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Manhattan Institute

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Gov's Got Guts to Fight


Gov's Got Guts to Fight

March 8, 2007

Although Gov. Spitzer lost his first big Albany showdown a few weeks ago. when the Assembly defied him and appointed one of its own as state controller, Spitzer has bounced back nicely by taking a tough stand against health care's special interests in Albany.

Spitzer is struggling to reform New York's bloated, unduly expensive healthcare system, whose costs are busting state and local budgets. Spitzer has outlined modest changes in the state's Medicaid system that he hoped would yield $1.3 billion in savings, including a freeze on increases in payments to hospitals and nursing homes, whose reimbursement levels in New York are far above those in other states.

Though Spitzer's proposals are hardly revolutionary and would just slow growth of the 545 billion program, the state's health-care lobby reacted fiercely to the plan. An alliance of the health-care workers' union Local 1199 and the Greater New York Hospital Association fired off N ads attacking Spitzer's proposals and linking them to the Bush administration efforts to control federal health care spending.

The ad campaign represents business as usual for the health care lobby. In 1999 they launched a similar campaign to derail pro-posed Medicaid cuts by then-Gov. George Pataki. running hyperbolic ads that warned of potential hospital closings and service reductions that might leave some New Yorkers without adequate care.

Though the charges were so overblown that even one of the group's allies branded the ads "scare tactics," they went largely unanswered by the Pataki administration, turning public opinion against the cuts.

One dramatic result has been mounting taxes to pay for health care. A recent report by New York City's Independent Budget Office found that the combined state and local tax burden in Gotham is 47% higher than the average of the country's next eight largest cities, and Medicaid spending accounts for about 20% of that hefty tax burden.

Spitzer has taken a more aggressive approach to attacks than Pataki did. He has responded with his own ads in which an announcer claims that New York State funds "a health care system that rewards institutions, insurance companies and unions. not patients." The TV spot adds that special interests have given New York "the most expensive Medicaid system in the country and some of the highest rates of chronic disease."

That second point, about chronic disease rates, must be especially galling to the healthcare industry, which has long claimed that the higher rate of spending is necessary to uphold the state's world-class health-care system. But as the Spitzer ad implies, New York's heavy government subsidies haven't just been costly; they've also helped support an industry rife with inefficiencies and outdated practices. Spitzer addressed this point in a recent speech when he complained that hospitals unable to absorb what amounts to a less than 1% cut in reimbursements must not be well managed.

Spitzer still has to get his reforms through the Legislature, which has too often done the health-care lobby's bidding. And Spitzer's budget still represents only a first step in reform, which also should include shutting down hospitals in areas where there are too many beds and slashing subsidies to train doctors that the state doesn't need.

But in standing up to the health-care alliance, Spitzer has shown more determination and moxie on this issue than any Albany elected official in recent memory.

Steve Malanga is a senior fellow at the Manhattan Institute and a contributing editor to the institute's City Journal.