A plan to help struggling hospitals that cater to minority and low-income patients in New York City that has been under consideration for more than a year is causing friction between the state’s Congressional delegation and the Obama administration, and leading to heated words between Albany and Washington.

In a tense phone call late last month, New York Gov. Andrew Cuomo (D) pushed Health and Human Services Secretary Kathleen Sebelius to act promptly on his state’s request to spend billions of dollars on Medicaid reforms, including hundreds of millions to shore up public hospitals on the brink of financial collapse.

At issue is a 152-page request [pdf] for exemption from some of Medicaid’s rules that would let New York reinvest some of the $17 billion it says it can save the federal government through reforms to the Medicaid process. The money, $10 billion in all, would be reinvested into the state’s health programs. The request would allow implementation of a multi-year action plan that Cuomo’s Medicaid Redesign Team says will improve care for the more than 5 million New Yorkers who participate in Medicaid.

On the call last month, Cuomo mused that he had expanded Medicaid in his state by executive order, which aides viewed as an implicit threat that he could unilaterally pull out of Medicaid expansion, dealing a major blow to the success of the Affordable Care Act at a critical juncture if the state’s request isn’t granted.

But some close observers of the process say Cuomo’s administration is to blame. They say the Cuomo administration has tried to use political pressure to force HHS and CMS to grant the waiver, without answering questions the department has asked.

A part of the request would address the ongoing financial crisis in New York City’s hospital system. The city’s health-care system, the largest municipal public health-care system in the country, is in a “dire fiscal situation,” according to a recent audit conducted by KPMG.

The Health and Hospitals Corporation, which runs a $6.7 billion system that includes 11 hospitals, several nursing and treatment centers and more than 70 local clinics, is in such dismal shape that it has just enough on hand to operate for 30 days. The corporation’s debt has doubled in the past three years, and it projects losses of more than $3 billion over fiscal years 2014 to 2016.

Much of the cash shortfall comes from uncompensated care costs incurred by uninsured patients that the hospitals must cover. Ballooning pension costs are also hurting the system’s bottom line.

But one of the biggest culprits responsible for the budget shortfall is the Affordable Care Act itself. Obamacare cuts federal subsidies for treating low-income patients. For New York City hospitals, that means $3 billion less from the federal government over the next decade, according to Capital New York. Cuomo talked state hospitals into accepting the cuts several years ago, with the understanding that the shortfall would be made up by the $10 billion the state could spend after receiving the exemption.

Put it all together, and the corporation faces a defining moment. In recent months, several hospitals have said they will need to close without a new infusion of funds.

Enter Cuomo and his Medicaid Redesign Team. After a year of study, the team began implementing Medicaid reforms like spending caps and effective care management that will save an estimated $17 billion in costs. New York wants to use $10 billion of that money to invest both in the ailing city hospital system and in other areas of health care, like Health Homes, created by the Affordable Care Act.

New York policymakers have been frustrated by what they see as HHS dragging its feet. The request was submitted more than a year ago, in August 2012. But HHS, through the Centers for Medicare & Medicaid Services, has yet to act on New York’s request. Most recently, CMS submitted a list of additional questions that New York must answer before the request is granted.

HHS spokeswoman Joanne Peters said her department is working with New York to make its request compliant with Medicaid law.

“We have been collaborating with New York on their waiver proposal to improve their Medicaid program. As part of that ongoing conversation, New York continues to provide additional details and technical clarifications to CMS,” Peters said in an e-mail. “We support their goal of providing quality, affordable coverage to New Yorkers, and are working closely with them to make sure that any proposal is consistent with Medicaid law and that we are good stewards of federal dollars.”

Along with its request for exemption, New York submitted more than 650 pages of letters [pdf] from stakeholders supporting the request.

“This reinvestment is critical to sustaining structural, technological and organizational improvements in New York’s health care system,” a bipartisan group of 26 members of Congress wrote in a letter to Sebelius in August 2012.

The year-long delay led to Cuomo’s short remarks to Sebelius. Cuomo said he had been assuring members of Congress who represent New York City, like Reps. Charlie Rangel (D), Yvette Clarke (D) and Hakeem Jeffries (D), that the hospitals would be funded, but that he couldn’t prevent those members from publicly voicing their frustrations forever.

Cuomo has his own political calculations to consider. He hopes to provide a tax cut in next year’s budget, and the extra $10 billion in funding would give him room in his budget to propose a cut.