PEBB Deadlocks Over $34 Million Hole
Medical costs for state employees expected to increase 9.9 percent next year
Unless they reach agreement, the Public Employees Benefit Board will have to dip into its dwindling reserves or require state agencies to offset those losses, which could result in layoffs. That board, which self-insures state employees, consists of eight voting members – four represent labor; four are management. Another meeting is slated for June 29, which could resolve this issue.
“My intent is that we will not be stalemated forever,” said Barney Speight, director of healthcare purchasing for the Oregon Health Authority. “But, we’re getting close to playing without a net. We have a sobering task ahead of us now and for the future.”
To deal with the deficit, Speight proposed changing the benefit design – requiring state employees to begin paying $250 deductibles – increasing their out-of-pocket maximum from $1,000 to $,1,250 -- and instituting $500 co-payments for procedures such as knee and hip replacements, for which there is not enough evidence to prove their effectiveness. All together, these design changes would save $35 million in 2011. Currently, state employees are only charged minimal co-payments for medical services.
But union officials refused to budge, saying they preferred to tap into the reserve accounts. “I realize we’ll be making twice those decisions in 2012,” said Diane Lovell, who represents Council 75 of the American Federation of State, Council and Municipal Employees. “But I don’t favor any additional benefit changes for 2011.”
It’s disingenuous for the unions to not consider evidence-based approaches, according to Dr. Jeanene Smith, administrator of the Office of Oregon Health Policy and Research. She reminded officials that they had approved such changes a week earlier, setting in motion $100 co-payments for sleep studies and medical imaging procedures such as PET scans, CT scans and MRIs in 2011 which are expected to save $3 million.
But moving toward an evidence-based approach is controversial among state employees, said Paul McKenna, research director of the Service Employees International Union 503. “We have to educate people at the minimum; to get people to understand and be supportive.”
By not taking action, the board is just shifting the costs, said Rocky King, policy advisor on health reform in the Consumer and Business Services Department. ‘We’re not really impacting utilization or the cost of goods. The evidence-based benefit design gets us back to the concept of medical necessity.”
In another attempt to reduce the deficit, Speight suggested that the 2,200 retirees be dropped from PEBB and, instead, seek coverage elsewhere, such as the Public Employees Retirement System or the high risk pool. Currently their medical costs exceed premiums by $10 million and they are not eligible for Medicare.
Once again, union representatives balked. “I understand the perspective,” Lovell said. “But I’m not convinced there won’t be some unintended consequences and don’t want to make a decision of this magnitude without public comment. We have to do something about these retirees but need to be thoughtful and do it in 2012, not 2011.”
Finally, Speight urged his colleagues to draw down a $32 million reserve account by next January established by Standard Insurance to provide $20,000 in death benefits to state employees, which is expected to run out in 2032.
“Quite candidly, we’re wasting that money,” Speight said. “The windfall from Standard is necessary to keep us sound. Managing a self-insured account calls for a great deal of conservatism.”
That alternative also failed to gain consensus with union officials insisting these reserves should only be used as needed – when the stabilization funds run down.
“We should use our current reserves to pay claims,” Lovell said, “and transfer money monthly as needed. That’s consistent with our collective bargaining agreement.”
In 2009, the labor unions signed a collective bargaining agreement with the governor, allowing them to petition PEBB to use reserve funds if medical costs exceed 5 percent but are below the 10 percent mark. In 2011, those costs are expected to rise by 9.93 percent.
With the state facing a severe budget shortfall, Governor Kulongoski has told the board to limit annual cost increases to 5 percent next year, preferring they make cuts rather than dip into reserves.
“I have a great deal of respect for the collective bargaining process, but am concerned about long-term stability,” Speight told his colleagues. “We do need to take some extraordinary measures this year.”
Learn More
For related stories about PEBB click here.
To learn more details about the impending budget shortfall facing PEBB click here.
For general information about PEBB click here.
Bookmark/Search this post with
Printer-friendly version
Comments
You will never control costs until you reign in the price of new drugs and medical technologies.
I see article after article about costs going up. Usually the blame is placed on insurers, or there are accusations of excessive benefits for public employees. The fact is that you will never control healthcare inflation until you reign in the exhorbitant costs of patented new drugs and medical technologies.
We must hold the line on costs by denying the monopolistic prices charged for these marginal improvements. Patents are for new products sold directly to the consumer. Is there any doubt the costs of new technology and drugs would be lower if they had to actually get the patient to pay out of pocket? Of course not. Insurers face loan shark prices for marginal new treatment that patients demand simply because they don't have to pay for them.
Put the blame where it belongs, and in this case it's not the insurers or the unions, it is the makers of marginal medical innovation. The public needs to wise up and demand change.
There are a variety of inputs to health care cost inflation, technology is only one. Perhaps the largest component is uncontrolled rates of personal and professional compensation across all disciplines (Administrators, doctors, nurses, etc.) It is an industry that pays extremely well and compensation is the majority of expense for hospitals and just about all health care entities. If the goal is to control costs, mathematically it just cannot be done without constraining the paychecks of a lot of people. Clearly we have not come to terms with that discussion and prefer to shift the blame to technology, malpractice insurance, irresponsible consumers, and the like. Correcting anyone of those popular whipping posts is absolutely no assurance that the largest component of health care costs, compensation, will be reduced.
With all due respect to "anonymous," you are wrong. Don't believe me? I wouldn't either. Instead, believe the premiere think tank on healthcare costs in America. That would be the Kaiser Family Foundation. When I say that technology is the primary driver of healthcare cost inflation in America, I am quoting their study. They go even further to say that you will never control healthcare cost inflation in the long run, until you "delay or prevent the implementation of "new medical technology and drugs."
Would we be spending almost 17% of our GDP on healthcare today, if we still had the same technology we had 10 years ago? Of course not. Just think about it. And as for doctors and nurses and other healthcare worker bees; well, we have been losing ground to inflation for many years. I can't defend CEO pay, so we may have one point of agreement at least. But keep in mind that Insurance Company profits amounted to about $12 billion in 2008. If you took all of that back, it wouldn't run the system for more than a day or two, and those 'profits' aren't inflationary anyway.
As a practicing surgeon, there is no love lost between me and the insurance companies. I don't try to protect them. I'm just trying to get people to move past the rhetoric and misinformation, and see the real driver of healthcare cost inflation. Everybody wants to know why it costs so much. Open your eyes and see for yourself.
Post new comment