GOP Speaker-Elect Misstates Wisconsin Health Plan Costs

Yesterday, Carrie Lynch picked up on a letter written by Assembly Speaker-elect Mike Huebsch (R-West Salem) to the Wisconsin Farm Bureau upon hearing the Bureau was going to consider supporting the Wisconsin Health Plan (WHP) proposal.

Carrie rightly criticizes Huebsch and other GOP legislators for ignoring the need for fundamental health care reform and instead backing only minor adjustments to the existing system.

But getting into the details of Huebsch’s letter also shows cause for dismay. In the letter, Huebsch writes:

According to the non-partisan Legislative Fiscal Bureau, the WHP can’t pay for itself. According to the Fiscal Bureau, the plan would be short $8.7 billion in the first year alone. The lack of funding can only be addressed in two ways: increasing this new and unprecedented tax on small businesses even higher or dramatically reducing payments to health care providers. Reducing payments would likely lead to physician flight and facility closings, especially from rural areas. The last thing we need as a state is for people in rural areas to have a harder time finding quality care.

Thankfully, Huebsch included a copy of the LFB report with his letter because when the Farm Bureau reads the actual report, they won’t find anything about the plan falling $8.7 billion short in its first year, as Huebsch claims in his letter.

Instead that $8.7 billion figure comes from the difference between total health care expenditures in Wisconsin in 2005 and what actuarial reports projected the total annual cost of the WHP to be in the same year.

Huebsch, amazingly, takes this to mean that the WHP would be $8.7 billion short in its (non-existent) first year of existence.

First off, as the LFB report explains – in a section Huebsch either didn’t read or just plain ignored – the WHP cost estimates do not include out-of-pocket costs paid by people enrolled in the plan (e.g., co-payments, deductibles, etc.) while those costs are included in the total expenditure numbers from 2005.

Based on what Wisconsinites currently pay in out-of-pocket costs, including these payments in the figures would drop the difference to $6.5 billion. And, the LFB report adds, “given that the WHP proposal includes relatively significant levels of cost-sharing in the form of deductibles, coinsurance, and out-of-pocket maximums, out-of-pocket payments could account for an even greater portion of the difference.”

Secondly, the LFB report also notes that estimates for the WHP were done on the cost of Tier 1 plans alone, which are the least expensive for participants. Those opting for the Tier 2 and Tier 3 plans would need to pay more out-of-pocket. As the LFB explains, "The additional payments would further account for the difference between the estimated PHCE [Personal Health Care Expenditures] in Wisconsin in 2005 and the WHP cost estimates."

Lastly, although perhaps most importantly, comparing estimated WHP costs to actual health care expenditures is risky business because it assumes total costs will not change at all under a new structure of health care.

Part of the promise of fundamental health care reform – such as what’s outlined in WHP (to an extent, anyway...more on that below) – is that it streamlines and simplifies the system in a way that increases purchasing power of payers in the system and reduces administrative costs. Hence, to assume the WHP would cost as much as the existing system is like assuming your new Prius should cost you as much in gas as your old Hummer.

And as if Huebsch hadn't already mischaracterized the LFB report enough in his letter to the Farm Bureau, he added this in the paragraph after the one quoted above: "The Fiscal Bureau memo, which I have included with this letter, also outlines a serious concern about the plan. The WHP will likely lead to thousands of employers paying more than they currently are for lesser coverage."

In all 18 pages of the LFB report, this point is never mentioned. What the LFB report does say is that some employers may need to pay above the Tier 1 assessment outlined in the estimated WHP costs "to provide a level of coverage equivalent to that currently provided." This says nothing about those increased payments in relation to what employers currently pay for coverage.

While the LFB report doesn't explicitly reject the possibility that some employers would need to pay more for the same level of coverage under the WHP, there is nothing in the report that defends this statement as fact or even a likely possibility on a small or, as Huebsch makes it seem, large scale.

As I’ve stated before on this blog, it’s my feeling that the WHP doesn’t do enough to realize the savings that could come from fundamental reform, which is why I prefer the plan proposed by Sen. Russ Decker (D-Schofield) and Rep. Terry Musser (R-Black River Falls) called the Wisconsin Health Care Partnership Plan.

By merely funneling the plethora of existing health plans into a tiered system – rather than actually reducing the number of plans – the WHP misses out on the full potential of increasing the purchasing power of payers by pooling as many as possible into a few (or just one) plan. And, actually, the discount rates assumed in the actuarial study of the WHP is a big sticking point highlighted by the LFB, and one that needs more clarification in a future actuarial study (which, apparently, is underway).

But, at the same time, it should be noted that a tiered system for health care plans has been successfully implemented for state employees in Wisconsin, resulting in savings “in excess of $14.5 million” in the first year, according to the administrator of the Division of Insurance Services at the Department of Employee Trust Funds.

Similar savings could be realized through the WHP (on a broader scale, of course). Indeed, one of the main architects behind the revamping of the state employee health plan is the director for the Wisconsin Health Project (which created the WHP), Dave Riemer.

In the end, any way you slice the numbers on WHP, the reality comes nothing close to the grim view presented in Huebsch’s letter to the Farm Bureau. Considering Huebsch is poised to become the top Republican in the legislature, this doesn’t spell good news for those of us looking for, if nothing else, an honest health care reform debate next session.

UPDATE: DHFS Secretary John Leenan already responded directly to Huebsch, and makes points very similar to the ones I do. You can read Leenan's letter here.