Monday, June 25, 2007

Senate Dems "Healthy Wisconsin" Initiative

UPDATED BELOW

As of this morning, the Senate Dems have released the major points of their universal health care plan, called "Healthy Wisconsin," and here's what can be gleaned from them:
  • Payer structure (see UPDATE below): Although it's not completely clear from what's been released so far, the payer structure under the Healthy Wisconsin initiative would mimic the structure under the Wisconsin Health Care Partnership Plan, in which a single plan would be created through a public-private trust that would negotiate directly with providers. Private insurance still would be available, but at a "nominal cost."
  • Funding mechanism: There would be a 4 percent assessment on employee Social Security wages (i.e., wages up to $97,500) and a 10.5 percent assessment on payroll for employers. Aside from preventive care and care for children, all visits and prescriptions would involve co-pays and a deductible set at $300 for individuals and $600 for families.
  • Bottom line: Based upon a Lewin Group study, the plan would save the state $1.3 billion, which would most likely come from reduced public worker benefit costs. The plan would use this money for property tax relief for households and businesses.
Republicans are jumping all over the funding, calling it the "largest tax increase in the history of the state," even though that soundbite ignores what employers and employees are already paying for health care -- which, on average, is a lot more than what they'd pay under the Healthy Wisconsin initiative -- and the property tax savings that would come under the plan.

The tax increase line is a predictable point of opposition to start with since it's an easier sell than what I think will ultimately be the biggest roadblock for this plan (aside, that is, from the Republican Assembly), which is the payer structure. Even though the plan isn't explicitly single payer, it looks quite close (unless I'm misreading the info that's been released on the plan, thus far -- look for an update later in the day if that's the case).

While single payer has great promise in terms of administrative efficiencies and putting payers back in a strong negotiating position with an increasingly consolidated provider side, it also has the political baggage that comes with shutting out an entire industry and the ideological heat that comes with involving the government directly in health care negotiations, even if those negotiations take place through a public-private trust.

It would help if the plan allowed for direct private competition in a similar way as John Edwards' national proposal, which lets consumers choose between a public plan and an array of private plans. Or the public plan could provide basic coverage while private plans are relied upon for supplemental coverage, which is essentially how the French do it. Any way you slice it, the Dems need to find some place for private plans, and it remains to be seen if allowing them at "a nominal cost" is enough.

The details will be telling, and -- since this is by no means a final offer -- so will the discussions that take place between now and when something actually gets passed, which -- as I noted last week -- won't happen before 2009, at the earliest.

UPDATE: The full text of the Healthy Wisconsin bill is out (the meaty details start on page 22).

Importantly, the text of the bill makes clear that this proposal is NOT single payer. The "health networks" it refers to are -- based on my reading -- private insurers who submit bids to the public-private trust. Based upon cost and coverage, the trust will determine the "low cost" networks and everything else will be categorized as a "higher cost" network. If people opt for one of the low cost networks, the trust will cover the entire cost of premiums. If people choose one of the higher cost networks, they will be reponsible for the premium cost difference between that network and the low cost network rate.

This is similar to how the tiering works under the Wisconsin Health Plan, which is the system currently used for state employees.

This is an important point because it avoids the political pitfalls of single payer and ensures that the direct negotiations between payers and providers will be a market endeavor rather than one that's overly-dictated by the state.

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15 Comments:

Blogger Dad29 said...

We're both operating partly in the dark here--but one (D) proponent stated that "the plan would be as good as mine."

So what's with the 'reduction in public-employee benefits'?

June 25, 2007  
Blogger Seth Zlotocha said...

The public worker benefit reduction is in reference to cost, not coverage.

Cost savings would come through heightened administrative efficiencies and increased purchasing power in terms of both provider services and prescription drugs. Plus, the $300 individual and $600 family deductibles and the 4 percent assessment would be an increase in costs for public employees like myself and that (D) legislator.

June 25, 2007  
Anonymous Anonymous said...

What is the difference between this and medicare? Medicare is on it's way to running out of money, in 10-20 years, wouldnt this plan meet the same fate? Also, how do the doctors feel about this plan? Would their reimbursements be cut? I keep hearing decreased admin overhead, but what makes one think that anything run by the Government would have less overhead?

June 25, 2007  
Anonymous Anonymous said...

