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Hevesi Raises Concerns about Financing for Health
Care Programs,
Recommends Moving All HCRA Spending to State Budget in 2005
The State program that provides billions of dollars in subsidies to
important health programs such as indigent care and insurance for the
uninsured is in danger of running a shortfall that could add to the
2004-05 State budget deficit, according to a report released today
by State Comptroller Alan Hevesi.
Hevesi noted that for the past two fiscal years, spending for the
Health Care Reform Act (HCRA) has increased significantly, outpacing
the growth in revenues by more than $1 billion, and that the program
is in danger of running an approximately $400 million deficit if certain
revenues under litigation fail to materialize.
Hevesi said the State is counting on a projected $1.2 billion infusion
of funds from the conversion of Empire Blue Cross Blue Shield to
a commercial insurer to keep the Fund solvent, but litigation challenging
the conversion may prevent these funds from materializing by the
end of the fiscal year. If the funds do not become available by next
March 31, he said the State may have to use about $400 million of
State tax revenues to maintain the commitment level for these services.
These activities, which also include funding for medical education,
health care for low income children, and pharmacy coverage for senior
citizens, are primarily funded from cigarette taxes, assessments on
hospital inpatient revenues and insurance companies, and surcharges
on hospital and clinical services. Today’s report urges policymakers
to minimize HCRA’s reliance on non-recurring revenue sources,
such as proceeds from the conversion of Empire Blue Cross Blue Shield
to a commercial insurer.
“Questionable financing arrangements, such as our reliance on
Empire proceeds, could lead to unfunded or underfunded programs,” Hevesi
said. “The State should be not be using non-recurring revenues
for ongoing expenses, but instead, should be using these resources
for one-time health costs.”
Also, while more than three-quarters of the HCRA program is currently
included in the State budget, more than $1 billion in annual spending
remains off-budget, meaning it is not subject to the same oversight
and accountability as State budgeted spending. As a result, Hevesi
has urged Governor Pataki to bring all HCRA spending on budget in
State fiscal year (SFY) 2005-06, one year earlier than recommended
by budget reform legislation passed this year.
“The health care programs funded through HCRA benefit millions
of New Yorkers,” Hevesi said, “Although the Legislature
adopted many reforms to this program to improve reporting, too much
of HCRA spending still lacks the checks and balances needed to ensure
that it is in the taxpayers’ best interests.”
Historically, HCRA has amassed large unspent surpluses as revenues
accumulated while many programs took longer to implement and reach
projected expenditure levels. Concerns about HCRA’s financial
stability stem from increased spending levels that have significantly
outpaced revenue growth in each of the last two State fiscal years.
In SFY 2002-03, HCRA spending exceeded revenues by $379 million. This
trend accelerated, actually doubling, in SFY 2003-04 when HCRA spending
exceeded revenues by $764 million.
As a result, HCRA’s ending fund balance decreased from $1.57
billion in March 2002 to $1.19 billion in March 2003 and to $430 million
in March 2004. While HCRA’s fund balance for the first five months
of SFY 2004-05 has increased to $817 million, due to higher receipts
and lower spending, the fund balance may start dropping again if monthly
spending returns to historical averages.
Although there was some progress this year on budget reform, which
would include moving all HCRA spending to the State budget, requiring
separate appropriations for each HCRA program, reform remains at least
two years away, subject to Executive action and the vagaries of next
year’s legislative session. According to today’s report,
over $1 billion of $5.5 billion in total HCRA spending was off-budget
in SFY 2003-04.
“Governor Pataki already has the authority to propose appropriations
for all HCRA programs, even those programs currently off-budget, and
does not need to rely on this aspect of budget reform legislation to
improve HCRA accountability,” Hevesi said. “Taxpayers deserve
the same accountability and oversight for HCRA dollars as for other
State budget dollars. I am calling on the Governor to make it happen
now.”
According to today’s report, off-budget HCRA spending grew from
$884 million in SFY 2001-02 to $1.05 billion in 2002-03 and $1.06 billion
in 2003-04. Total HCRA spending grew from $2.57 billion in SFY 2001-02
to $4.07 billion in 2002-03 and $5.47 billion in 2003-04.
HCRA funds are disbursed by Excellus Health Plan through a no-bid
contract with the State Department of Health (SDOH) costing over $3
million a year. The report recommends that policymakers decide whether
to continue outsourcing some or all HCRA administration activities
or move some responsibilities from Excellus to SDOH and the Office
of the State Comptroller. Assuming outsourcing continues, the report
also recommends awarding the HCRA administration contract through a
competitive procurement process to ensure that taxpayers get the best
value.
Today’s report is a follow-up to last year’s HCRA report
in which the State Comptroller recommended regular and comprehensive
reporting of HCRA revenues and spending, if the Legislature could not
eliminate off-budget spending. Although action was not taken to move
off-budget HCRA spending to the State budget, the Legislature accepted
the Comptroller’s recommendation to establish new reporting requirements.
These requirements, which started in July 2003, have begun to provide
greater transparency in the collection, pooling and distribution of
HCRA funds. For example, newly available monthly data show that some
HCRA pools maintained a positive fund balance in SFY 2003-04, but only
because of a temporary increase in federal funding and massive transfers
from other HCRA pools.
Click here for a copy of the report.
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