Fund to Aid Children Harmed at Birth Hasn’t Kept Promises, Families Say

The birth had been long and difficult. Denise Olivio requested a cesarean section, she said, but was rebuffed until a doctor decided it was an emergency.

The baby, GianRaul, came out purple, and it took doctors 15 minutes to locate his heartbeat. Hours later, Olivio and her husband — exhausted but relieved that their son had survived — said they saw their doctor and midwife being pulled aside by a man in a suit who they believed was the hospital’s lawyer.

“We locked eyes,” Olivio recalled, “like, ‘Oh, I think we need to talk to someone in a suit, too.’”

The family sued the hospital over the brain damage that had left GianRaul unable to walk, talk or breathe on his own, and it took seven years before a $6.5 million settlement was reached. In that time, he was hospitalized repeatedly for seizures, respiratory and digestive problems, even at one point receiving hospice care. Each time, GianRaul pulled through, giving rise to his nickname: GMO, a partial acronym for God’s miracle on Earth.

Under a quirk of New York law, the family received just half of the $6.5 million settlement — used to pay the parents’ lawyer, unpaid doctors’ bills and Medicaid, as well as to set up a trust for GianRaul’s care.

The other $3.25 million for GianRaul’s eventual medical expenses essentially disappeared, with neither the hospital nor insurers forced to pay it. In place of the money, the boy’s family was enrolled in a New York state program called the Medical Indemnity Fund, or MIF, which since 2011 has covered the care of children neurologically damaged as a result of malpractice at birth.

Almost immediately, GianRaul’s parents encountered problems. Many doctors refused to accept the fund, particularly specialists. Claims were denied for things that the fund deemed “not medically necessary,” like a seat belt for her son’s wheelchair. Reimbursement checks were slow to arrive, placing the family in a financial bind.

These were common complaints among the fund’s families, Olivio would learn — so frequent that one mother had established a support group on Facebook.

The fund itself had long struggled to remain solvent, forcing the state to stop accepting new children in May. Enrollment was reopened through March 2025, after the state issued a short-term, $58 million infusion. But the fund’s long-term viability is still in doubt: State officials estimate it will eventually face a shortfall of at least $3.2 billion.

The state now must reckon with a dilemma: Should it continue to enroll children into an unpopular and expensive program? Or should it close the fund to new applicants, a move that hospitals say would increase malpractice insurance rates and could lead them to close more maternity wards in New York?

Whatever the state decides, the roughly 1,000 children like GianRaul, who are already enrolled, would seem to have no choice but to depend on the fund for the rest of their lives.

When the fund was created a decade ago, state officials said it would help to bring down health care costs for New Yorkers, and provide a first-class level of stability for families of children who had been neurologically impaired during birth. “Like you were going to Tiffany’s for health care for the rest of your life,” recalled Crista Grisanti, whose daughter, Ava, entered the program in 2011.

But parents like Grisanti and Olivio now say that the state reneged on its promise to cover all their children’s needs through the fund.

“The hospital did this to my son. They took his life away,” said Raul Moreno Carreon, GianRaul’s father, adding, “and then they took our life away after that.”

The fund began as a means to solve a financial and political problem.

Under pressure to deliver a victory in his first budget negotiation as governor, Andrew Cuomo took on an ambitious redesign of the state’s costly Medicaid system.

The Greater New York Hospital Association, a powerful trade group that spent $4.7 million on lobbying last year, according to the Committee on Ethics and Lobbying in Government, got behind the effort, but pushed for something in return: relief from a specific sort of medical malpractice case involving infants that they said had driven up the cost of insurance.

The payouts on these cases could easily run into the tens of millions of dollars. Trial lawyers viewed the children as ideal plaintiffs: innocents whose lives were altered by egregious medical error.

Cuomo’s proposal sought to address the hospitals’ concerns. Instead of having hospitals absorb the future medical costs, a new state-sponsored program called the Medical Indemnity Fund would cover the children’s expenses.

Over the past 13 years, hospitals that do obstetric procedures have paid roughly $40 million a year into the fund — far less than they had been paying in malpractice settlements. New York has contributed another $222 million.