One point that has not been brought up regarding funding. Usually, when employees pay health insurance it is part of their flexable spending plan, thus premuums are paid pre-tax. Under this plan, funding is like a payroll tax, thus for income tax purposes, it will be paid from post tax dollars, correct? I would like this better, if the amount of the tax would be excluded from gross income for Federal and State income tax purposes.

June 25, 2007  
Anonymous Anonymous said...

Seth--

Nice try with the update. One problem you neglected to mention in the payment structure of the plan. The annual cost cap for the payer. Under the current draft, a single participant's maximum annual contribution to the plan would be capped at $2,000. So your discussion about the participant who opts to go with the higher price plan paying the difference is null and void. Sure they would pay the higher cost until they reach the $2,000 limit and then what? Of course the only answer is government would be forced to squeeze those costs out of another participant, ie, you and I.

After my first read of the plan this so-called reform has the makings of a bureaucratic boondoggle that will exponentially increase the size and cost of our state government.

June 25, 2007  
Blogger Seth Zlotocha said...

Anon 1,

There are many differences between Healthy Wisconsin and Medicare, not least of which is the population each serves. Medicare is charged with providing care for the sickest (i.e., most expensive -- by far) portion of our population. As that population increases in size along with rising health care costs -- and the wages that fund Medicare don't rise at nearly the same rate -- the result is a dwindling of the Medicare trust fund. This is an issue that needs to be dealt with through reform measures like changing the reimbursement schemes from fee-for-service to pay-for performance (to help prevent fraud, which costs Medicare billions each year), but it's really a separate issue than providing coverage to the rest of the population.

And it's important to note that Medicare costs would be running high regardless of whether it was a publicly or privately run system. In fact, Medicare Advantage -- which is the privatized segment of Medicare -- costs more than traditional Medicare. To be sure, the Medicare Payment Advisory Commission has estimated this spring that if Medicare Advantage was elimintated, it would save the public coffers $65 billion between 2008 and 2012 alone. This, of course, gets at your question of how anything by the government could be run more efficiently. Not all things could be, but when it comes to third party payers -- which is what insurance companies are -- the government can do it for less b/c it isn't concerned with profit or marketing. But all of that is really beside the point since Healthy Wisconsin involves private insurers, not a public payer model like Medicare.

As for what docs or providers in general think, I'm really not sure. Based on the Lewin study of the WHP, which is very close in structure to the Wisconsin Healthy initiative, providers would see an increase in reimbursements of around $110 million, mostly due to the fact that the need for charity care would be nixed since there would be virtually no more uninsured patients. On the other hand, providers -- most of them non-profits by legal definition -- have been making a killing on aiming their services at the privately insured, and this initiative would essentially end that practice, which I imagine won't be looked upon too kindly.

Anon 2,

The employee assessment would be pre-tax since it's based on social security wages. I'm not sure whether or not this would have the effect of lowering your taxable income; I agree that would be nice, but I'm hesitant to think it would be the case since, essentially, the assessment would inself be a tax.

Anon 3,

I'm glad to see you've read through the bill, but you're going to want to re-read that section on maximum annual contributions since it refers to cost-sharing only (deductibles, co-pays, and co-insurance), not plan premiums.

June 25, 2007  
Anonymous Anonymous said...

I know this is off topic a bit, but a comment that Seth make struck a nerve. As someone who works in the billing office for a primary care clinic, Doctor reimbursement rates are being cut by both Medicare and Private Insurance companues. Doctors should be paid on a fee for service basis and should be paid in accordance with their level of responsibility, education and risk level. People who are not in the medical profession have no idea what it is like and think pay-per performance is the greatest. I believe most physicians would be for it if the standards are set accurately, but since the Government will want to cut costs, I will bet that this will not be the case. Primary care doctors will be squeezed the most. In fact if pay-per performance is not based in reality, it will have the unintended consequence of Doctors in effect "fire" patients who are high risk or non-compliant. It will increase the production line method of medicine that their is now. Primary care doctors will have to increase the # of patients they see per day to compensate for the reimbursement cuts, as they have been doing over the years.

On another note, I was talking with some one from England, and he told me that his Father has been waiting over 18 months for a knee replacement and is still waiting. Before I form an opinion of this plan, I am interest to read what the medical establishment has to say about this plan. Wisconsin has the number 1 quality of health care in the country and I would hate to us lose that,

I am a conservative, but I am not against taxes if they are for an investment with a long-term payoff. I am not sure at this point if this plan offers it. The plan sounds good, but their are always untended consequences. Will the plan attract or detract new physicans from practicing in Wisconsin?

