Missing in campaign: debate on health cost management

The campaign for governor has come and is almost gone, and both Gov. Walker and challenger Mary Burke have managed to largely avoid the biggest economic issue in the state: out-of-control health costs.

They have debated mightily over how many people should be on the Medicaid rolls and whether the state should take more federal dole for that program. That is a slice of the health access issue, but has almost nothing to do with lowering the fundamental costs of delivering care.

And, no, Obamacare (ACA) has not reduced health costs. ACA subsidizes the price of insurance coverage, but it does little to attack the underlying, bloated cost structures. (Prices and costs are not the same thing.)

Further, early returns on the 2015 sticker prices for insurance premiums indicate they will be rising sharply, so much so that the federal subsidies may not be enough to offset the increases.

Back to the Wisconsin race for governor: there is great irony in this ducking of the inflationary reality in health costs by our governor and would-be governor. All around them, innovators in the private sector and local government are taming the beast.

The governor knows that. He and his staff have immersed themselves in the new market and consumer driven dynamics that are lowering costs sharply in the private sector. But they haven’t yet acted, preferring to not rock boats until after the election.

Under Act 10, Gov. Walker cost-shifted to public employees by asking them to pay premiums equal to about half of those paid by employees in the private sector. That move needed to be made, despite the predictable back-lash, and it helped state and local governments to balance their budgets. But cost shifting is not cost management.
Private payers, in contrast, are managing costs. They are successfully using levers like:

• Incentives and disincentives in consumer-driven plans where higher deductibles and co-insurance are offset by savings accounts. With their own money is at risk, consumers quickly change buying behaviors and over-utilization disappears.

• Value-based purchasing, which means steering employees to best buys for quality and price.

• Transparency charts that display price and quality for procedures.

• Medical homes at or near the work site to deliver primary care in a proactive manner. They are sharply lowering hospital admissions. Serigraph has seen about a 50% reduction in admissions. Every Wisconsinite should have a medical home and proactive primary care.

• Intense management of chronic diseases, employee by employee in their work forces. That’s where the big costs and savings lie.

• Free generic drugs, because they are so much cheaper.

• Bundled prices for surgeries at infection-free clinics and hospitals. The surgeries at some of these centers of value are warrantied against readmissions. Complex bills disappear.

• Self-insurance, with employers taking on the risks of providing care instead of health insurers. Companies keep the savings from innovative management of costs.

• Health care analytics for the work forced as a whole and predictive analytics for individual health.
You might say that these reforms, which amount to a new business model for the delivery of care in America, wouldn’t fly in a unionized company or in slow-moving government. You would be wrong on both counts.

Many unions have seen the light. They have learned that bloated benefit costs impinge negatively on raises, and they are joining the parade toward the new levers. How can you argue with improved workforce health and smarter purchases?

Local governments are racing to the new model, and they can’t believe how much money they can save and recycle into raises, school facilities and broader curriculums. It’s like found money.

Some states have won waivers to apply the new tools to soaring Medicaid costs, but not here.

Despite the self-imposed gag orders the candidates imposed on themselves on this subject in the elongated campaign, they will have to deal the soaring costs for public care packages.

Gov. Walker has already signaled his interest in self-insurance for state employees, and that, in turn, signals the requirement for more intelligent management of health care risks.

He devoted one page of 62 in his economic plan to health care (Medicaid enrollments aside), citing support for a price data base, for rural medical training, the University of Wisconsin Carbone Cancer Center and an oncology imaging network. All in all, not very comprehensive or bold, but not nothing.

It’s hard to figure what a Gov. Burke might do in this arena. The Madison School board, on which she served, has been a laggard on using Act 10 to address the costs of its rich benefit package. Her economic blueprint for the state passed on the issue.

One certainty: the fiscal pain from health care inflation will demand some kind of cost management response from whoever is elected.

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  • Bill Kraus

    There are a lot of things missing from this campaign. It’s the curse of playing to the base. The base is characterized by smugness and righteousness and has little or no interest in new ideas. And campaign managers have less interest in annoying or offending the base in any way, shape, or form.

    • JohnTorinus

      Great insight on why candidates play small ball.