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January 7, 1999  

Institute report sparks lively debate on 'temporary' taxes on health care

A new report on health-care taxes from The Business Council's research affiliate has ignited a lively debate on the future of those taxes, which raise $1.38 billion a year and are due to expire this year.

Misguided Money, a study released Nov. 30 by The Public Policy Institute, argued that these "temporary" taxes undermine the competitiveness of New York business, make it harder for businesses to afford health insurance and fail to deliver many of the intended benefits.

The taxes were created by the Health Care Reform Act (HCRA) of 1996 to subsidize graduate medical education, bad debt and charity care at New York State medical institutions.

The report concluded that the HCRA taxes should be reconsidered before their scheduled expiration in December.

Hospital lobbying groups immediately scrambled to rebut the report-in some cases, with inaccurate representations of the report and its core arguments, according to Elliott Shaw, director of government affairs and The Council's chief lobbyist on health-care issues.

Shaw objected to one hospital association's characterization of the report as an "attack on graduate medical education and health care for the poor."

"This report clearly affirmed the business community's support for graduate medical education and health care for the poor," Shaw said.

"But business believes that taxation of the privately insured is an inappropriate way to finance graduate medical education. We also think that subsidies of health care for patients who refuse to pay their bills should come with more stringent accountability standards."

Shaw said The Council is working to establish a dialogue with hospitals and their lobbying groups "to make sure that our case is clearly understood and accurately represented.

"We're confident that this year's dialogue on the future of these taxes can unfold with the same spirit of open discourse that hospital interests, The Business Council, and many others brought to the original HCRA negotiations," he added.

Through HCRA, New York joined 48 other states by deregulating its hospital rate-setting system. In a key compromise negotiated by hospital interests, The Business Council, and others, these temporary taxes were created for three years to subsidize hospitals.

The subsidies were created to address predictions that deregulation would produce financial disaster for hospitals, with massive closings and layoffs. Those predictions proved unfounded.

Click here for a release on Misguided Money.