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October 26, 2004

Taxpayers may have to fund additional $400 million in HCRA spending

"Questionable" financial practices in the state’s Health Care Reform Act (HCRA) program could mean taxpayers will have to spend an additional $400 million this year, according to a new report released by Comptroller Alan Hevesi.

The report said that HCRA spending has outpaced revenue growth by more than $1 billion over the past two years. The program subsidizes hospital spending on bad debt, charity care, and some graduate medical programs.

“The state is counting on a projected $1.2 billion infusion of funds from the conversion of Empire Blue Cross Blue Shield to a commercial insurer to keep the Fund solvent, but litigation challenging the conversion may prevent these funds from materializing by the end of the fiscal year,” a press release from the Comptroller’s office said. If the expected funds are not available by March 31, the state may have to use about $400 million of state tax revenue to avoid a shortfall.

HCRA’s mostly off-budget spending has increased “significantly” in the past few years, the report said.

“In SFY 2002-03, HCRA spending exceeded revenues by $379 million. This trend accelerated, actually doubling, in SFY 2003-04 when HCRA spending exceeded revenues by $764 million.”

The Comptroller urged lawmakers to include all HCRA spending in the general budget. The report said this would assure the same accountability and oversight for HCRA dollars as for other state budget dollars.

In addition, "policy makers should minimize HCRA's reliance on non-recurring revenue sources, such as loans from other pools and proceeds from the conversion of Empire Blue Cross Blue Shield to a for-profit insurer," the report said. "Questionable financing arrangements could lead to un-funded or under-funded programs. It is preferable to use non-recurring revenues for one time health-related costs or for health-related investments that will reduce future annual cost to the state."