Walker targets big health care savings

Governor Scott Walker

Governor Scott Walker

The immediate resistance to the one bold initiative in Gov. Walker’s state of the state message is perplexing. He called for self-insurance for health care for state employees, a move everyone should love except for the incumbent health insurers.

The Wisconsin politicians who oppose to move, including members of his own party, remind me of the weatherman who sits in his windowless cubicle and predicts a pending rain storm. If he would stick his head outside, he would realize it is already pouring cats and dogs.

If our erstwhile legislators would get out into their districts and talk to business people, they would soon learn that most sizeable companies already self-insure for coverage of their workforces. They would learn that self-insurance opens the door for huge savings.

They would also find out that local governments, especially school districts, enabled by Act 10, are taming run-away health costs by taking on heir own risk management. If it works for local government, often in unionized environment, why would it not work for state government?

There are two obvious reasons for the pushback from legislators. First, legislators themselves are on the state plan, and it is viewed as a rich plan because it is an expensive plan. Wrong answer. It is expensive because it is under-managed by the Employee Trust Fund (ETF). The self-insured plans in the private sector are often better plans.

Second, the lobbies for the health insurers, hospital corporations and doctors write big checks for political campaigns.

At some point, though, the politicians have to look past their own interests and do the right thing by the taxpayers. ETF spends north of $1.1 billion annually on 65,000 state employees and their families. That equates to about $18,500 per employee, far above the best practice in the self-insured plans at private companies and local governments.

You can do the math. Best practice in the private group plans is about $13,000 per employee. If ETF operated at that level, the annual savings to taxpayers would be a staggering $350 million. How can political leaders not take advantage of that gift horse?

Here’s the greatest irony: state workers would get an improved health plan.

What happens when a payer organization goes self-insured is that they become hugely motivated to manage the risk in their plans. They innovate.

For instance, they often put in primary care clinics for their people, conveniently located on or near the workplace. Often it’s free or very low cost. The health teams there are hired for the express purpose of keeping members well and out of expensive hospitals.

They benefit from proactive care versus reactive care. Employee well being goes up, and costs go down.

Further, they invariably deploy incentives and disincentives in consumer-driven plans. Employees start acting like consumers so they build up their Health Savings Accounts, which have huge tax advantages for employees. Over-utilization disappears, smart buying appears and big savings result.

The self-insured plan managers soon steer their members to best value when they need a treatment or surgery. That means hospitals or clinics with low infection rates and bundled prices. Why pay $47,000 for a joint replacement, or more, when they can be bought for $28,000 in Southeastern Wisconsin, with a warranty against readmissions? Savings from smart purchasing, again, are huge and outcomes improve.

The point here is that self-insurance is just the first enabling step toward improved workforce health and lower costs of quality care.
Gov. Walker promised to use the first round of savings of $41 million from going self-insured for K-12 education. That’s smart policy and smart politics. You can’t go wrong investing in kids.

Here’s the final irony as this debate over self-insurance kicks off. Health insurers and hospital corporations are some of the biggest employers in Wisconsin. Note: they are almost all self-insured for the health care of their workforces, as they should be.

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  • Jerry

    The biggest problem with this proposal is that Walker is proposing it and his track record with what he says and what he does or with the truthfulness of what he says is not strong. Wisconsinites have learned to be very cautious and very suspicious of this man as his actions usually benefit a special interest donor group or has a hidden selfish political motive rather than being something from which the people of Wisconsin will benefit. He could have helped thousands of people with healthcare coverage by not rejecting the federal Medicaid money but he chose instead to tell people to go find coverage from the ACA; a plan he is attempting to kill. Some 27,000 former BadgerCare recipients were left without coverage by his actions. His demeaning and denigrating words towards public employees and the severe cuts in take home pay as a result of Act 10 give most pause as to why anything that Walker proposes would long term be in their best interests. Non- contradictory studies showing the benefits that you tout would be needed to convince me that this approach is good for the public employees and good for Wisconsin. I fear he will do just as he has done with Civil Service……take away the benefits or cut the protections once the program is in place. Via Act 20 he controls all agencies and all programs with the exception of DPI. We have seen what he has done to the DNR and the GAB. There is no guarantee that he would not attack self insurance provisions as long as he holds office and is hinting at a 3rd term.

