A State Fund That Helps Children Hurt at Birth Is Quietly Suspended

For more than a decade, a little-known New York State fund has paid the medical expenses of children who have suffered neurological injuries as a result of medical malpractice during childbirth.

In that time, the fund has distributed hundreds of millions of dollars to 963 families, helping to pay for hospital stays, nursing care, speech therapy and in-home medical equipment, among other costs.

But with little warning, the state shuttered the fund earlier this month. A financial report released around the time of the closing projected that the fund would eventually face a shortfall of at least $3.2 billion — a figure that would rise if the fund continued to enroll new children.

The fund’s financial problems had been known for years. Rising enrollment, combined with a costly change in 2017 that increased the quality of care offered by the fund, were cited four years ago as reasons that money would run out by the end of 2023.

Still, the closure of the Medical Indemnity Fund, which was disclosed on the state Health Department’s website, surprised families, lawyers and lawmakers alike.

Kenneth E. Raske, the president of Greater New York Hospital Association, said that hospitals, particularly those serving poorer patients, could buckle under the astronomical costs of birth injury claims — potentially worsening a trend that has led roughly 30 maternity wards in New York to close since 2008.

Mr. Raske said that his team was blindsided by the suspension, and by the casual way it was communicated.

“I likened it to basically saying, ‘Oh, by the way, the bridge is out,’” he said.

The state Health Department has assured the children currently enrolled in the fund that their coverage will be uninterrupted. On Friday, state budget officials announced a short-term reprieve: $58 million of state funds to ensure that enrollment would continue through March 2025.

The state budget director, Blake G. Washington, acknowledged that the state’s handling of the fund’s closure had caused anxiety to the families affected, but pledged that they would be made whole.

Even so, Mr. Washington could not guarantee the fund’s long-term viability, noting that the $3.2 billion shortfall was a best-case scenario, with liabilities potentially exceeding $5 billion.

“I think there is probably — not right now, but in the long term — a broader discussion to be had about how the fund is supported, and what the expectations are,” he said. “But that’s a problem for another day.”

For some families, the uncertainty was not so easy to dismiss.

The mother of a 5-year-old boy from Westchester County had always known that he had suffered through a difficult birth. But it took years — and diagnoses of epilepsy, cerebral palsy, learning delays and apraxia — to realize the consequences of the accident during delivery that deprived his brain of oxygen. In 2021, his family brought a case against the hospital that had delivered him, reaching a settlement earlier this month.

But the day after they met with the judge, their lawyer delivered the bad news: Because the fund was suspending new enrollments, the family’s settlement had been rejected.

The mother, who spoke on the condition of anonymity because of the uncertainty around the settlement, said the news was devastating. “This is a really big issue for kids, excuse my language, but who have already been screwed by the system,” she said, using an expletive.

The Medical Indemnity Fund was established by Gov. Andrew M. Cuomo in 2011 as a way to lower the cost of health care and provide stability for the families of children who had been neurologically impaired.

These types of injuries, which often occur when a baby’s brain is deprived of oxygen during labor, are rare. But their profound effects on a child’s life, future earnings and ability to live independently made them spectacularly expensive for hospitals — expenses that administrators argued drove up costs for all patients.

Under Mr. Cuomo’s arrangement, families would still be required to bring malpractice claims in court. But rather than requiring hospitals to pay the entire judgment or settlement, the state would pick up the cost of all future medical care.

In exchange, New York pledged to require that hospitals institute new safety protocols, such as increased staffing and training, to reduce the number of birth injuries.

Yet in the following years, New York’s rate of birth injury surpassed expectations. Where actuaries predicted that roughly one in 10,000 children would be eligible for the fund as a result of a brain or spinal cord injury in 2011, by 2014 they were expecting nearly three times that number — partly thanks to New York’s broad definition of birth injury.

The surge in enrollment strained the fund, which by 2017 was already facing a spending gap of half a billion dollars. This stress was exacerbated by a change that lawmakers pushed through later that year, which raised the rates of reimbursement from their previous Medicaid-prescribed caps.

The change resulted in substantially better care for children enrolled in the program, but drastically increased the fund’s liabilities. In 2018, there was just one child who had received more than $1 million in benefits from the fund. By 2022, there were 14.

That change was critical, said Cameron Brown, whose daughter has quadriplegic cerebral palsy as a result of a birth injury.

She is thriving, Mr. Brown said, in large part because of the care she has received through the fund. But this, too, presents a long-term funding challenge.

“My daughter, she’s supposed to live until she’s 19 — she’s 14,” he said. “But she’s doing really, really well. She gets a lot of treatment. Could she live until she’s 40, 50? It’s very possible.”

Julie Smith’s son, now 16, has been a part of the fund since its inception. It has not always been easy, she said, recalling countless hours poring over paperwork, negotiating with case managers and pushing for reimbursements.

Even so, she said she believed the fund offered more stability than other options. “If you have extensive medical needs, that money doesn’t last,” she said, noting the costs of nursing care, hospital visits and medical equipment.

“It’s not sustainable,” she said. “Just like the fund isn’t sustainable.”

It is not clear how long the state will find the money for the fund to meet its obligations, which are projected only to grow in the coming years.

State Senator Liz Krueger, the chairwoman of the Finance Committee, has a proposal to extend the fund’s enrollment for two years and provide more durable protections for the children currently enrolled. An plan proposed in the State Assembly would keep the fund open for one more year.

Ms. Krueger acknowledged that the fund was imperfect in many ways, most significantly in its failure to meaningfully reduce the incidence of birth injuries. But she believes the state has a moral obligation to the children benefiting from the program it set up.

“Maybe it wasn’t a good program, maybe we shouldn’t have done it,” Ms. Krueger said. “But we did it.”