Testimony of
Daniel B. Walsh, President
The Business Council of New York State

Assembly Health and Insurance Committees Renewal and Revision of the Health Care Reform Act (HCRA)
February 16, 2005

Chairman Gottfried, Chairman Grannis and members of the Assembly Health and Insurance Committees, thank you for inviting The Business Council to offer comments on renewal and revision of the Health Care Reform Act (HCRA).

On January 11, 2005 The Business Council testified before the Senate Health and Insurance Committee. Much of that same testimony follows.

Renewal of HCRA joins the list of major challenges facing the executive and legislative branches in the next six months. Your action on HCRA renewal, the adoption of a fiscally-sound 2005-06 state budget and the resolution of the Campaign for Fiscal Equity case, should be among the most important measuring sticks to the success of the 2005 legislative session.

I believe that the most important action you can take this year to answer the public's rising dissatisfaction is to pass a budget by April first.

With the numerous changes that were made in 1999, 2000 and 2003, HCRA has become a fundamental part of the funding of the health care system. It is imperative that the decisions on the future HCRA be done as part of the budget.

It is important that the debate over HCRA be more public than it has been over the past five years and we commend you for calling this hearing. One of the possible outcomes of a public debate over the renewal of HCRA might be the creation of a Commission to look at where our health care system is headed. There are at least 2-3 Commission variations on the table and I hope a sensible approach can be negotiated.

The HCRA program has become a behemoth and yet, as the Comptroller's report highlights, it may still not be enough money to pay all the programs that are attached to it.

Let me offer our priorities. The Business Council's recommendations on HCRA can be stated simply:

  1. More accountable

    In 2003, state Comptroller Alan Hevesi released a report that recommended moving all HCRA revenues and spending to the state budget to provide greater accountability and oversight of the funds. The Assembly's budget reform proposal also moved HCRA on-budget.

    Putting all HCRA funds on-line is essential to making the system more accountable to taxpayers and public and private payers of health insurance. The Comptroller deserves credit for his insistence that funds be brought on-line and we applaud the Assembly for making this a priority in your budget reform legislation.

    A more complete picture of HCRA funding will tell the story of a system that over-burdens employers with taxes, provides inadequate information and measurements about what the programs deliver and often pays equally for sub-par care as it does for those who achieve excellence.

    HCRA was adopted in 1996 with great fanfare; deservedly so. After a generation of government price-setting, New York joined the rest of the country in unleashing market-forces as one of the determining factors in shaping the size and scope of the system. It has never been fully unleashed. Many of the changes since 1996 have relied on one-shots, broadly expanded programs and transferred public health programs onto HCRA . Roadblocks to creating valuable public report cards, have also made the system less responsive to market pressures and less accountable to the public.

    A system less responsive to market pressures will invariably result in over-capacity, inefficiency and unnecessarily high debt. New York's system shows signs of all three, and more.

    Re-authorization should emphasize changes that:
    • Put the entirety of HCRA revenues and expenditures on-line.
    • Put greater emphasis on market forces.
    • Put each revenue source to key tests of affordability and accountability - is the revenue reliable and what effect does raising it have on those who pay for it.
    • Put each spending program to similar tests - is the program necessary, are there identifiable goals associated with it and is the program structured and run in the most cost-effective way.

  2. Spend less

    In New York, we spend far more on health care than other states, without achieving dramatically better health outcomes for New Yorkers. Another flamboyant statement by The Business Council? No. This is one of the opening lines in the report of the Governor's Health Care Reform Working Group - a report that serves to jumpstart the discussions of HCRA. The Senate and Assembly, through your public hearings, have elevated the importance of early debate on what needs to be renewed and revised.

    HCRA imposes burdensome taxes on employers, particularly the tax to fund graduate medical education. A scan of the country is instructive. Not a single other state thinks it is a good idea to tax business to pay for new doctors. Perhaps it is because New York employers are helping to fund doctors that eventually move to their states. The graduate medical education tax should be reduced and the state should be prohibited from changing employer's tax rates retroactively.

    The ability for any stakeholder to sustain a new or higher tax is at the tipping point. We firmly oppose any punishing new or higher tax on businesses, individuals, health plans or hospitals and nursing homes.

    We oppose transferring public health programs to HCRA and to the state Insurance Department where they become an added burden on insured employers.

