Attacking Health Care Crisis

Matt Kranich

The health care cost crisis is affecting everyone nationwide. Because of Wisconsin’s revenue caps and the Qualified Economic Offer (QEO) law, teachers and education support professionals have lost thousands of dollars in salary. The direct result is that Wisconsin’s average teacher salary has dropped to 22nd in the nation and 7.1% below the national average.

As the new Wisconsin Legislature begins to take a serious look at ways to address the health care cost crisis, OnWEAC In Print sat down to discuss the impact of changes in the health care environment with Matt Kranich, a Kenosha teacher who serves both on the WEAC Board and the WEA Trust Board.

Q: Why do health care costs keep rising at a rate greater than inflation?

A: This has been happening for decades and the levee is about to burst. Our current health care system does not respond to market forces like other goods and services. Some of this can be traced to the fact that the patient does not directly negotiate or pay for the health care services he or she receives from a doctor. Another reason is that new procedures and medicines have little or no price regulation.

Q: My district wants us to switch our health care to a different insurer. Are the Trust’s competitors really offering the same plans for less?

A: It is very difficult to show that two health plans are the same even if they appear on paper to cover the same things.That’s because how an insurance company chooses to administer its plan can vary greatly. What we know is that the Trust is a not-for-profit company that was created by WEAC to provide services to public school employees. It doesn’t work to generate profit for shareholders or executives, and it doesn’t pay any commissions to its employees for getting or keeping business.

Q: But my district keeps claiming that it is health insurance costs that are creating all of the problems. They say that if we switch away from the Trust they won’t have to cut any more positions. It that true?

A: Most likely your district’s budget problems are only partially the result of health care costs. In most cases, switching away from the Trust will, at best, provide a one-year fix to your district’s budget problems. Last year, South Milwaukee left the Trust for a lower cost plan provided by a megainsurer. This February, when the South Milwaukee School Board met for budget deliberations, it was determined that they had to cut another $820,000. When asked, the school district business manager stated,“Unless there are some changes, it looks about the same next year.”

Q: But don’t the for-profit megainsurers get larger network discounts than the Trust, and as a result don’t they pass that savings back to us by offering the same plan for less?

A: This “hope” is simply not true in the long run. In some instances the mega-insurers may have slightly larger discounts, but they also need to generate extra income to deliver profits to their shareholders, whereas the Trust does not. When the costs are lower you should expect the plan to be administered in a different manner than how it was by the Trust and you should expect cost shifting to take place. Nobody should believe that the mega-insurers will suddenly become non-profit and begin to care for their members in the same way that the Trust has done for decades. Clearly, the mega-insurers were created for a different reason.

Q: What are you referring to when you say “cost shifting” and how is that different than “cost savings”?

A: Cost shifting can come in many forms and it simply means that the cost of something is not really reduced, but is passed on to someone else. Some forms of cost shifting are easy to recognize and avoid. For example, if a monthly health insurance premium is $1,000 and the school district asks its employees to increase their premium contribution from 5% to 10% they are simply “shifting” their costs to the employee.There would be no cost savings with respect to the care provided. Other forms of cost shifting are much more difficult to detect and defend against. Some companies regularly deny claims and place the stress and burden of obtaining coverage onto the backs of the plan participant. Multi-million dollar fines have been imposed on some of these companies, but the practice continues. Other types of cost shifting that are difficult or impossible to defend against are frequent changes in prescription drug co-pays, strict quantity and duration limits, and suddenly requiring prior authorization on certain drugs without first informing the member.

Q: What then are the real “cost saving” opportunities that everyone in Wisconsin should be pursuing?

A: There are two different types of cost saving measures that everyone should be aggressively pursuing. The first is simply to make sure you bargain the most cost-effective health and prescription drug plan. With respect to the WEA Trust, these plans would be the Trust Point-of-Service, Trust Select and the new Trust Preferred plan. These plans offer tremendous cost savings by encouraging members to use providers who have agreed to offer services at a greater discount than non-network providers. Sixty-six percent of Trust members are in one of these plans. Similarly, in the threetier drug plan, when there are two or more drugs that treat the same condition, the three-tier drug plan gives members a lower copay to use the lower-cost drugs. Eighty-eight percent of Trust members are using the threetier drug plan.

