The high cost of reform

New York health insurance consumers may not realize it, but on average they pay an extra $1,000 a year on their family policy for things that have nothing to do with their families’ health care — not one additional screening, test, procedure or prescription. That added premium is due to something called the Health Care Reform Act (HCRA), which costs New Yorkers more than $5.2 billion each year in taxes, fees and surcharges.

First enacted more than two decades ago, HCRA accounts for the third-largest source of state revenue behind sales and income taxes, with little of the money going toward making New Yorkers healthier. These taxes apply to every entity providing coverage including employers and their workers, union benefit funds, plus the more than 250,000 consumers in the individual market. Originally, HCRA was created to fund laudable health care-related programs like reimbursing hospitals for caring for the uninsured or encouraging medical school students to stay in New York. However, Albany quickly got hooked on HCRA, using those taxes to fund myriad programs with little or nothing to do with direct patient care or plugging holes in the state budget.

At the same time, New York has become one of the Top 10 states with the highest health care spending. New York’s per-capita spending is more than 20 percent above the national average, with average annual increases far outpacing, even doubling, inflation. Rising health care costs, including prescription drug prices and provider reimbursements, is a key factor driving health care spending, and threatens to place New York at the bottom for middle-class affordability.

Now the state is facing a $6 billion budget deficit, much of it related to Medicaid spending, prompting  Gov. Andrew M. Cuomo to convene a new Medicaid Redesign Team to “identify $2.5 billion in savings this year by finding industry efficiencies or additional industry revenue.”  Unfortunately, recent news reports out of Albany indicate that the MRT might consider increasing health insurance taxes to help fill the state budget gap. This is bad policy that will make health care even more expensive and hit New York’s middle class.

New Yorkers already pay enough and shouldn’t pay higher health insurance taxes to close the Medicaid gap. The fact is, there are common-sense reforms the MRT could advance — like reining in the high cost of prescription drugs and requiring belt-tightening from large, high-cost health care institutions — that would make Medicaid more efficient and ensure that every dollar is serving the most vulnerable residents without additional taxes. 

Any recommendations to raise taxes on health care would be an added burden on the backs of New York’s health insurance consumers. In fact, it would be contradictory to Cuomo’s proposal to continue the phase-in of middle-class tax cuts for millions of New Yorkers. The MRT should take its cue from the governor and focus on reforming and controlling Medicaid costs without punishing New Yorkers with higher health care taxes.

Eric Linzer is president and chief executive of the New York Health Plan Association, and insurance industry group.