Our concerns about reported health -care legislation

A letter to Senate Majority Leader Joseph L. Bruno, January 11, 2002 (Similar letter to the other legislative leaders and to Governor Pataki.)

Hon. Joseph L. Bruno
President Pro Tem
New York State Senate
Room 909 Legislative Office Building
Albany, New York 12247

Dear Senator Bruno:

RE: Our concerns about reported health-care legislation

I am writing to express The Business Council's very grave concerns about the health-care legislation that is reportedly now being negotiated for early enactment.

The proposed legislation has not been released for public scrutiny, so we have only sketchy details. But from what we have been able to learn, it appears to us that the package contains numerous elements that would, among other things:

At the very least, we urge that the Legislature delay any action on this proposed measure until there has been time for detailed study and reasoned debate about its provisions and its implications.

We would welcome a dialogue on ways to expand health-care coverage in New York State; we agree that is an important public policy priority. We also agree that the conversion of the Empire Blues should be approved and that, if done properly, this conversion would give the state resources that could be used to expand health-care coverage. But the reported terms of the proposed legislation—and the speed and secrecy with which it has been developed—raise serious fiscal and health-policy concerns.

With monotonous regularity, of course, New York City hospital interests declare that they are facing a "crisis," demand that Albany provide them with billions in new revenues, and bluntly threaten political vengeance if they do not get their way. That is what happened in the enactment of HCRA 2000. That is what is happening now.

It's time for a reality check. Are the New York City hospitals in dire straits, despite the new money the state poured into them with HCRA 2000?

You remember the rhetoric then: the hospitals were faced with massive cutbacks and downsizing, and a state bailout was needed to help them make a gradual transition.

But a quick look at the jobs numbers shows that hospitals haven't declined since HCRA 2000 was enacted—their employment has grown. Indeed, hospital employment in New York City has grown seven times as fast as private-sector employment. (See Attachment 1.) If this is their idea of a "crisis," there are a lot of companies in New York State that would dearly love to have a crisis of that kind!

To finance a new infusion of cash into this system, the proposed legislation is reported to have a number of elements that seem dubious to us.

First, of course, there is the proposed use of revenues from the conversion of the Empire Blues—using one-shot revenues to finance a program that will continue long after the initial funding has all been spent. What will we do when the money runs out?

Second, there is the proposed 39-cent-a-pack increase in the cigarette tax. By encouraging still more bootlegging and tax evasion, this will be a severe blow to retailers, especially convenience stores, and especially in areas of the state close to our borders or to Indian reservations. Yet it is unlikely to provide the revenues hoped for. From Budget Division figures, it appears to us that the number of packs taxed in New York State has dropped by more than 25 percent in consequence of the 55-cent increase adopted in HCRA 2000. If the 39-cent increase results in another 20 percent reduction in legitimately taxed sales, the state's revenues would increase by a net of only about $75 million, at best— less than a third of the $251 million we see reported in the press. (See Attachment 2.) And that's without counting the sales tax revenue lost to the state and localities when our retailers are denied the other, non-cigarette sales that would have accompanied the tobacco purchase.

It is demonstrably self-defeating for New York to raise its cigarette taxes farther and farther above the levels in neighboring states (not to mention reservations and the Internet).

Third, there are the reported proposals to reduce the fees paid to pharmacies that handle Medicaid prescriptions. In effect this will increase the uncompensated costs being borne by these pharmacies on behalf of the state. If—as those in the business openly fear—this forces many pharmacies to go out of business or to stop handling Medicaid prescriptions, it will obstruct consumer access to needed medications. And because drug therapies are often a cost-effective alternative to hospitalization, it seems likely to drive up health-care costs, not reduce them.

Fourth, there is the effort to restrict consumer and physician choice of pharmaceuticals, by mandating the use of "generics" that are supposedly equivalent. Generics have their place. But many are foreign-made; many are considered by health-care professionals to be less effective than the brand-name drugs with which they compete; and none of them contribute to the cost of the research and development that brings cost-effective new therapies to the market in the first place. This provision, too, will undermine sound health-care policy in our state.

The Business Council fully shares your concerns about the quality and availability of health-care coverage in New York State. But when there are this many questions about an initiative of this size, with such long-term consequences, it seems to me that the prudent approach is to slow down.

Let it air out in public. Let it be closely examined. Let's see if we can take out the parts that won't work. Let's see how it fits in with the other spending and tax decisions awaiting us in the state budget. And let's think twice before we commit New York to such a huge new program, premised on such shaky financing, with so many negative consequences for health care and our economy.


[Signed, Daniel B. Walsh, President and CEO]