The award for the most deceptive name in New York state government goes to an obscure but expensive program called the “Indigent Care Pool.”

Each year, this pool distributes upwards of $1 billion of the public’s money to hospitals, ostensibly — as the name implies — to compensate them for providing free or discounted care to the poor and uninsured.

Taking care of the indigent — who could possibly object to that?

But the reality is very different. An analysis of pool spending for private hospitals in 2016 shows that, in the vast majority of cases, how much a hospital received had nothing to do with how much care it provided — to the poor or anyone else.

St. Joseph’s Hospital in Yonkers, for example, delivered $42 million worth of charity care, and received just $20 million in return. Meanwhile, Brookdale Hospital in Brook­lyn provided just $15 million in charity care — almost two-thirds less than St. Joseph’s — yet collected a slightly larger payout of $21 million.

Some hospitals were reimbursed for as little as 40 percent of their charity-care costs, others for as much as 600 percent.

Four hospitals received “indigent care” grants even though the state determined that their charity care costs were zero. Among them was the world-famous Memorial Sloan Kettering Cancer Center, which got $12 million.

Overall, there’s no rhyme or reason to who got how many tax dollars. One pattern that does emerge from the seeming chaos is a negative correlation between the poverty of a hospital’s patients (measured by how many are on Medicaid) and the size of its Indigent Care Pool grant (as a percent of need).

In other words, the state reimbursed richer hospitals more generously, on average, than poorer ones — exactly the opposite of how this should work.

The chief culprit is the program’s funding formula, as “reformed” in 2013. Gov. Cuomo’s Medicaid redesign team had called for basing grants more tightly on charity care, in keeping with federal mandates. But Cuomo and the Legislature added a “transition adjustment” that sharply limits how much each hospital’s grant can grow or shrink from year to year. This largely freezes funding at pre-2013 levels, regardless of changing circumstance.

Of 180 facilities funded by the Indigent Care Pool in 2016, 37 lost money because of the transition adjustment, while 105 hospitals gained. Only 48 received an allotment directly tied to how much charity care they had provided.

In effect, the state took money away from hospitals that needed it most, and transferred it to hospitals that needed it least.

Also problematic is how Albany finances this dysfunctional program: through heavy taxes on insurance, levied under the state’s 20-year-old Health Care Reform Act.

These surcharges add as much as 6 percent to a typical New Yorker’s premiums and raise about $4 billion a year — making them one of the state’s largest sources of revenue. Part of the proceeds flow to the Indigent Care Pool. Most of the rest goes to Medicaid health coverage for the poor.

The HCRA taxes regressively hit the middle class as hard as the wealthy, and counterproductively drive up the cost of care for everyone. Yet because they’re so hidden from the public, state lawmakers have hiked them again and again.

Why Albany spends the Indigent Care Pool money so carelessly is another question. Some observers think the formula is cynically designed to subsidize the big, powerful hospitals that have outsized lobbying clout.

More likely, the transition adjustment reflects the lawmakers’ typical lack of stomach for shaking up the status quo. A better name for the program would be the Political Inertia Pool.

Twice in the past two years, the Assembly and Senate voted overwhelmingly to establish a new financial aid stream for fiscally stressed safety-net hospitals — leaving the dollar amount to be determined later. The governor vetoed last year’s bill, and this year’s hasn’t yet been delivered to his office.

Meanwhile, the Legislature this year extended the Health Care Reform Act through 2020, with scarcely any debate and without the slightest reform to an Indigent Care Pool that misspends $1.1 billion a year.

Rather than creating yet another spending program to help safety-net hospitals, Albany should fix the one it already has.

Bill Hammond is health policy director at the Empire Center. This op-ed is adapted from his report, “Indigent Carelessness: How Not To Subsidize Hospital Charity Care.”

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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