June 25, 2007  
Blogger Seth Zlotocha said...

Anon 4,

Thanks for your comment. I certainly didn't mean to suggest all or even most Medicare docs scam the system. But the fact is some do, to the tune of millions to billions (depending on the one doing the estimate) of dollars each year. I would bet the primary care clinic where you work does not partake in this; but, unfortunately, this is one of those instances where the few bad apples ruin it for everyone else, to an extent.

And, yes, pay-for-performance is in its infancy, in many respects, and there is currently no standard for how it should be implemented. But that doesn't mean it's not something to continue to explore, it just means it shouldn't be implemented on a widespread basis, at this point.

As for your UK example, it really doesn't apply to the Healthy Wisconsin initiative. For starters, the UK is a completely public system -- payers and providers are owned and operated by the government. And, more importantly, they place high restrictions on spending to keep down cost. No one is proposing that for Wisconsin; in fact, no one's proposing anything close to that. The Healthy Wisconsin proposal would involve private payers and private providers, just as we have now, and the level of services would essentially stay the same -- the proposal is just about distributing those services equitably in terms of both cost and ease of access.

And, speaking of what we have now, it's important to note that rationing does take place in the US, we just base it on an ability to pay rather than perceived medical need. And it still costs us over twice as much.

Lastly, I respect that you're waiting for word from the medical establishment on this. I am, too, to an extent. Their opinion matters more than most interest group's on this; but, at the same time, you can't forget that they are still an interest group. After all, if we did everything the AMA wanted when it comes to health care reform, we'd need to shut down the retail health care industry, which I'm sure wouldn't make the free marketers very happy. Part of the AMA's trouble with retail health is the legitimate concern about doctor-patient relationships and continuity of care...but there's another big piece that's just plain old turf protection.

June 26, 2007  
Blogger Seth Zlotocha said...

Anon 2,

FYI, I just saw this from the Wisconsin Radio Network: "Coverage will be paid for by a payroll deduction ... about $370 a month for the average employer and $140 for the average employee. Erpenbach says, 'This is actually a $2-billion tax cut .' "

This suggests the assessment payments would, in fact, decrease the amount of taxable income for both employers and employees. Just thought I'd pass this along, in case anyone's still reading this thread.

June 26, 2007  
Blogger Dad29 said...

Ahhh...Erpenbach's statement is not precisely accurate.

In fact, "taxable earnings" of employers will RISE by the amount equal to their reduction in health-insurance premiums (more or less.)

So it is a cost-of-doing-business reduction, which means an increase in net-before-tax.

Meaning, of course, that the employer will pay MORE tax dollars to the Feds.

June 26, 2007  
Blogger Seth Zlotocha said...

Based on Erpenbach's statement, it seems the taxable earnings would only increase if the employer or employee was paying less for health care under the Healthy Wisconsin plan than they do now. I can't imagine that's something they'd complain about.

June 26, 2007  
Anonymous onlyone said...

I just want to be sure i understand. I am a sole proprietor. I would pay 10% of my gross income for healthcare?

July 09, 2007  
Blogger Seth Zlotocha said...

You'd pay 9-10 percent of your social security wages (up to $97,500, as of 2007).

July 09, 2007  
Anonymous onlyone said...

Thanks for the reply. Don't mean to sound dim - so you mean, if I make 80,000 gross/yr as a sole proproprietor, I would pay about $8,000 for healthcare?
I am pretty sure I am totally in support of this initiative, I definitely believe that our current system is broken and this would benefit most people greatly.

July 09, 2007  
Blogger Seth Zlotocha said...

Yes, my understanding is that you'd pay between $7,200 and $8,000 per year for care, at least to start. Depending on your health status, this could be either really good or about average for what you'd be able to get for a single policy in the individual market today (it's great for a family policy regardless of your health status -- although, if married and in a dual income family, the spouse would need to pay a portion of his/her payroll, too). A big bonus would be that you wouldn't lose coverage, or get priced out of it, if the health status of you or one of your dependents deteriorates in the future; I imagine that type of security means something for most sole proprietors.

I'm glad to hear you back the initiative. The push for it has just begun. It's not going to make it through this budget process, but hopefully 2009 will be different...it really all depends on how things go in November 2008.

July 10, 2007  

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