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SLAPPING A TAX ON HOSPITALS IS NO WAY TO MEET FISCAL CRISIS DON'T HIT NON-PROFIT INDUSTRY WITH NEW LEVY

IN SEARCHING for a solution to the state's budget mess, Gov. Cuomo has sought to avoid new taxes as the first option. Instead, he is pushing the more painful course of cutbacks throughout state government.

Why, then, is he abandoning that approach when it comes to getting the required pound of flesh from the state's health care industry?

In floating the seemingly painless alternative of taxing the revenues of hospitals, nursing homes and other health care providers, the administration is embarking down a faulty path. Not only will this action still result in cutbacks, but it will also open the door to more taxes on non-profit providers of essential services, a door that has appropriately been closed until now.

The proposal to levy a 1 percent tax on all patient revenues -- not just profits -- comes in the wake of a more draconian one announced by Cuomo last month when he first unveiled plans for dealing with the state's budget problems.

The original scheme included cutbacks in everything from dental care for adult welfare recipients to a 15 percent cut in state reimbursement for hospital capital projects. It also included a freeze in reimbursement rates paid by the state and undermined much of the impact of the hospital bailout bill approved earlier this year.

All told, the measures would have a $477 million impact statewide, compared to the $161 million impact resulting from the revenue tax, according to industry calculations. It is thus little wonder the industry considers the new tax to be the least painful of the two painful options.

But the tax is a back-door attempt that does nothing to directly face up to the problems of funding health care in New York State, where hospital officials point to over-regulation and layered bureaucracy as primary targets for anyone wishing to cut costs.

Levying the tax will simply reduce hospital revenues, forcing each facility to lay off workers, reduce services, delay equipment purchases or take other steps that help drive top-flight personnel from this region.

The result that can be expected is a reduction in the quality of service, something residents may not notice at state budget time but will surely see when they or their loved ones have to go in for treatment.

The hospital tax is the kind of "fix" that will not generate much of an immediate outcry, a fact which may make it attractive to politicians. But it will do nothing to bring about overall reform of the health care industry and the state's relationship to it.

And once the ground has been broken for a 1 percent levy on this non-profit industry, there is nothing to say the state won't come back a few months from now and hike the tax as budget problems become more pronounced.

This health care tax is not a solution; it merely helps mask some of the problems. Cuomo and the Legislature must drop this idea and find a better way.

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