But as early as 2017, actuaries were predicting that the Medical Indemnity Fund’s unfunded liabilities would be at least $550 million over the lifetime of the children enrolled at that point. In the most recent report on the fund’s finances, actuaries projected the shortfall to be much higher, between $3.2 billion and $5.8 billion, because of increased enrollment and rising medical costs.

In May, the fund ran out of money, forcing the state to contribute the extra $58 million — a reprieve that some parents say is meaningless unless the administration of the fund is overhauled.

Walter Sadowski of Westchester County estimates that he spends upward of 40 hours a week tracking checks, negotiating with case managers and submitting applications for reimbursement for medical expenses for his 17-year-old son, who is paralyzed from the neck down. Some requests are basic, like medication and dental visits. Others are more extensive, like an aqua-therapy pool to help his son move his body, or a generator to keep his motorized wheelchair running in case of a power outage.

When Sadowski’s requests are denied, as he says they often are, he files an appeal with an administrative court, a byzantine process to which he said he has devoted years of his life.

In roughly a dozen interviews, families related stories about how they had to fight to get their needs met. Once-covered medications and treatments could be denied with little notice. Family therapy was considered out of scope. Routine medical supplies, like feeding tubes, wheelchairs — even adult diapers — required a doctor’s note.

But finding a doctor or caregiver to accept the fund — with its unusual setup, extensive paperwork requirements and 45-day payment window — can be difficult.

The state Health Department, which oversees the fund, denied requests for interviews, adding that they could not comment on individual cases.

State budget officials also refused requests for comment, although in an interview earlier this year, the budget director, Blake G. Washington, stressed that whatever the cost, the state’s first responsibility was to the families currently enrolled in the fund.

“We want to make sure that people know — that they have confidence — that the claims will be met,” he said.

Not every family has been unhappy. Children with less severe disabilities may receive more care than they would have in a traditional settlement. And some families with the means and time said they were able to navigate the bureaucracy.

But few relished having to ask permission for every little thing, and many families interviewed said they wished they could opt out.

“We were forced into this,” Sadowski said. “This wasn’t a voluntary decision. A lifetime of health care — didn’t say at what cost.”

It is not yet clear whether the fund will accept new children after March, when the $58 million in state emergency funds is expected to run out.

If the fund were to stop accepting new children, families may find themselves seeking damages for future medical expenses the old-fashioned way: through malpractice lawsuits.

Under that process, damages for pain and suffering as well as lost earnings and future medical expenses would be put into a tax-free, interest-bearing account. And while the family would still need to apply to a court to draw from it, the money — sometimes tens of millions of dollars — would be theirs to use.

Hospitals are desperate to keep the fund in operation. “If it goes away, it would be a major problem,” said Kenneth Raske, president of the Greater New York Hospital Association, adding that the projected rise in malpractice premiums could devastate already struggling hospitals.

Raske said that hospitals would be open to finding alternative funding sources for the program, which he said was fundamentally sound.

“The thing works,” Raske said. “If people are dissatisfied with it, they are dissatisfied because of the hassle that goes with it, and that’s because of the way they operate it.”

Thomas J. Abinanti, a former state assemblyman who led the Assembly Committee on Disabilities, said that he believed that the program was a mistake from the outset.

“It’s not working for the people who are injured, and it’s not working for the taxpayers,” he said. He suggested that enrollment be voluntary, and that the uncollected half of settlements go directly into the fund.

But even that could create its own problems, he said.

“How do you tell the last person in that if you had settled your lawsuit two months later, you get your full award and you wouldn’t be saddled with this?” he asked. “And how do you tell the first person who doesn’t get in who wants to be in?”

Parents say that some recent changes, like a temporary increase in reimbursement rates, have led to modest improvements. But they say the bureaucratic thicket is still virtually impenetrable.

Even if the fund were flush with cash, Grisanti, of Buffalo, said that one fundamental problem would remain. The system, she said, undermines the ability of disabled people, like her daughter, to care for themselves.

Grisanti, like many parents, worries about how her daughter will navigate the world — including the fund — when she is gone. “When I die,” she said, “my daughter will never be able to figure this out.”

This article originally appeared in The New York Times .