What's New

Zack Hutchins
Director of Communications

January 7, 2000

Health-care entitlement expanded
Legislature preserves health-care surcharges

Governor Pataki and the Legislature have agreed to a major expansion of health-care entitlements, while preserving most of the state's unique subsidies for the hospital industry.

The so-called Health Care Reform Act 2000 was adopted in quick special sessions of the Assembly and Senate last month. It is intended to expand health-care coverage to as many as 1million of the state's uninsured-supposedly to be financed by tobacco monies, including a near doubling of the state's cigarette tax.

But The Business Council warned that the new entitlements "are very likely to cost far more than now projected-while the tobacco revenues that are supposed to finance these new entitlements seem likely to be less than projected."

The Council opposes commodity-based taxes, including cigarette taxes. And it warned that the 55-cents-a-pack increase would divert consumers to out-of-state and untaxed Indian vendors.

The package was sparked by the Dec. 31 expiration of some $2.7 billion in health-care surcharges that the state adopted in 1986 to subsidize teaching hospitals and to help pay for bad debt and charity care. Some $1.3 billion of those surcharges are paid by employers; the rest are imposed on the taxpayers.

Fearing that the Legislature would increase these surcharges, The Business Council campaigned for two years to get the surcharges reduced or eliminated. The final deal reduces the surcharges-though only slightly.

But Local 1199, the state's largest hospital union, parlayed a huge warchest and a strong grass-roots effort into a lobbying campaign that forced through a major expansion of taxpayer-financed health insurance, which should increase demand for services from the state's currently underutilized hospital industry.

The union's money came from extra dues contributions and from a pension-fund raid; it was spent on television advertising, grass-roots pressure on individual lawmakers, and other lobbying activity.

The package will expand Medicaid to cover more families with incomes up to 150 percent of the federally defined poverty level. It mandates that local governments pay 25 percent of the cost of this expansion.

The new law also aims to expand private health-care coverage, by providing subsidized "stop losses" for insurance programs purchased by individuals and by small businesses that do not currently offer health insurance.

The Business Council had urged that the Legislature reject this expansion of entitlements, at least until there had been a detailed, public examination of the potential cost. "New health-care entitlements have always cost far more than anybody thought they would at the time of adoption," Business Council President Daniel B. Walsh said in a Dec. 27 memorandum to the Senate.

The joint news release announcing the health-care agreement said it would reform the 1996 surcharges to save businesses and individuals $110 million a year, by reducing the so-called "covered lives" assessment and by eliminating surcharges on laboratory fees. The fine print of the bill revealed, however, that the full amount of those savings will not kick in until 2003.

The hospital union's campaign for this bill is generally believed to have been the most expensive single lobbying effort in the state's history. Ironically, in the same special session that it yielded to this campaign, the Legislature voted for "reforms" in lobbying laws-though the changes will mostly require more paperwork by lobbyists, and would not impact campaigns of the sort run by Local 1199.