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THE EMPIRE STATE is again at the center of a controversy over health care surcharges, this time over a state surcharge on hospital bills to finance excess medical malpractice coverage for doctors and dentists.

We believe this medical malpractice surcharge amounts to employer-subsidized state welfare for doctors.

New York enacted the surcharge in 1985 as a temporary measure to keep doctors from leaving the state amid the last hard market, though it has been extended several times over the years. The surcharge finances a layer of excess malpractice coverage for doctors and dentists working at general hospitals in New York, essentially doubling the limits of primary coverage purchased by the doctors. The funds raised by the surcharge are held by several medical malpractice insurers that issue coverage.

To date, the program has raised about $2.5 billion in premiums and investment income, but has paid out only about $100 million in claims, according to the New York State Conference of Blue Cross & Blue Shield Plans. The surcharge annually generates about $170 million in premiums.

While there may have been a need for such an excess coverage mechanism in 1985, when malpractice rates soared and capacity dried up, that is no longer the case today. It also is ludicrous that employers and other health care payers should continue to bear this expense.

What's more, the ample funds collected to date currently are a target for state lawmakers seeking to finance budgetary shortfalls, meaning employers are indirectly financing other programs with no connection to their needs. To date, lawmakers have "borrowed" more than $700 million from these funds to balance the budget.

The good news for employers is that the surcharge is due to expire June 30, having not been extended by comprehensive health care legislation New York passed in 1996. The bad news is that physician groups and the med mal insurers that participate in the program currently are lobbying for it to be continued.

We think the surcharge on hospital bills should end.

Before there is any knee-jerk movement by lawmakers to scrap or continue the fund, however, we think the state should conduct an actuarial analysis of the program's current exposures and the adequacy of existing reserves to meet those claims.

While the disparity between the funds' assets and claims paid is huge, we recognize that medical malpractice coverage is a long-tail liability line and reserves are needed for future claims. If, after analysis, current funds are inadequate, though, additional premiums should come from doctors, not health care payers.

Indeed, if there is any legislation needed, it is to protect the fund from being misappropriated by greedy lawmakers for other budgetary needs.

And if doctors deem that a mechanism is needed to continue providing them excess coverage, they should pay the premium. Since 1985, though, many alternative risk financing mechanisms have been developed and refined that we think could affordably meet their needs for coverage far better than a state fund.