Coming Around to the WHP
When I initially looked at the Wisconsin Health Plan (WHP) almost a year ago, I saw it as a legitimate attempt at solving the growing health care crisis, but one that simultaneously was based on a flawed structure that relied too heavily on market forces to control costs.
Even then, however, the way the plan wisely blended liberal equity with conservative individuality was clearly a feature that made the WHP the most politically tenable of the three major health care reform proposals to date (here and here are the other two).
More recently, though, I have started to see the merits of the WHP beyond just political expediency. Two recent additions to the Health Care Reading list (in the right-hand column, just under the Lefty Blogs feed) have helped with this.
The first is a report by the American Association of Pediatrics (AAP), which provides an excellent overview of the current structure and use of High Deductible Health Plans (HDHPs) in the US. Most eye-opening are the sections on the funding of individual medical savings accounts associated with HDHPs and the application of the deductible to preventative care.
According to figures cited by the AAP, only 20 percent of HDHPs in the US currently have employer-funded HSAs or HRAs associated with them. That means the other 80 percent rely entirely on the patients to fund the full annual deductible that can range from $2,000 to $10,000 for family plans. Not surprisingly, this set-up has contributed to a rise in unpaid medical bills in the Milwaukee area and elsewhere, which hospital execs directly attributed to high deductibles in a recent Journal Sentinel article.
Also noted in the AAP report is the fact that, as written in federal law, HDHPs can be structured so that preventative care is not applied to the deductible. The benefits of this set-up are clear in that it provides incentives for patients to get the routine care that can catch medical problems early before they develop into more complicated and costly ailments.
Unfortunately, though, the AAP reports that only 30 percent of HDHPs currently provide preventative care separate from the deductible. The other 70 percent force people to pay out-of-pocket for routine care until the entire deductible is met.
Of course, poor funding for individual medical savings accounts and applying preventative care to the high deductible is not the way HDHPs need to be set-up; it's just the way they are being set-up in our existing fragmented health system.
This is too bad since the use of HDHPs does provide some promise. For instance, a study by the Harvard Medical School recently found that HDHPs reduced the number of ER visits for non-critical ailments by 10 percent. And non-critical repeat visits to the ER dropped by 25 percent under HDHPs. Visits for critical ailments were not significantly affected.
Since ER overcrowding is a big problem, particularly for urban hospitals, cutting down on ER visits that really aren't emergencies -- such as those for headaches, nausea, or colds -- is a promisng trend.
But right now the promise of HDHPs is being severely dampened by the way they are being rolled out without necessary financial protections for patients such as even partially-funded individual medical savings accounts or preventative care that isn't applied to the deductible.
The beauty of a plan like the WHP is that it provides those financial protections that patients need -- in the form of a minimum HSA contribution of $500 and fully covered preventative care -- while also allowing and encouraging those patients to be consumers.
Of course, by charting out a middle ground, the WHP risks being attacked by some on the left because it isn't single payer and by some on the right because it involves government regulation of the health care market.
Hopefully enough people on both sides actually read through the plan and see that it is possible -- and quite desirable -- to have the best of both worlds.
Even then, however, the way the plan wisely blended liberal equity with conservative individuality was clearly a feature that made the WHP the most politically tenable of the three major health care reform proposals to date (here and here are the other two).
More recently, though, I have started to see the merits of the WHP beyond just political expediency. Two recent additions to the Health Care Reading list (in the right-hand column, just under the Lefty Blogs feed) have helped with this.
The first is a report by the American Association of Pediatrics (AAP), which provides an excellent overview of the current structure and use of High Deductible Health Plans (HDHPs) in the US. Most eye-opening are the sections on the funding of individual medical savings accounts associated with HDHPs and the application of the deductible to preventative care.
According to figures cited by the AAP, only 20 percent of HDHPs in the US currently have employer-funded HSAs or HRAs associated with them. That means the other 80 percent rely entirely on the patients to fund the full annual deductible that can range from $2,000 to $10,000 for family plans. Not surprisingly, this set-up has contributed to a rise in unpaid medical bills in the Milwaukee area and elsewhere, which hospital execs directly attributed to high deductibles in a recent Journal Sentinel article.
Also noted in the AAP report is the fact that, as written in federal law, HDHPs can be structured so that preventative care is not applied to the deductible. The benefits of this set-up are clear in that it provides incentives for patients to get the routine care that can catch medical problems early before they develop into more complicated and costly ailments.
Unfortunately, though, the AAP reports that only 30 percent of HDHPs currently provide preventative care separate from the deductible. The other 70 percent force people to pay out-of-pocket for routine care until the entire deductible is met.
Of course, poor funding for individual medical savings accounts and applying preventative care to the high deductible is not the way HDHPs need to be set-up; it's just the way they are being set-up in our existing fragmented health system.