  • JOSEPH KAYLOR

    Jerry outlined exactly why this man and his corrupt cronies can not be trusted. Please stop using Walker and Bold together, a better choice would be pandering- self serving.

    John, I seem to recall where you proposed similar logic when challenging cost savings that would negate the budget cuts to the UW system.

    Your self insurance idea, which I totally agree with, has been around for 20 years yet you have not been able to receive any traction with politicians- why? Politicians exist on the basis of promoting promoting fear and creating division- Walker at his best. Follow the money John.

    A leader would promote stronger open records laws, as in nothing to hide, and focus on the Wisconsin economy and JOBS- it does not matter if a R or D follows the candidates name.

    Joseph Kaylor

  • biggovno

    Jerry and Joseph; not sure what you base your comments on. Jerry, the DNR has had power taken away from it which is a good thing, it was a nasty organization in the Doyle days and was above reproach, the people voted to correct this, twice or was it 3 times 🙂

    Joseph, I do not see the corruption in the Walker (the person you refer to as “this man”). The UW system is another power hungry group that has little to do with education anymore. Let them function on less government handouts and bring their cost under control to attract customers. Why are the universities allowing students to be bilked out of 10’s of thousands in loans for carriers that don’t exist in the real world? Then taking the money and building fiefdoms for themselves to live off of. That’s corruption.

    Walker is taking power and money away from our state government and creating a better middle class in Wisconsin as we voted him in to do 3 times 🙂 I am out here in the middle class and 4.5% unemployment is not a failure and wages are going up.

    If you are unhappy in the public sector leave, we will higher folks who are not constantly complaining about the opportunities we are providing them. Move on and get out or your rut, we would appreciate it.

    The Left in Wisconsin is not in power (along with 29 other states) because they so poorly ran the government institutions we entrusted you with at one point in time. You corrupted them with your unions and tyrannical dictates. Union pension and insurance plans run by the unions; districts were forced to raise taxes on us to pay for plans that cost twice of private plans – that is corruption. We in the private sector do not want to pay you special compensation and give you special protection just because you got a job in the public sector.

    The same will start at the national level with the next conservative administration: DOJ, EPA, DHS, Dept Ed, NLRB, etc will all be forced to changing. The public sector is sick of the current balance of power and equity redistribution.

  • Jerry

    biggovno……….You must be living in a different Wisconsin. The middle class in this state has shrunk the fastest of any state in the nation. We have become a low wage state with median income having dropped $800 per year. Poverty is up and nearly 45% of our school age children now qualify for free our reduced priced lunch. Wisconsin roads are ranked 3rd worst in the country. The state ‘s borrowing has increased and so has long term debt. During the last biennium the state spent in excess of $700,000 million more than it took in with revenues. Based on your statements there must be two Wisconsins in which people live.

  • Jerry

    This was about possible healthcare savings for the state. If it can be done with savings for taxpayers and public employees are not victimized in terms of their coverage and co-pays….of course it should be explored. Just be ware of the messenger.

  • Peter Felknor

    Mr. Torinus–

    A big reason why state employees are upset by the self-insurance proposal is that Scott Walker has proven repeatedly that he has no understanding of even the most basic economics. Two shining examples–our roads are among the worst in the nation and he won’t acknowledge the fact and move to restore our vital infrastructure. And he is carrying over $800K in personal debt. Do you really think that he understands insurance policies beyond the kickbacks that would be accruing to his donors in the industry? BTW I work in the private sector.

    • JohnTorinus

      I spent two days with Gov. Walker and some of his cabinet members a while bak in a dialogue on health care econmics. I can report that, unlike the presumptive GOP nominee for president, that Walker has a deep understanding of health care costs and politics.
      He is moving as fast as he can, given the absolute lack of comprehension in the Democratic Party that high costs can be managed and that high costs mean less access. As one wag said, free lunch is never free. COSTS are THE ISSUE.
      Re roads: This is a long-term issue, and both parties have borrowed to pay for road construction. As with health care, I would like to see some emphasis on cost control over soaring inflation in road building. NO ONE talks about that, except for a few legislators.
      It’s mostly about mangement science, not political science. Stop pointing fingers and mange the damn costs.