A new ad by hospitals makes an old argument — that pro posed cuts in state health- care subsidies are a monster, a “Cutzilla” that would devastate New York’s health system, forcing facilities to shut down and leaving citizens vulnerable. Only big new taxes can save New Yorkers from this ruin, the advocates argue.
Although Cutzilla may be more creative, it’s part of a long tradition of “the sky is falling” claims from health-care special interests dating back to the ’70s.
That’s right: For four decades, health advocates have regularly warned that cuts in state health-care spending (which often aren’t really cuts at all, just slower increases) would devastate institutions and expose citizens to extreme dangers — warnings that have never come true.
When the 1991 recession prompted budget cuts, the Greater New York Hospital Association, composed of New York City institutions, warned that shaving Medicaid spending would lead to “a vast destruction of the health-care system.” Indeed, “people will die because of these proposals.” But Gov. Mario Cuomo went ahead — and nothing devastating happened at all. In fact, city hospitals grew by 7 percent over the next three years.
In 1995, Gov. George Pataki sought to begin reforming the state’s heavily regulated and subsidized health industry through deregulation. Hospital advocates warned of an “avalanche” descending on the industry, wreaking havoc. Pataki did the reforms anyway — and no landslide engulfed hospitals.
One reason our health-care industry manages to emerge from such cuts with far less devastation than it regularly predicts is it’s already so fat, thanks to taxpayer subsidies — something that ads like “Cutzilla” conveniently neglect to mention.
How fat? In 1999 Pataki, weary of incessant attack ads from the health-care lobby, dedicated some $9 billion in proceeds from the state’s settlement with tobacco companies to New York’s health-care system — something no other state did. For good measure, he tossed in $1.3 billion in cigarette-tax money. Four years later, he handed the hospitals $2.7 billion in taxpayer cash from a conversion of Blue Cross to private status. This paid for wage increases for workers, an unprecedented state subsidy to private employers.
It is precisely because of such unparalleled subsidies that New York’s public health-care spending has become the true Godzilla of the state’s budget, driving taxes ever higher.
New York spends far more than any other state — more even than California, which has twice our population — on subsidized care. The state’s reimbursement rates for hospitals, for instance, are about 15 percent higher than the national average (even after adjusting for higher New York costs of living). The cost to the state budget of those higher rates? More than $800 million a year, according to a Manhattan Institute study.
The state also spends twice the US average on care per elderly Medicaid patient. A big part of that is generous reimbursement rates to nursing homes — a powerful part of the coalition behind the Cutzilla ads.
With such vast subsidies, the industry continues to grow robustly — despite repeated hysterical claims that it’s shrinking. The Cutzilla ad, for instance, notes that 29 hospitals and 51 nursing homes have closed in the last decade. But it doesn’t mention that a state commission determined several years ago that New York has an excess of hospital and nursing beds — a product of state aid that kept alive unneeded institutions. And even with those closings, total hospital jobs in the state have increased by nearly 20,000, or 6 percent, this decade.
New York’s vast state health-care subsidies have created an ongoing dynamic that pits hospitals and other health institutions against taxpayers — who usually lose.
Part of the blame lies with the state overregulation that has devastated the private health-insurance market, sending people fleeing into government-paid care, which is subject to intense lobbying and political backroom deals. But the whole system is based on an unsustainable model in which costs continually rise faster than tax receipts and eat up any new source of subsidy that the state can find.
This has reduced the health lobby to absurdly claiming that all of this government health spending is good for the economy, because it creates jobs by luring even more federal health subsidies to New York. Yet those federal dollars can only come if New York keeps taxing itself at ever higher rates.
New Yorkers are tapped out, and more taxes to subsidize more health-care spending will only make the situation worse. That’s why I’m rooting for Cutzilla to crush the forces sent to slay him.
Steven Malanga is senior editor of the Manhattan Institute’s City Jour nal.