This is too bad since the use of HDHPs does provide some promise. For instance, a study by the Harvard Medical School recently found that HDHPs reduced the number of ER visits for non-critical ailments by 10 percent. And non-critical repeat visits to the ER dropped by 25 percent under HDHPs. Visits for critical ailments were not significantly affected.
Since ER overcrowding is a big problem, particularly for urban hospitals, cutting down on ER visits that really aren't emergencies -- such as those for headaches, nausea, or colds -- is a promisng trend.
But right now the promise of HDHPs is being severely dampened by the way they are being rolled out without necessary financial protections for patients such as even partially-funded individual medical savings accounts or preventative care that isn't applied to the deductible.
The beauty of a plan like the WHP is that it provides those financial protections that patients need -- in the form of a minimum HSA contribution of $500 and fully covered preventative care -- while also allowing and encouraging those patients to be consumers.
Of course, by charting out a middle ground, the WHP risks being attacked by some on the left because it isn't single payer and by some on the right because it involves government regulation of the health care market.
Hopefully enough people on both sides actually read through the plan and see that it is possible -- and quite desirable -- to have the best of both worlds.
Labels: hdhp, health care, hra, hsa, whp
posted by Seth Zlotocha at Monday, March 19, 2007
8 Comments:
One of the issues that Doctors, especially primary care doctors have is the reimbusement levels. Medicare and medicaid reimbusement levels are low. This would need to be addressed and the fact that we are facing a shortage of primary care doctors. How do doctors feel about the WHP? Do you know? Or is it something that we are going to force on them to accept?
The WHP uses existing private insurers, not Medicaid, Medicare, or any new public payer. The private insurers under the WHP are free to negotiate rates with providers, just as they are now.
In the current market, private insurers can typically get around a 23 percent discount on services; by contrast, Medicaid gets around 72 percent and Medicare is about 61 percent (see here, page 8, for those numbers). The actuarial group that initially reviewed the WHP -- Northstar Economics -- set the assumed discount of private insurers participating in the program at about 40-45 percent depending on the provider service. So it's clear the WHP insurers would pay more than Medicaid and Medicare currently do.
But, again, those discounts are negotiated between the insurer and the provider; the 40-45 percent figure was just cited for actuarial purposes in determining the overall cost of the program. The assumed higher discount rates could be justified because there will be no more uninsured in Wisconsin -- eliminating the cost-shifting that currently takes place to cover provider charity care -- and the WHP would eventually phase out the need for Medicaid, which would essentially eliminate the "hidden health care tax" you brought up in your comment. Currently the well-respected Lewin Group is reviewing the WHP and should be able to provide a more definitive answer in the next month on whether the assumed discount rates used by Northstar are reasonable.
As far as I know, the Wisconsin Medical Society has not taken a position on the WHP or either of the other two reform proposals being considered by the legislature. I also haven't read of any individual doctors or smaller doctor groups that either support or oppose the plan. Frankly, I don't think it's going to be very widely discussed until it actually starts to go somewhere in the legislature.
I have to tell you that I am a conservative, but something has to be done with health care. I don't agree with the liberal idea is giving it to everyone for free. People will just abuse it, just like many people abuse medicaid. People should have to pay for their own health care, even the poor. If someone can afford to buy cigarettes and beer, they can afford to pay something for their healthcare. Why are liberals so big on socialist programs and entitlements? If you want to live in a socialist county, move!. There has to be a better way then to have the Government run everythig for us.
Read the WHP. You can find links to it in the post. If you see anything about socialism or allowing government to control your health care, let me know. What you will find are significant financial incentives for people not to abuse the program, along with the freedom to choose your own health care plan.
Being a conservative isn't a problem. Being uninformed is.
Has an independant review been done by a group with no political ties? I seem to have read an article that discussed the funding problem with the WHP. Also, isnt the plan going to penalize company's that pay high salaries to employees? Also, lawyers, doctors, engineers, and other upper middle class professionals will have to pay more out of pocket. I believe employees would have to pay 2% of their pay. So, someone who makes $200,000 will have to pay $4,000, plus the employer cost, while an employee who makes $50,000 will only have to pay $1,000. This does not seem fair to me. Shouldnt other health factors be taken into account? Also, if the projected costs of the plan, which I thought were low, are indeed higher than anticipated, what will be the affect? Either cuts in benefits or in provider reimbursements. Why isnt there any medical providers on the board? There are numerous questions with this plan.
The study you read about was by the Wisconsin Policy Research Institute. I discuss it here.
The Lewin Group, which is reviewing the plan now, is independent, and its report should be out within the next month.
Otherwise, the Legislative Fiscal Bureau did a review of the WHP and you can find that here.
