screen-shot-2017-01-10-at-4-20-49-pm-300x190-4647850The biggest-ticket revenue action in Governor Cuomo’s budget proposal was not extending the so-called millionaire tax, but renewing the Health Care Reform Act, which imposes a hidden tax on New Yorkers of all incomes.

Continuing HCRA’s surcharges on health insurance through 2020 will bring about $13.3 billion to state coffers over the next three years.

That’s $700 million more than Cuomo’s announced three-year extension of the income tax surcharge on million-dollar earners, which is projected to reap $12.6 billion.

Unlike the millionaires’ tax, however, the HCRA extension went unmentioned on Tuesday.

The governor didn’t bring it up during his Executive Mansion press conference. Nor was it spelled out in key budget documents, which simply took for granted that HCRA revenue would continue flowing at about $4.4 billion a year.

The one formal acknowledgement of this consequential step came in one of Cuomo’s 14 draft budget bills, which changed the expiration dates of various HCRA provisions from December 31, 2017, to December 31, 2020.

The Health Care Reform Act, which took effect 20 years ago this month, abolished the state’s complicated and counterproductive system of price controls for hospitals. To smooth the transition, it imposed two surcharges on health insurance and used the money to subsidize hospitals for providing free care for the poor and uninsured and for training new physicians.

As the Empire Center documented in a report this month, HCRA has since morphed into little more than a mechanism for raising cash.

Rather than phase out the surcharges, lawmakers have hiked them or added new ones 14 times over the past two decades – tripling their dollar value and leaving them as the state’s third-largest tax.

Though hidden from public view, the taxes add an estimated 6.2 percent to the cost of a typical New York City health plan. They make no allowance for ability to pay, taking a bigger percentage bite from middle income New Yorkers than from the wealthy. One of the surcharges varies radically from one part of the state to another, costing $10.24 per person in Utica, but $202.82 in New York City – a difference of 1,800 percent.

HCRA spending has also drifted from its original purposes. Now, two-thirds of the money simply flows into the Medicaid budget – which traditionally was financed with general, broad-based tax revenues. Much of the rest is dedicated to questionable or mismanaged programs.

The law’s expiration at the end of 2017 gave Cuomo the opportunity to start weaning state government away from its addiction to health taxes. Phasing out the surcharges could have saved hundreds of dollars a year for every New Yorker with health insurance.

Instead, he has proposed to continue the dysfunctional status quo.

About the Author

Bill Hammond

As the Empire Center’s director of 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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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.