Q: So why does the Trust have many brand name prescription drugs at lower tier levels (lower cost) than their competitors?

A: The Trust works with pharmacists and physicians to decide the most cost-effective prescription drug option for different medical conditions. They call it an evidence-based prescription drug formulary and it serves the best interests of the member, not the shareholders of a for-profit insurance company.

Q: Getting back to cost savings, what is the other type of cost saving opportunity everyone in Wisconsin should be pursuing?

A: The second cost-saving opportunity that we must all pursue is health care reform, meaning a major overhaul of how health care is administered. Pursuit of health care reform will require both legislative and political action. Health care reform is easiest to understand when explained as four unique but overlapping components.

Q: Does one of the reform components have to do with the prescription drug formulary as described above?

A: Yes, the first health care reform component is the creation of a statewide evidence-based prescription drug formulary. Evidence-based prescriptions offer the best care at the lowest price. Purchases could then be combined to create bigger discounts through a statewide purchasing pool.

Q: If an evidence-based approach makes sense for pharmaceutical drugs, can the same be done for health care services?

A: Yes, the second health care reform component is to centralize the processing of all insurance claims in Wisconsin and then use this statewide data to determine which health providers are offering the best services at the lowest cost. Currently, such data is not shared among all of Wisconsin’s insurance companies. We need the Legislature to make health care data sharing a law. Without it, the inefficiencies that increase health care costs by approximately 25% will continue.

Q: How come I never get to see what my doctor charges until I get the bill or explanation of benefits in the mail? And why do two different patients pay different amounts even when they receive an identical procedure from the same doctor on the same day?

A: A law requiring uniform and transparent (visible) pricing of standard health care procedures is the third health care reform component that would benefit all of Wisconsin’s citizens. Without uniform and visible pricing we will never be able to eliminate the tens of millions of dollars that are spent every year paying for network negotiators and a complex and wasteful billing system. The price for health care services should be the same for everyone, regardless of which insurance card they plop on the counter.

Q: What about the uninsured? Aren’t they driving up my costs by getting free health care?

A: That is an excellent question and it addresses the fourth and final health care reform component, which is having the state government provide preventive and catastrophic care for everyone. It is true that unpaid emergency room fees are recouped through elevated costs to those that are insured. Another way hospitals receive payment is through state and federal health programs. In other words,working citizens are currently paying for the health care of the uninsured through taxes and higher costs. In order to provide health care benefits to the uninsured and lower overall costs,Wisconsin legislators must require that not only emergency care be provided to all citizens, but catastrophic and preventive care as well. Doing so would actually reduce overall costs because the health needs of those who are currently uninsured would be treated before they became more serious and more costly. Everyone should be expecting our legislators to provide catastrophic and preventive health care for all citizens.

Q: Is it true that legislators are considering reform plans that would provide universal coverage for all employees or citizens?

A: Universal coverage refers to the concept of having the same health insurance plan for all citizens. The United Kingdom and Canada have universal health coverage.The universal plans that are gaining the support of many constituent groups have some of the cost-saving reform components built into them. A problem is that all of the plans lack detail and we really can’t tell which of the reform components they will incorporate or how well they will be carried out.

Q: I have sacrificed a lot of salary to maintain my quality health care benefits and service. If a universal health care proposal becomes law, will I lose a lot of my benefits?

A: The details of these plans have yet to be determined. It is hoped that all cost savings could be used to either increase salaries and/or provide for wraparound plans. Wraparound plans refer to the concept of having “supplemental” coverage for those services that a universal plan may not cover.

Q: In either case, will the Trust be the one administering either a universal plan and/or a wraparound plan?

A: It is impossible to say at this time. What we do know is that the Trust has set the standard of excellence for over 30 years and has delivered more value than any other insurance company in the state. It has been a selfless leader in health care reform while its forprofit competitors have benefited from maintaining the status quo. When it comes to the future of the Trust, everyone should expect that our legislators don’t try to fix what isn’t broken.

Posted March 25, 2007