Business Council testimony on reauthorization of funding and programs under the Health Care Reform Act


Testimony of
Daniel B. Walsh
The Business Council of New York State
Senate Health and Insurance Committees

Re-authorization of the Health Care Reform Act (HCRA)
January 11, 2005

Majority Leader Bruno, Chairman Hannon, Chairman Seward and members of the Senate Health and Insurance Committees, thank you for inviting The Business Council to offer comments on re-authorization of the Health Care Reform Act (HCRA).

Re-authorization of HCRA is on 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 including core changes to Medicaid and the resolution of the Campaign for Fiscal Equity case, should be among the most important measures of success for the 2005 legislative session.

The HCRA-renewal question will be a critical one for you this session because it is linked to closely to the state's budget—and the state's fiscal challenges. I believe the most important action you can take to answer the public’s rising dissatisfaction is to pass a fiscally-sound budget by April first. For this reason, it's essential that lawmakers consider the state's HCRA programs and HCRA problems quickly and courageously.

HCRA has changed many times since 1996—in 1999, 2000, and 2003. The HCRA system has become entwined with the funding of health care in New York, and it is imperative that the decisions on its future be done with the budget you pass on April 1.

The program has become a behemoth. The number of people in the room today attests to
that. I wonder if the room would be this filled if the hearing was on the industrial future of the state.

HCRA has become synonymous with the health care system in New York. HCRA is the embodiment of a hospital-centric mentality that has not wavered, even in the face of rapid change in the delivery of health-care that should prompt adjustments in society's thinking about how to support the delivery of health care.

Let me begin with our priorities, broadly-stated:

  • The HCRA and health care system must be more accountable,
  • It must spend less.
  • The money must be spent differently.

1. Make HCRA more accountable.

All HCRA revenues/spending should be on-budget.

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. Please do that.

Putting HCRA funds on-budget 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-budget and we applaud the Senate for making this a priority in its budget reform legislation.

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

Promote deregulation and greater regional approaches.

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.

But the full power of market forces has has never been fully unleashed.

Many of the changes adopted since 1996 have relied on a variety of "one-shot" funding schemes, expanded programs broadly, and transferred various public health programs to the HCRA banner and HCRA funding mcehanisms. Roadblocks to creating valuable public report cards have also made the system less responsive to market pressures and less accountable to the public. It is nearly impossible for consumers to make informed choices about how much health care will cost at one hospital compared to another. . . or which one is likelier to provide better care.

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.

There has been a relentless drumbeat about the “uniqueness” of New York. It is used to defend the non-profit tradition, the unique taxes employers pay for graduate medical education, the regulations on continuing care retirement communities, the benefit structure of Medicaid and on and on. People scoff when we suggest that economic forces are the best way to bring about change.

We have never advocated open warfare in the marketplace. Quite the opposite. If encouraged more, a deregulated market could result in greater regional collaboration and more of a regional imprint on the local health-care system. This could help make the system stronger or stabilize it, rather than making it weaker.

Re-authorization should emphasize changes that make the system more accountable.

  • Put all HCRA revenues and expenditures onto the state budget.
  • Emphasize market forces more.
  • Put each revenue source to key tests of affordability and accountability. 
    Let’s ask whether the revenue source is reliable. Let's consider the
    effect that increasing those revenues will have on those who have to
    pay for it.
  • Put each spending program to similar tests. Let’s ask if the program is
    still necessary and 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. We’re glad the Senate is building momentum on the renewal debate with today’s hearing.

Reduce the burden of the graduate medical tax.

HCRA saddles employers with especially burdensome taxes, especially 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 businesses to pay for new doctors. Perhaps that's because New York employers are helping to fund doctors that eventually move to their states. The graduate medical education tax should be cut in half and the state should be prohibited from changing employers' tax rate retroactively.

The ability for any stakeholder to sustain a new or higher tax is at the tipping point. We strongly 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 dismantle the state’s TennCare program.

Negotiate a Freedom Health Law.

We urge the Senate to negotiate the two-house passage of Senator Seward’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. It is an issue that needs close attention.

There are other actions that need action too, many also highlighted in the Governor’s report. Medical malpractice reform deserves special mention. Shifting the costs of medical malpractice around the system is not the answer.


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, system has further weakened.

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

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