The Health Care Reform Act of 1996 was an earthquake in New York's system of paying for hospital care. Before 1997, the state set New York's hospital rates, determining how much to charge for everything from an appendectomy to cancer treatment.
But beginning Jan. 1, 1997, Albany stepped out of the mix to create a market-based approach in which all rates were negotiated by hospitals and insurers. At the same time, it created funding mechanisms to support various "public goods" whose funding had been hidden in the old rates. Among those public goods were charity care and graduate medical education.
That act expires on Jan. 1, and it is to be succeeded by HCRA 2000, agreed to this month by Gov. George Pataki, Assembly Speaker Sheldon Silver, Senate Majority Leader Joseph Bruno and Dennis Rivera, head of Local 1199, the state's largest private sector union, representing health care workers.
The Health Care Reform Act of 2000 reduces taxes on business while maintaining or expanding its program funding and creating a new health insurance program for New Yorkers without coverage. It was approved last week by the Assembly. The Senate is expected to take it up this week.
Here are some of the main differences between the Health Care Reform Act of 1996 and its successor:
HCRA 2000 creates Healthy New York, a $2.9 billion package of four new insurance programs: Family Health Plus, expected to cover about 1 million uninsured adult New Yorkers whose children are enrolled in Child Health Plus; a health insurance subsidy for businesses with fewer than 50 employees; subsidies for working individuals without insurance and their families; and subsidies for people who buy their own health insurance.
Funding for the program is to come from four sources: smokers, who will be hit with a 55-cent increase in the state tax on a pack of cigarettes; about $500 million a year from the state's take from the tobacco lawsuit settlement; about $350 million from the counties, roughly the amount they are to receive under the tobacco settlement over the 3 1/2 -year life of the HCRA law; and federal Medicaid dollars.
The 1996 law created an 8.18 percent surcharge on hospital care, clinic care and laboratory services to help help underwrite bad debt and charity care as well as supporting several health-care initiatives, such as the state's Child Health Plus insurance program.
It was designed to raise $789 million in its first year, but never met expectations, partly because the state diverted some of the money into its general fund. Even at its best, the fund would only have defrayed uncompensated care at a rate of 40 cents on the dollar, according to the Healthcare Association of New York State.
Under HCRA 2000 the surcharge on laboratory fees will be eliminated, although total funding will rise to better meet the costs of indigent care, especially in rural and inner-city hospitals. Funding for Child Health Plus increases by $1.1 billion.
The 1996 measure levied an assessment on every health insurance policy to help pay for teaching hospitals' residency programs, known as graduate medical education. The fee was designed to raise $544 million statewide, to which the act adds about $812 million from Medicaid funds, for a state total of $1.3 billion. The federal Medicare program adds another $1.3 billion to graduate medical education in New York.
Under HCRA 2000, the assessment on health insurance premiums is dropping by about $60 million, though the total provided to teaching hospitals remains unchanged. The difference will be made up with other funds, including some of the state's share of the tobacco lawsuit settlement.
HCRA 2000 also provides $500,000 to the University of Buffalo's medical school. Unlike other medical schools in New York State, it does not have its own teaching hospital, and so never benefited from the 1996 law.