costs for county governments and New York City by about $168 million per year. All told, state and local governments will have to foot the bill for somewhere between $1 billion and $2 billion in new annual SNAP costs.

That amount depends on the state's payment error rate. According to FPI, the SNAP error rates that determine cost-sharing are unreliable because of typos, not fraud.

The law also imposed new work requirements on SNAP recipients that will likely reduce or eliminate benefits for 300,000 households, with an average loss of $220 every month. These requirements will make it harder to qualify for assistance and primarily affect parents of children over 14, adults aged 55 to 64, veterans, refugees, and asylees.

OBBBA also cuts $29 million per year from the SNAP-Ed New York Program. Plus, less money to spend at the grocery store means slimmer profit margins for thousands of businesses, with job losses and other ripples possible all along the agriculture and food supply chain.

According to New York State Office of Temporary and Disability Assistance Commissioner Barbara Guinn, "The historic cuts and cost shifts related to SNAP enacted last week will take food off the tables of hundreds of thousands of New Yorkers and shift billions of dollars in costs onto the backs of the State and local governments in New York, while weakening the very safety net families rely on when times are hard."

SALT deduction: A small benefit for few

Even so, Brown said he likes that OBBBA extended the policies of the 2017 Tax Cuts and Jobs Act that raised the standard tax deduction to $15,750 for single filers, and the child tax credit to $2,200. He's a fan of the additional $150 billion for border enforcement. "We're finally giving ICE and our border patrol the tools they need to keep America safe," he said.

The legislation also includes $150 billion more in defense spending, with $25 billion for a Golden Dome space-based missile defense system and $29 billion for building ships. Plus, OBBBA creates "Trump Savings Accounts" that gives parents and guardians of children born between 2024 and 2028 a $1,000 deposit from the feds.

New York's Republican backers of OBBA counted another major win in the bill. Stefanik said she was "proud to help lead the successful effort to increase the State and Local Tax deduction cap to $40,000—the largest tax cut for New Yorkers ever."

SALT lets taxpayers subtract some state and local taxes they've already paid from their income on their federal taxes. OBBBA raises the limit to $40,000 for households earning up to $500,000. Both the cap and the income threshold are also supposed to increase by 1% each year.

The Business Council of New York State praised the SALT, noting it "will benefit all taxpayers in states with high state and local tax burdens" and specifically crediting Republican U.S. Congressmember Mike Lawler of New York for the extension.

But the labor union 1199SEIU opposed the bill and called out the congressmember. Greg Speller, Executive Vice President for the Hudson Valley and Capital region of 1199SEIU, said that Lawler "sold out every New Yorker" by voting for it. He claimed that OBBBA will "throw 1.5 million New Yorkers off their health insurance, kill 60,000 good jobs in our state, shutter New York hospitals and nursing homes, force service cuts all over the place, and raise healthcare costs and wait times for all of us—and for what? To fund more tax cuts for the richest of the rich."

For his part, Lawler celebrated the bill that he said "secured meaningful SALT relief," representing "the largest tax cut for New Yorkers ever."

But according to FPI estimates, this new SALT cap offers just $3,200 in extra tax breaks for a household earning between $450,000 and $500,000, with little to no benefit at all for those making anything under $305,000. FPI called it a "pretty marginal benefit for an income group that represents about 3% of all taxpayers in the state."

Now, different sources present different figures, accounting for different methodologies or projected timeilnes. FPI, for example, estimated a total state cost of about $23 billion a year, comprising some $10 billion in direct costs and $13 billion more from knock-on effects throuhgout the destabilized healthcare system.

Washington, meanwhile, cited a $750 million impact in the current fiscal year that ends March 2026 and projected "at least $3 billion or more" for the following fiscal year, from April 2026 to March 2026. He also noted about $500 million for eligibility system upgrades over a period of years.

His figures focused on the immediate and near-term state budget impacts, unlike the multi-year projections from FPI or directly from Hochul's office. Despite such variations, most analysis attached below shows consistent and substantial reductions for New York's social safety net.

Check out the most recent FPI analysis below: