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Manhattan Institute

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What Needs To Change


What Needs To Change

July 16, 2001
Urban PolicyOther
Health PolicyOther

There's no mystery what the state's health-care system needs to heal itself. But it can't happen unless courageous leadership in Albany forces the necessary moves.

* Eliminate the costly subsidies that serve no useful purpose, especially the $544 million paid yearly for graduate medical education and retraining of hospital workers.

This steep tax on insurance premiums (it adds some $375 to the cost of a family health policy in the city) is a classic case of how government money can drive up costs and produce imbalances. After years of training subsidies, New York has more doctors per capita than any other state, and more than half of all doctors trained in the state leave to practice elsewhere.

The average cost of training a resident in New York is now about four times as high as at major medical centers in California or Massachusetts. The graduate-training tax does little for New York and needs to be scrapped.

* Shrink the charity/bad-debt fund, a $738 million-a-year pot of money paid for by an 8.18 percent surcharge on health-care services and intended to pay for care for poor people who don't qualify for Medicaid.

The state has increased the pot without auditing hospitals' billing practices. An audit would show, the Business Council of New York estimates, that two-thirds of hospitals' uncompensated care doesn't represent charity cases, but uncollected bills due to inefficient administrative or collection procedures. Albany could easily cut this subsidy at least in half and still pay for real charity care.

* Finally, given the state's surplus of hospital beds, let hospitals fail and close.

A movement to shut hospitals is already gaining currency. The Buffalo News recently editorialized in favor of eliminating about 25 percent of the beds in that marketplace, and Erie County Executive Joel Giambra called for a health-care summit to discuss closing at least one local hospital.

The heads of two upstate hospital associations, Gary Fitzgerald at the Iroquois Healthcare Alliance and Dan Sisto of the Health Care Alliance of New York State, also advocate allowing the state's hospital network to shrink. Sisto points approvingly to New Jersey Hospital Association advertisements urging that hospitals there be shut as a way of right-sizing the market in the Garden State.

In Albany, though, it's hard to discern the courage needed to make such moves. The Assembly is the creature of 1199's Rivera; the Senate belongs to the hospitals; and the governor is consumed with worry about his tenuous hold on his job. So the problems are only likely to get more acute, especially since the federal government has significantly cut its health-care programs.

The state's ever-growing bills will fall more and more on average New Yorkers. For years they have ignored the state's health-care mess, because someone else—their employers, their insurers—paid the freight. But now they are footing a growing portion of their own insurance, and an explosion of self-employment has left many people completely responsible for their own coverage.

When the current system of subsidies expires in mid-2003, the complaints of these average citizens may be loud enough to allow a strong-willed, reform-minded governor to push through health-care reforms that truly make a difference.