Missing in governor race: health cost budget buster

One of the major political footballs in this year’s campaign for Wisconsin governor is how many people should be on the state’s BadgerCare/Medicaid program. It is a legitimate issue, raised by the Obamacare offer of 100% coverage for three years for adding impoverished enrollees.

Gov. Walker takes the position that the federal government can’t be trusted to continue Medicaid funding at 90% plus levels. Challenger Mary Burke says take the “free” money from the feds and expand the rolls by about 85,000 people.

But the much larger issue for both candidates is the under-management of the costs of public payer programs in Wisconsin. Neither candidate has addressed the cost issue.

A recent analysis by two national research organizations showed that the health care program for Wisconsin state employees ranks right near the top for richness of the plan and cost to the taxpayers.

That’s no surprise, because management of public dollars going into the employee plan and into Medicaid has never been a hallmark of state government.

In the combined public and private sectors, Wisconsin has always ranked high in the nation for access to health care, usually north of 90%, before and after the passage of Obamacare. And the overall ratings for the quality of care in the state also generally rank high.
But cost management by state government as a payer has been a black hole, a deficiency that has caused major hemorrhages in state budgets.

In the last state budget, the soaring costs of BadgerCare chewed up more than half of the new dollars coming into state coffers as the economy recovered.

The bill for health care for the state employees under the Employee Trust Fund (ETF) is $1.1 billion per year. A recent Federal Reserve report concurred with the other two analyses and said Wisconsin had the second most expensive plan of the 50 states, trailing only New Hampshire. It put the expense for family coverage here at $22,400.

That compares to a national average of about $16,500 and to best practice in the private sector for top-flight health plans at about $10,000.

The state’s share of the $6 billion annual bill for Medicaid/BadgerCare is about $2.4 billion.
Combined, ETF and BadgerCare are consuming some $3.5 billion of $15 billion in annual general fund spending, or 23%. That fast rising percentage is crowding out other state priorities like education, economic development and environmental advances.

Medicaid/BadgerCare in Wisconsin runs at $9,000 per client, with 782,000 people on the rolls. The per-person cost in the private sector for health care is around $4500 with best practices. It’s not entirely apples and oranges, because there is some long-term and disability care in the state’s Medicaid program. But, you get the idea: there is lots of room for cost savings in the management of ETF and Medicaid.

Under Act 10, Gov. Walker and the GOP-controlled legislature cost-shifted to state and local employees, and Act 10 enabled local government to manage benefits in more innovative ways. But the state’s leaders stopped short of the real reforms that have lowered the inflation trend at private companies. Even with the cost shifting, the costs of Wisconsin’s ETF plan are still sky high.

That includes management platforms like self-insurance, consumer–driven incentives, primary care clinics at work places, aggressive chronic disease programs, value-based purchasing for quality and price and bundled prices. There is no reason why these approaches can’t be deployed equally well in the public sector. These are proven programs with audited savings in the 20% to 30% range.

Some states, for example, have won waivers to use Health Savings Accounts (HSAs) for Medicaid recipients. People’s behaviors change immediately when HSAs put money in people’s pockets to buy care. Gone are behaviors like going to the expensive emergency room instead of a clinic or doctor’s office.

Don’t think that these cost-management techniques can’t work in government, because they are already at work in local government. School districts and counties in Wisconsin are leading the way by putting these methods to work.

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