The talks are being driven by several factors: the looming expiration of a state law that imposes surcharges on hospitals bills to pay for care of the poor and the training of young doctors; a consensus in Albany to use a significant part of the money from the national tobacco settlement on health care; and a growing recognition among lawmakers that something should be done for the more than three million uninsured New Yorkers. People close to the talks say an agreement could be reached this week, but they caution that a long list of issues remain, like the governor's call for holding the line on Medicaid spending and the demand by Democrats and labor unions for a plan that would cover most of the uninsured, rather than a smaller percentage of them, as Republican lawmakers have proposed. At the center of the negotiations is a state law that adds $2.6 billion in surcharges to hospital bills, largely to help hospitals train doctors who are just out of medical school and to care for poor people who are not insured. The law expires on Dec. 31, and it would be a crushing financial blow to the state's hospitals if it were not renewed. In the current negotiations, Democrats are calling for the state to provide coverage directly for the uninsured, starting with about 300,000 people. But Pataki's aides are concerned that such a plan would encourage private employers to stop paying for their workers' medical insurance and instead let the state provide it, people close to the negotiations said. The governor wants to provide coverage mostly for the unemployed while providing incentives for private employers to expand coverage for their workers. The lawmakers must also agree on how to pay for their plans. All sides agree that some of the money will come from the $500 million a year that New York state expects to receive from the settlement of the national lawsuit against tobacco companies. But there are already competing plans being discussed for that money -- the state Senate, for instance, wants to subsidize the cost of prescription drugs for the elderly -- and what is left is not nearly enough to pay for the kinds of coverage for the uninsured that state leaders are negotiating. That, in turn, has prompted negotiators for Pataki and legislative leaders to consider raising the state's tax on cigarettes, now 56 cents a pack, according to the people involved in the negotiations. The increase was initially proposed by leaders of 1199, the hospitals and health care employees union, a major player in the negotiations. The size of the tax increase has not been determined, but one proposal under serious consideration would increase it by at least 25 cents a pack, which would generate more than $250 million in new revenue for the state. By approving such a measure, the governor and lawmakers would be addressing criticism that the state government has been reluctant to cross the tobacco industry by approving tougher anti-smoking measures. The state last adopted a significant anti-smoking law in 1993, when lawmakers raised the cigarette tax from 39 cents a pack, to 56 cents. At the time, that was the highest rate in the country, but 13 other states have since adopted higher ones. If the tax in New York were raised by 25 cents, to 81 cents a pack, it would be the highest in the region. New Jersey's cigarette tax is 80 cents a pack, and Connecticut's is 50 cents. Hawaii and Alaska, on the other hand, impose a cigarette tax of $1 a pack. If New York state raises its tobacco tax, it will also mark the first time that Pataki and the Senate majority leader, Joseph Bruno, both Republicans, have agreed to a tax increase since they rose to power five years ago. A new tobacco tax would also put Bruno and Pataki in front of an issue -- the fight against tobacco -- that has been led mostly by Democrats. Anti-tobacco groups have long contended that the additional tax will discourage thousands of teen-agers from ever smoking and will encourage thousands more people, including many adults, to quit. But the tobacco industry has long opposed tax increases, saying they depress sales perhaps more than any other tobacco restriction. The industry also says that such a tax is regressive, hitting the poorest consumers the hardest, and that it encourages the smuggling of cigarettes from states with lower taxes.

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