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 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

You may also like

82 Questions Hochul’s Pandemic Report Should Answer

This is the month when New Yorkers are due to finally receive an official report on the state's response to the Covid-19 pandemic, one of the deadliest disasters in state history. T Read More

The Real Lack of Courage Driving NYC Congestion Pricing

Governor Hochul is taking heat after postponing the state’s years-old plan to charge drivers to enter lower Manhattan. As critics slam her for lacking “political courage,” it’s an appropriate time to examine some of the underlying issues that congestion pricing was meant to indirectly mitigate—because many if not most advocates were afraid to touch those issues themselves. And if congestion pricing proponents are to be taken at their word about their concern for MTA finances, or traffic, or air quality, they must show some of the same courage they’ve accused the governor of lacking. Read More

To Encourage Recycling, Pols Move To Trash The Legislature

New York state lawmakers in recent years have surrendered some of their policymaking and taxing powers to the executive branch. With the 2024 legislative session coming to close, they’re poised to go even further and turn those powers over to an organization outside of government entirely. Read More

Lawmakers Seek To Revive a $10 Fee for Prescriptions That Was Dropped by DFS

A plan to require a $10.18 "dispensing fee" for filling drug prescriptions is back on the table in Albany – this time in the form of legislation rather than regulation. The Read More

Running Over Taxpayers: Legislature Speeding to Protect Cadillac Benefits for NYC Retirees

Bills designed to block any change to retiree health coverage for state and local public employees have been introduced repeatedly by legislators in both parties over the past 30 years. But the latest statewide “anti-diminution” measure, inspired by an ongoing controversy in New York City, would be the broadest and most costly yet—and more than two-thirds of state lawmakers are supporting it. Read More

How a Medicaid ‘Cut’ Could Lead to More Unionization of Home Care Aides

A money-saving maneuver in the newly enacted Medicaid budget could end up increasing costs in the long term – by paving the way for more unionization of the state's burgeoning home health workforce. Read More

Eight in 10 New York towns and cities have lost population since 2020

Filling in more details of New York's ongoing demographic decline, the Census Bureau has just released updated local population estimates showing that 80 percent of the state's towns and cities have lost residents since 2020. In addition to New York Ci Read More

Sales tax receipts are signaling slow growth in most of New York State

After rising sharply with an extra push from the inflation surge of 2022, sales tax receipts in New York grew much more slowly during the first four months of this year, according to from state Comptroller Thomas DiNapoli's office. Statewide sales tax Read More