    The last two years we have surveyed our membership about the cost of doing business in New York. The responses to the health-care question are off-the-charts.

    Our 2003 survey of more than 600 businesses showed that health insurance was business's number one concern. Almost nine of 10 respondents (89 percent) said the cost of employee health insurance has a high impact on their operations. Most of the rest (9.5 percent) said the impact of these costs is moderate. Virtually no one (1.3 percent) said the effect of health insurance costs on their operations is low.

    This year, our member survey of nearly 500 member businesses, almost nine of 10 respondents (89 percent) said the cost of employee health insurance has a high impact on their operations. Only (9.5 percent) said the impact of these costs is moderate. Virtually no one (1.3 percent) said the effect of health insurance costs on their operations is low.

  3. Spend differently

    A recent U.S. Census Report: "The Facts About Upstate New Yorkers without Health Coverage: An Update from the 2004 U.S. Census"shows that the percentage of New Yorkers with employer-provided health insurance has declined slightly in recent years. At the same time, the percentage of New Yorkers with taxpayer-funded health insurance has increased.

    Not a surprising finding. But what can be done to reverse the trend? The Governor of Tennessee has taken the dramatic step of proposing to partially dismantle the state's TennCare program. We should at least take some steps in New York to make Family Health Plus more on-par with the health insurance benefits that other government and private sector employees receive.

    Negotiate a Freedom Health Law.

    We urge the Assembly to negotiate the two-house passage of Assemblyman Morelle's Freedom Health Plan bill to allow employers more options and less expensive health insurance. The state needs to offer carrots to small business to incent coverage, instead of hitting the most vulnerable businesses with punishing new taxes.

    The issue of employer-sponsored coverage could fill another legislative hearing. We have said repeatedly for years that you can not make health insurance more affordable by making it more expensive.

    Health insurance needs to be less costly. Let's find ways to do that this year.

    It is likely that a bonding initiative is on its way to help finance hospital information technology needs. It raises many questions:

    1. Will it be hospital-only, sustaining the policy that the hospital is at the center of the health care delivery system?

    2. Will it tie-in to the initiative of President Bush's new office of National Coordinator for Information Technology -- which has a goal making creating a fully ""interoperable"" system in which two different doctors at two different sites can access a patient's medical records?

    3. Will it be written in a way to improve quality and cut down on medical errors?

    4. Will it respond to the inability to close down certain institutions because of their heavy debt load?

Wire the system

The initiative of the National Coordinator for Information Technology deserves special attention. The office of the National Coordinator was created by President Bush by Executive Order, and its work holds the potential for great accomplishments. Prominent New Yorkers from all stakeholder groups have recognized this unique opportunity and are working collaboratively to develop health information technology requirements. The requirements will have at their foundation standards that allow systems to communicate with each other.

If successful, an individual's electronic medical record can be made available at different points of care in the delivery system, resulting in better patient care. The Taconic IPA in the Hudson Valley is already taking a leading role in New York State, and The Business Council strongly supports their work.

Any policy decisions involving information technology should encourage and enhance interoperability as its primary goal.

The state should participate more actively in quality initiatives

There are numerous other quality initiatives that can improve care and reduce errors, many organized and led by the business community. The work of the Leapfrog group and Bridges to Excellence are two initiatives that are taking hold in New York. Dr. Michael Stocker, CEO of Well Choice Inc., working closely with Business Council member companies, has taken a leadership role in rewarding quality in the health care system.

The Governor's Task Force had a number of important recommendations around quality and we have worked with Assemblyman Gottfried on legislation that would put more information in the hands of employers and consumers. Hopefully, we can revisit that legislation this year.

There are other areas that need action too. Medical malpractice reform deserves special mention. Shifting the costs of medical malpractice around the system is not the answer. It must be fundamentally reformed.


Earlier, I called HCRA a behemoth, not necessarily a flattering term. The Business Council has been relentless in its criticism of the amendments to HCRA in 1999 and 2002. The changes did not represent cohesive health care policy and greatly slowed the movement to deregulation.

The changes failed to make sense of rising costs and inconsistent quality or accessibility. Since then, the system has further weakened.

Holding a hearing on one of the most important issues facing this legislature lends a greater sense of urgency. Its an urgency we feel from our own members.

We look forward to working with you to create a more sensible and more rational HCRA system.