The elephant in the room (pun intended) for Republican leaders in Wisconsin as they try to balance the state’s hemorrhaging budget is run-away health costs.
They are an enormous contributor to a two-year budget that is $3 billion under water. They compound the predicament as Gov. Walker and GOP leaders in the legislature try to grapple with the barrel of red ink left behind by Gov. Doyle and his health care experts, Karen Timberlake and Jason Helgerson.
For perspective sake, the projected shortfall for Medicaid and BadgerCare Plus, the last of several under-funded Doyle expansions, is $1.8 billion. That’s more than half of the projected state deficit for the 2011-2013 biennium.
A new Doyle program called BadgerCare Plus Core, which provides basic coverage for adults making less than $36,620, has enrolled 47,000 people, but has 80,000 on the waiting list.
Doyle is unapologetic about providing coverage. Fine, but the problem he ducked during his eight years was how to pay for the largesse. Harvard guys apparently don’t do math. It almost seems as if Doyle deliberately ran up the tab on health care, knowing how hard it is to retreat from subsidies once they are in place.
The manna would come from somewhere. In Doyle’s case, it came from President Obama in stimulus dollars for the BadgerCare expansion. But those dollars are gone.
There is a ray of sunshine in this fiscal mess. Health costs can be managed better than the public payers have figured out – far better. Pioneer companies in the private sector are offering full health benefits for less than one-half of what government pays.
Gov. Walker has asked public employees to pay for 12% of the cost of their expensive health plan. That compares to a national average of 25% borne by employees in the private sector. A 75-25% split between employer and employees is the norm. Walker’s demand is as half step toward better stewardship of health care dollars provided by taxpayers.
But normalizing the payment formulas is only a start. Gov. Mitch Daniels of Indiana has installed a consumer-driven health plan for state employees, and it produces huge savings – with no loss of benefits for the plan members. In the private sector, the consumer-driven savings average around 24%. Those are proven, audited numbers.
Gov. Walker should follow suit immediately. Pass whatever legislation is necessary to make it happen. He has strong majorities in both houses.
Then he should apply for a federal waiver so he can put consumer-driven disciplines into Medicaid and Badger Care. There is no reason why a high deductible, offset by a personal health account, won’t produce the same kinds of behavior changes in the public sector as they have in the private sector.
Again, there would be no loss of benefits. If a person is too poor to contribute to a personal health account, just give them the account. Once it is the person’s own money, behavior changes instantly. The savings will far exceed the cost of the accounts.
Gone will be the abuses that plague the Medicaid and Medicare systems. I know two emergency room doctors who have quit their jobs because they couldn’t stand the abuses.
This is typical. Medicaid recipient develops a sore throat. Feeling entitled because of “free” coverage, he calls 911, abusing that system. Gets ambulance ride to hospital, abusing that expensive system. Then sees triage-trained doctor, abusing the ER system, which, by law, is required to treat the sore throat.
That doesn’t happen in private plans, because the financial incentives and disincentives are in place. It’s the incentives, stupid!
Consumer-driven plans are a better path than top-down rationing of Medicaid, which Oregon has introduced. It’s better than abandoning the Medicaid program altogether, which some financially stressed states are threatening.
There are other private sector reforms that could also be deployed, such as offering free primary care at the work site, such as seeking out centers of value among health care providers. Some providers offer better quality and better prices than others; yet the present system rewards them equally.
Why would anyone pay $50,000 for a hip replacement when the highest quality surgery centers will offer then for $25,000? That happens all day, every day in the public plans, because the incentives to do otherwise are lacking.
The economic side of health care is busted. The train that was coming down the track has emerged from the tunnel and it is upon us as taxpayers. The state is busted; Medicaid is busted. Medicare is busted; school districts and many municipalities are busted because of benefit costs.
The road back to fiscal solvency has been paved by private sector companies. They have proved out the reforms in the real world at the grass roots level. Our political leaders just need to innovate and adopt their proven innovations.
There is room for the elephant on the reform train.