Free UW chancellors to manage benefits

The faculty at the University of Wisconsin – Milwaukee (UWM) has received no general raises over the last five years, so it has become a target for poaching. The campus has lost 40 faculty members recently to competing institutions.

Crippled from of a decade of major cuts from governors and legislatures of both parties, the entire university system is in a financial straight jacket.

Leadership at UWM is trying to fund $2 million as a stop-gap to retain good professors, but needs as much as $18 million to bring pay levels up to par.

Lots of luck. The 2013-2015 state budget, now in the making, has already been hammered by a request from Dennis Smith, the governor’s secretary for health services, requested an increase of more than $650 million for Medicaid over the two years. That bloated request will chew up much of the new revenue dollars coming from the meager growth in the economy and will crowd out investments in big priorities like education.

Fortunately, there is a solution.

Assuming that the Wisconsin Supreme Court over-rules a Dane County judge’s shaky rationale and keeps Act 10 in place, a Republican legislature (they could win both houses)and governor could turn the units of government loose to cut their own deals for health care. The local leaders could better manage costly benefits if they didn’t have to be bargained.

Similarly, If the chancellors were given the flexibility and the freedom to manage benefits, they could apply management disciplines to their health costs and save buckets of money. Those savings could be applied to faculty salary increases.

Private corporations, and even local units of government (thanks to Act 10), are racing ahead with real reforms in the delivery of health care, and they have proved beyond debate that huge savings are possible – WITHOUT ANY LOSS OF CARE. In fact, the innovative reforms produce better health care.

Here are the available reforms in a nutshell:

• Consumer driven plans with a high deductable and an offsetting savings account, which bring savings of 20% or more. Major corporations like GE Healthcare, health care providers, health insurers are already there with their own employees. Why not government employees?

• Transparency on health care quality and price so consumers can search for centers of value, which deliver savings of 30% or more on elective procedures.

• Proactive primary care on-site at workplaces, which produce savings of 20% to 30% through serious management of chronic diseases and steerage to centers of value for care beyond primary.

Now, let’s apply those better management practices to the unmanaged delivery of health care at UWM. It covers 3759 employees at a total cost of about $60 million. That’s about $16,000 per employee, about the national average and about double best practice in the private sector.

At least one-quarter of that expense could be cut with best practices, much of the saving coming from improved health management in the workforce.

If the health package has to be bargained, forget the savings. Union leaders can’t get off the fallacy that high price equals quality, when the inverse is reality. So they fight for the bloated, under managed plan – at the expense of salary increases.

They should consult with their steel worker brethren at Bucyrus (now Caterpillar) where a consumer-driven plan has been well accepted and saved more than 20%. Note: steelworkers are getting raises, and Bucyrus added investment in the South Milwaukee plant.

There’s a problem, of course, with getting the governor and legislature to give campus chancellors latitude to bargain for better health care value. They are on the under-managed state plan themselves.

They could lead by example, though, as the Bucyrus executives did. They could opt for a consumer-driven plan themselves and then free the chancellors to manage.
It has to be awkward as all-get-out for them to slash university budgets and still keep campuses in straight jackets on management. They can’t have it both ways.

Turn the chancellors loose.

A closing thought for Mr. Smith: the real reforms could be applied to Medicaid, the state’s budget buster, as well.

This entry was posted in Health Care Economics. Bookmark the permalink.