The WPRI study took what the LFB did and put some major spin on it, as I discuss in the post cited above. The LFB noted that current health care expenses were about $4.3 billion higher than the projected cost of the WHP. The WPRI took this to mean that the WHP was underfunded by $4.3 billion rather than considering the cost savings that the plan would entail. Hopefully the Lewin Group report clears up this point and the one I discuss in the comment above on discount rates.
And, yes, the employee assessment is flat. Typically wealthy individuals would prefer a flat assessment, as opposed to a progressive one, so I don't imagine too many will be complaining about the 2 percent employee assessment. Making the assessment regressive would never work because of the high cost to lower (and middle) income people.
As for the employer assessment, it is indexed so that employers pay between 2 and 12 percent of payroll based upon their total payroll level. I've seen some talk of including a provision that takes into consideration the number of employees an employer has in addition to the total amount of revenue generated, and this certainly could be an addition that's worth considering as the proposal moves forward. However, I'm not convinced, at this point, that increasing a percentage or two on the payroll assessment scale will turn employers off from paying higher salaries, especially considering estimates are that most employers pay around 15 percent of payroll for employee health benefits under the existing system.
And, on the question of costs exceeding proposed revenues for the plan in any year, here's what the WHP concept paper says:
"The assessment is collected by the Wisconsin Department of Revenue and can only be increased through an act of the state Legislature. If the Private Health Insurance Purchasing Corporation determines that the assessment will not generate sufficient funds to pay for the health insurance benefits described above, it must present options to the Legislature to raise revenue and lower costs. If the Legislature does not act, the Corporation must reduce the HSA funding or other benefits. The Corporation also has the authority to direct any surplus revenues to a reserve fund, increase the HSA funding or other benefits, or recommend an assessment decrease to the Legislature."
The Purchasing Corporation would be made up of reps from Wisconsin Manufacturers & Commerce, the Milwauke Metropolitan Association of Commerce, the National Federation of Independent Business (WI chapter), the Wisconsin AFL-CIO, the SEIU Wisconsin State Council, the Wisconsin Farm Bureau, and two gubernatorial appointees. All major board decisions would require 7 of 8 votes, so no one segment can dominate. Board meetings would be public, and it must provide an annual report to the legislature along with submitting to a LAB audit every two years.
It does not seem fair to me that someone who makes $50,000 who might smoke, drink, overweight, etc. would pay $1,000, while someone who does not drink and lives a healthy lifestyle would pay the same or more. This is not right.
Also, why would someone who gets health insurance from their employer with little or no cost be for this? Like Government employees, unions, teachers.
Also, what if someone did not want to have insurance? You are forcing them to have it.
There are many questions regarding this plan. Also, I cannot see why doctors would be for this, especially GP's, their income would go down. Why would a doctor come to Wisconsin to practice, given the WHP?
I am trying to convince a couple to take jobs in Wisconsin.
Thanks for the information you put on your blog.
These are legitimate questions. I think they all have legitimate answers, but that's, of course, subjective. Here goes...
There are, in fact, significant financial incentives in the WHP for people to take care of themselves. The HSA that each person would receive gets $500 each year from the program funding (employers are free to give their employees more), but the annual deductible for the health plan is $1200, which means people are going to be shelling out up to $700 of their own money each year -- and that doesn't include medical and hospital co-insurance costs or prescription co-pays after the deductible is met -- if they need to receive a lot of medical care. So the less healthy would be paying more under the WHP, just not out of the initial employee assessment if they don't have a very high income.
As for those who already have great health insurance coverage, the WHP is set-up in a three-tiered system in which the first tier has the least expensive and least extensive plans, while the third tier has the most expensive and most extensive plans. The base funding from the WHP provides enough for each Wisconsinite to afford Tier 1 coverage with the "premium credit" they receive, but if employers want to continue to provide their employees better coverage, then they can always kick in more (or the employees themselves can kick in more) to afford coverage that's just as extensive and not any more expensive (and possibly less expensive) than what they have now from the choices in the second or third tiers.
And no one would be forced to have insurance under the WHP. Each resident will be afforded a "premium credit" to purchase a health care plan from one of the three tiers, but I don't believe there's any rule saying they need to purchase a plan using the credit. Of course, they also can't simply pocket the money from the premium credit. Like our public schools, everyone would be required to contribute to this plan financially whether they use it or not. My guess is the vast majority of the population would use it.
I'm not as clear on your concern about doctors wanting to practice in Wisconsin. Private insurers would continue to negotiate prices (i.e., doctor pay) freely with health care providers under the WHP, just as they do now. And, most doctors and physician groups have come out in support of universal health care in recent years. After all, there's a distinct advantage for docs in knowing that all of your patients have health coverage and, therefore, will be able to pay you (and, for most, do so in a timely fashion).
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