The Business Council strongly opposes this legislation, which would establish a fund to provide financial support to hospitals and physicians to pay for health information technology (HIT) and other healthcare initiatives. With billions of dollars in taxes on private health insurance and in state and federal funds already committed to HIT, to restructuring New York’s healthcare system, and many other state healthcare initiatives, this bill seeks to create yet another pool of healthcare dollars and generate funds that are simply not justified. The legislation would create a funding mechanism that redirects the financial resources used by insurers to help control costs and improve health care, and creates a slush fund for providers to spend. It imposes another tax on health insurance that will increase the cost of coverage for New York’s employers and drive healthcare spending higher.

As cited in the final report of the Commission on Health Care Facilities in the 21st Century (“the Commission”), years of excess capacity, duplication of services and inefficiency in New York’s hospitals - rather than a lack of state funding - are among the key factors that have contributed to the instability of the state’s acute care system and to the financial distress of some hospitals.

In fact, the Commission identified excess capacity as “a fundamental driver of the crisis in New York’s health care delivery system” - a factor that increases costs, jeopardizes quality of care, encourages needless hospitalization and diverts resources away from the most vulnerable communities, such as inner cities and rural areas.

The proposed reinvestment fund would support a host of community healthcare priorities for which funding already exists. For example, more than $2.5 billion in taxes on private health insurance already fund a host of community healthcare priorities including hospital bad debt and charity care, workforce retention, graduate medical education, coverage for the uninsured and dozens of other healthcare and non-healthcare related programs and initiatives. These taxes are reflected in New York’s high health insurance premiums, adding as much as five percent to the cost of coverage in some regions. Compounded by a $75 million increase in the Covered Lives Assessment enacted in this year’s budget, the proposed funding mechanism would amount to another tax and create a new burden that would drive premiums even higher.

In addition, the state has set aside $1 billion as part of the Health Care Efficiency and Affordability Law for New Yorkers Capital Grant Program (HEAL NY) to help pay for voluntary restructuring initiatives as well as the reconfiguration and closure of 57 hospitals recommended by the Commission and for investment in HIT. Also, the Federal-State Health Reform Partnership (F-SHRP) allocates $1.5 billion for similar purposes, including “reorienting New York’s healthcare system away from inpatient facilities to outpatient and primary-care focused delivery systems.”

There is little justification for a proposal that runs completely counter to this healthcare reform agenda by creating another pool of money without commensurate accountability for needs that are already being funded.

Redirecting a percentage of the premium dollar away from insurers and giving it to providers could also undermine insurers’ efforts to control spending, reduce administrative costs and improve health care for their members. For example, insurers must spend a portion of the premium dollar on technologies that make their operations more efficient, on identifying improper claims, and on programs that channel healthcare spending toward the most cost-efficient and effective therapies.

The Business Council strongly supports wringing the excess capacity, inefficiency and duplication of services out of New York’s healthcare system. We support F-SHRP, the HEAL NY initiative and HIT as a means of reducing costs and improving healthcare quality and access. Healthcare providers have had ample opportunities to participate in two rounds of HEAL NY funding and have access to this source of capital funds.

The Business Council opposes yet another tax on health insurance to finance yet another pool of healthcare monies, even one disguised as “community reinvestment.” This redirection of the premium dollar will undermine the insurance industry’s efforts to reduce costs and make more efficient use of the health insurance premium. It is a tax that will lead to higher premiums and higher spending overall. We vigorously oppose S.6056/A.8407.