With the jury still out on the effectiveness of Obamacare, it is stunning to see alternative reforms racing ahead in the world of self-insured payers.
Those reforms – I call them real reforms – have been so successful in the private sector that they are now steaming ahead in the world of local government.
Because the economic pain of out-of-control medical costs is so high, school districts, counties and municipalities are moving quickly to garner the savings from the four major platforms for containing health care spends: self-insurance, consumer-driven incentives and disincentives; on-site proactive primary care; and value-based purchasing.
Here is one spectacular example: The City of Milwaukee, with 6500 employees, has held its health care costs flat for the last five years. FLAT!
It’s even better than that. Milwaukee spent $139 million on health care in 2011 before switching over to a self-insured plan in 2012. Costs dropped to $102 million in 2012 and have stayed at about that level ever since. Mind you.
The city’s previous hyper-inflationary trend of 8% to 9% increases every year has been tamed. Note: all of this amazing progress has been made without any impact from Obamacare. Note also: the city’s progress was also made in the face of 6% inflation in employer plans in recent years.
The intelligent management approach was led by Michael Brady, benefits manager, in close collaboration with the mayor, council and unions. The positive results from Milwaukee’s new health care model has many positive ramifications: layoffs avoided, no crowding out of raises for county employees, flat employee premiums for five years, better health outcomes for families of employees, improved productivity, lower absenteeism and less pressure to raise taxes.
If the old trend had continued, the trend before Act 10, health costs for 2016 would have been about $200 million, double where they are projected to come out for this year.
As with other enlightened group plans, there are many moving parts under the four platforms in Milwaukee’s modernized plan. Here are some of the highlights of what’s changed over the last five years:
• 12% of costs are paid by employees, but they have stayed flat because employees are making better decisions about family health and their purchases of care.
• An onsite Wellness Center and a Workplace Clinic, headed by nurse practitioners, have sharply reduced hospital admissions. Onsite physical therapy was added last year. These services are free for employees and spouses.
• Relatively low deductibles (now $750 per single employee and $1500 per family) were installed to create a consumer mentality.
• Co-insurance was set at 10% for members who use United Health Care’s Premium Provider program, which uses only the top doctors, vs. 30% outside that group. That tiered approach, aimed at better health outcomes, is a form of value-based purchasing.
• Participants in city’s wellness program can earn $250 in a health account. Good progress has been made on hyper-tension and smoking (now 12% vs. U.S. average of 14%), but, like other employers, there’s not been as much traction on obesity. There has been some workforce progress on diabetes and glucose.
• $200 co-pay for use of emergency rooms has cut non-urgent visits by 300 per year.
• An Intense program to reduce injuries, which got its start in 2008, has resulted in a 70% reduction in injury hours off work. The program has saved another $10 million per year compared to previous trend line.
• Milwaukee is bringing in health insurance at about $15,000 per employee per year, well below the national average and not too far off the $13,000 at best practice private companies.
Governments are not known for bold innovation, so this track record — in a unionized environment – is an eye-opener. Said Brady: “These results are amazing considering changes in the city’s workforce demographics and the difficult and challenging environmental hazards that city employees regularly face.”
In contrast, the top-down reforms under Obamacare (ACA) have had more mixed results:
• Per Gallup, the uninsured rate dropped to 11.9% in the country from 16.4% in 2010 when President Obama led the fight for ACA. The main aim of the Affordable Care Act was to increase access. One in nine Americans is still uncovered.
• Half of its non-profit CO-OPs created to offer care have gone bust at a cost of $1.2 billion.
• The deductibles for the plans sold on the ACA exchanges ($5,372 for Bronze plans) are proving unaffordable for families. The most popular Silver plan has a deductible three times higher than for employer plans.
• Premiums rose at double-digit rates for those plans in most states.
• Major insurers are pulling out of the market for individual policies offered on the exchanges.
• On top of premiums, the cost to the federal government is about $5,000 per subsidized person per year.
There is one obvious conclusion from the contrast above: When you hear presidential candidates from both parties talk about taking employers out of health care and moving people to the exchanges, tell them they are crazy.
Employers are the real reformers.
Most of the meaningful reform of the chaos on the economic side of health care in this country is coming from self-insured employers, like the City of Milwaukee. The candidates just don’t know what is going on outside the beltway.