Critiques of Healthy WI Keep Coming Up Short
At the start of the column, Torinus makes a curious claim. He writes that the HW plan is solely about coverage and not costs. This is curious because the Lewin Group actually found that HW would reduce health care spending by over $750 million in the first year alone.
The thing is, Torinus has a monolithic view of health care costs. It's like every other market to Torinus in which consumers purchase a service for a price that's entirely driven by the cost and value of that service from the perspective of the seller.
There is certainly some of that in the health care market, but the reality is much more complex. Since health care typically works with third-party payers -- which is necessary if you want to distribute risk -- there is the added cost of paying for those third-parties. Also, since health care is unlike most other markets in that its services are often required to sustain life, people's ability to pay does not always dictate whether they receive the service. And when they can't pay, others pay more to compensate.
In short, when consumers pay for their health care -- or, more accurately, their third party payers pay for it -- they're not just paying for the health care they received. To be sure, in its recent review of the Wisconsin Health Plan (WHP), the Lewin Group estimated (page 13) that health care services actually cost private payers 70 percent more, on average, than the true cost of those services.
So when we talk about reducing health care costs, there's much more that needs to factor in the equation than simply the literal cost of that care.
But, actually, the literal cost of care is something that the HW plan addresses, Torinus just doesn't acknowledge it. He laments that the HW doesn't include a higher deductible with a HSA like the Wisconsin Health Plan does. On that we're in agreement.
But Torinus ignores the fact that there is a significant deductible -- $300 for individuals and $600 for families -- included in the HW for non-preventive adult care. So there is some incentive to shop around for care under the HW plan; and, if it's raised as a substantive issue, perhaps Dems would be willing to include a HSA option in the mix.
However, the majority of cost savings under the HW plan comes from increased administrative efficiencies and reduced cost shifting. And this is really the most appropriate place to target cost savings. As studies have shown, even with pricing data, consumers really aren't in a good position to "shop around" for health care, nor do they really want to shop around for it. And with the increasing geographic disbursement of different hospital and clinic systems -- a byproduct of provider consolidation -- the options for shopping around are decreasing by the year.
The rest of Torinus' column relies on a numbers game in an attempt to demonstrate how businesses are already handling health care costs in a much better way than the HW would. He writes:
The Democratic rhetoric is that every citizen of Wisconsin should have the same coverage as do state employees. The problem is that many private companies are offering essentially the same level of benefits as does the ETF plan, but at about half the cost. Last I checked, the ETF plan was more that $11,000 per employee.
Best practice private sector plans are at about $6,000 per employee for all-in costs. (My company is at $7,400.)
This is disingenuous on a couple of levels.
What's more, the "best practice private sector plans" that Torinus refers to are high deductible health plans (HDHPs) that may or may not include a HSA. The thing about HDHPs is that they're low on premiums and -- true to their name -- high on deductibles.
According to a report in the March 2007 issue of Pediatrics, the average traditional comprehensive health plan -- which is what the HW plan would involve -- had an average family premium of $11,090 per year and an average family deductible of $646 per year. The average family HDHP, on the other hand, had an average premium of $7,909 and an average family deductible of $4,070.
So when Torinus puts these "best practice private sector plans" up against the ETF plan -- which, again, isn't the same in terms of employer cost as the HW plan -- he's really comparing apples to oranges since the figures are weighted toward premiums (which is always going to be higher in a traditional comprehensive plan) rather than deductibles (which is always going to be higher in a HDHP).
There's more. Torinus writes:
My company, where management and co-workers aggressively and collaboratively manage health costs, spends about 14% to 15% of payroll on overall health costs. The Riemer plan calls for an initial payroll tax of 14.5% - 10 1/2 % from the employer and 4% from the employee.For the life of me, I can't find where Torinus is getting that "16%-12% from the employer" figure. Here is what the HW bill literally says about the employer assessment (page 48): "Subject to sub. (4), the board shall calculate an assessment, based on its anticipated revenue needs, that is a percent of aggregate social security wages that is at least 9 percent and not more than 12 percent."
The Senate bill allows, however, for 16% - 12% from the employer and 4% from the employee. You just know that the 16% - or more - will become the assessment once the government is in charge of the system.
That's 9-12 percent of social security wages, not even payroll, so any portion of an individual employee's pay that exceeded $97,500 (in 2007) wouldn't be subject to the assessment. When you add in what employees would pay, the percentage goes to somewhere between 11 percent and 16 percent, but that's not what Torinus wrote. He wrote that employers alone would pay 12 to 16 percent, with employees contributing 4 percent more, which just isn't the case.
So Torinus' company right now has health care costs at 14 to 15 percent of total payroll, and he fears a universal health care plan that would run his company 9 to 12 percent of social security wages?
In the end, a couple of things about the Torinus column did make me happy, though. One, he speaks pretty highly of the WHP, which is certainly still an option that's on the table (actually, the HW isn't all that much different than the WHP to start). And, two, his inability to make solid points against the HW is, to me, little more than a demonstration of the plan's overall strength.