Government-Pay Plan Could Slash Revenue For 77 Percent Of New York’s Hospitals

Government-Pay Plan Could Slash Revenue For 77 Percent Of New York’s Hospitals

While Democrats saw modest gains nationally, they dominated midterm elections in New York, taking control of both chambers of the legislature and the governor’s mansion for the first time since 2012, only the second time ever since the mid-1930s. The majority of the incoming legislators have endorsed the New York Health Act (NYHA), a proposal to implement a state-level government-payer system. First introduced in 1992, NYHA has passed the state Assembly five times, but never had the votes needed to pass the Senate.

Like all single-payer plans, NYHA promises to use public funds to provide comprehensive medical coverage to all residents of the state. NYHA is incredibly vague about specific payment arrangements, however, leaving us to guess how those funds will be apportioned to the state’s health-care providers.

A RAND Corporation analysis, released in August, estimated that the bill would not dramatically change New York’s health-care spending in the short run, and might even reduce it by 3 percent by 2031. This is a very generous outlook: it assumes that expanded benefits could be funded by enormous savings from reduced administrative costs and reductions in payments to doctors and hospitals over time.

That’s one scenario. But another is the approach taken by single-payer’s most famous proponent, Vermont Sen. Bernie Sanders. Sanders’ plan would base health spending on current Medicare rates, which are considerably lower than what private insurance pays.

There’s no way to know for sure that NYHA will be enacted with the same payment rates as Medicare for All, because NYHA’s authors left it intentionally vague. This may have enabled lawmakers to offer their support for the bill without having to face its hard questions, but it doesn’t hide a few unfortunate and undeniable facts about what this system will look like.

First, like all government-payer (“single-payer”) bills, NYHA will be redistributive. Hospitals that are currently well-funded will lose money, which will be reallocated to hospitals with fewer resources. Second, this reallocation will not be enough to equip these underfunded hospitals to handle the massive influx of patients they’ll have to treat once everyone in the state has government-run health care. Finally, the state will need to raise anywhere from $91 to $226 billion in taxes to support NYHA’s publicly funded health-care infrastructure.

As part of a new report by the Manhattan Institute and the Empire Center, authors Chris Pope and Bill Hammond looked at the effects of a single-payer system on New York’s hospitals. Assuming the new plan paid at the same level as Medicare, the report finds that 77 percent of hospitals would lose money, including some of the crown jewels of New York’s hospital system.

NYU Langone would lose 43 percent of its revenues, Sloan Kettering would lose 18 percent, New York Presbyterian would lose 16 percent, and Mount Sinai would lose 13 percent. Under this reimbursement model, four in ten hospitals would face revenue losses of 15 percent or more, putting them at risk of service cutbacks or closure.

Alternatively, if fees were set 20 percent above Medicare rates—keeping average rates at current levels—two-thirds of hospitals would gain at least some revenue. However, higher reimbursement rates would mean even steeper tax hikes, especially as costs grow over time. Additionally, one in eight would still face losses of 15 percent or more, including such flagship institutions as NYU Langone and the Hospital for Special Surgery.

Making the government the sole funder of medical care will pit community against community in a fight to claim the largest share of the limited funds available. Before voting yes on NYHA, lawmakers need to face facts and reckon with the disastrous consequences single-payer would have on their state. If they don’t, New York will soon stand as an example to the rest of the country of the dangers of socialized medicine.

Tim Rice is the deputy director for health policy at the Manhattan Institute. He's on Twitter @timerice1.
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