Imagine that the government, instead of distributing food stamps, wrote checks to grocery stores to reimburse them for giving stuff away.

Now imagine that the government gave lots of that money to Zabar’s and Whole Foods while stiffing the bodegas and supermarkets where poor people actually shop.

Such a system would be considered a travesty. Yet that, believe it or not, is how the state of New York finances health care for the uninsured.

Through a program called the Indigent Care Pool, the state pays $1 billion a year to hospitals, supposedly to reimburse them for giving free treatment to uninsured patients. But there’s no apparent rhyme or reason in who gets how much of the money.

Take, for example, the city-owned Kings County Hospital Center in East Flatbush, Brooklyn. In 2015, it provided $111 million worth of medical care to the uninsured, the most of any hospital in the state. It got back just $15 million from the Indigent Care Pool.

Over in Manhattan, meanwhile, internationally renowned New York-Presbyterian Hospital gave away $60 million in care, and got back $49 million from the pool. That’s three times more funding than Kings County received, for delivering about half as much care.

In a study of the program published last month, the Empire Center found similar inequities throughout the city and state. A statistical analysis showed, in fact, that hospitals serving a greater share of poor patients tended to get less funding, proportionally, than the institutions serving wealthier communities — the opposite of how an “indigent care” program should work.

The culprit is a funding formula that Albany lawmakers revised most recently in 2013. It goes through the motions of factoring in how much free care each hospital provides. But it also says no hospital can get significantly more or less than its average payout in 2010 through 2012, regardless of how much free care they provide now.

In most cases, that requirement wipes out the need-based calculation.

In effect, the formula guarantees that the hospitals which were most grossly shortchanged or overpaid in the past will continue to be shortchanged or overpaid — which makes no sense.

Government-owned hospitals like Kings County have access to other sources of public funds to plug budget holes. But for private, non-profit safety-net institutions, the Indigent Care Pool is the only option.

Equally dysfunctional is how Albany raises money for the Indigent Care Pool — through a multibillion-dollar tax on health insurance.

Under the 20-year-old Health Care Reform Act, Albany squeezes $4.2 billion a year from health plans, which pass along the cost to customers. Because these surcharges are hidden from public view, state lawmakers have gotten away with hiking them, or adding new ones, 14 times over the past two decades.

Now the state’s third-largest tax, HCRA adds about 6% to the premium of a typical city health plan, or more than $1,000 for a family of four. And its surcharges make no allowance for ability to pay, taking a bigger bite from working New Yorkers than from the wealthy.

One surcharge, the so-called covered lives assessment, varies radically from one part of the state to another. Utica residents pay just $10.24 per year, while the tab in New York City is $202.82, a difference of more than 1,800%. This is a throwback to a HCRA program that subsidized teaching hospitals, which ended seven years ago. Yet the assessment lives on, raising more money than ever.

Two-thirds of HCRA proceeds simply flow into the budget for the state’s Medicaid health plan for the poor and disabled, which used to be entirely financed by broad-based, general taxes. Much of the other third goes toward questionable or mismanaged programs such as the Indigent Care Pool.

With HCRA expiring in December, this should be the year to fix a broken system — to end wasteful programs, find a better system to finance indigent care and phase out a regressive tax on health care.

Yet Gov. Cuomo’s budget proposal simply extends the law through 2020. The Legislature must insist on reform — or it will be prolonging an indefensible status quo.

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About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.