Burda: Let’s pick up on that theme, and also one of the sausages being made, this idea that there could be a new government health insurance program for people who don’t qualify for Medicare or Medicaid and don’t have access to coverage through their employers. I know the health insurance lobby doesn’t think that’s a good sausage to make. Vicky, what’s your view on that? And how would that affect the Tennessee Blues?
Gregg: We’ve actually tried to take a step back and be thoughtful about it, and try to figure out is that something that really, in a meaningfully way, can push the agenda forward? From our perspective, and I guess some of the history with TennCare is we look at that. We really have questions about whether or not that’s the right step. Our concern is that becomes the focus of the reform, and that becomes the focus of the debate as opposed to some of these harder, tougher issues, which is how are you going to ultimately deal with cost-curving in healthcare?
We were very successful in expanding coverage. We then found ourselves in a situation where we couldn’t afford it because of the medical cost trends. And then the debate became, you know: Who is it can do this best? Is it the state? Is it back to managed-care organizations? And that ended up, in some ways, becoming more of the focus as opposed to really rolling up your sleeves and saying, ‘What are the things that are driving this medical trend that we collectively need to be working together on regardless of who is somehow in the middle of this?’
So my concern is this whole issue around a government-run plan is much more about ideology than the practical aspects of making whatever it is that comes actually work in the marketplace and be sustainable for the long-term.
Burda: Larry, do you think a new public program like that—how would that affect your coalition numbers?
Boress: All of our members tend to be large, self-funded employers. So it tends to impact them more on their part-time people. And the biggest group at risk, that we think is the pre-65 retirees. Because if anything, employers are cutting back more and more on those kinds of people and on retirement. And in fact, you look 20 year ago, probably 67% of all employers offered some kind of retiree benefit. Now, it’s probably less than 30%, and in another 10 years, probably no one will cover retiree benefits. And the pre-65 people are getting hurt as well. So, I think there’s an interest, and, in fact, in a survey of our members of employers, we find there’s a recognition of a need to cover—to give people access to care. The question is, you know: What should that look like? Who should do it?
We think an employer-based system has to be part of the solution. Most people who vote, most people who have care, don’t want to change that. They like their doctor; they don’t want to shift away to something different. That’s working, but for those people who don’t have coverage, for those people who can’t afford coverage, the government has got to provide something in there. But—and if they do that, then that also assists us in reducing the cost-shifting problem because we know that Medicare and Medicaid are not paying what they should be paying to hospitals and physicians. That means that, they’re shifting those costs to those private payers, the employers and their plans, who can’t afford it.
If you have a national plan, that’s just going to cover more of those people, and so it could be a bigger cost-shifting back to us. So, there’s got to be some play. Now, if everybody’s covered, that means the providers are at least getting something so those people that are not getting any money for it, that’ll help us all. But clearly, we as purchasers are already paying taxes to cover that. We’re providing over half the country’s coverage on care, so if they’re going to require us to add more to that, more taxes on us, I think that’s going to be an issue for many employers.
Burda: Allan, where do you come down on that, this third federal health insurance program?
Baumgarten: The health plan industry has been opposed to it. I tend to view this as not necessarily a bad thing for the health plan industry, in much the same way that eight years ago, the pharmaceutical industry was strongly opposed to a Part D benefit because they saw that coming with cost controls and other things. And I always thought that, well, you’re getting access to all these new customers even if your profitability on each customer is less, it’s an enormous potential business opportunity. And I think that if you see the public plan and in the context of a wide expansion of access and of coverage, then I think that it’s creating significant business opportunities for the health plan industry.
On top of that, I think it raises a very important issue, which is provider payment—one of the concerns that’s been expressed by the health plan industry is that they wouldn’t be able to compete with a government plan that’s paying Medicare rates. What if these private plans had access to the same kind of payment rates, and would that, you know, put things on the level playing field? And on top of that, it’s a challenge to the health plan industry whose administrative costs tends to be higher than the government programs. Maybe they need to take a very close look at the administrative costs and see if they can bring that down in order to become more competitive with a public plan.
Gregg: It is interesting again with the TennCare experience. Essentially the TennCare program became a place for people who were considered uninsurable, uninsured, and what we actually saw was that the plan also became a place where employers actually moved employees out of their existing self-funded plans and in some instances out of their commercial insured plans in order to offload that risk to government because the perspective was that somehow somebody else was paying for that. So when you think about slicing this up and fracturing those risk pools even more, you need to be thoughtful about how people can play that.
We actually saw in Tennessee, in some instances, dependents in particular being targeted to move them into that program. We also went through this whole cycle of payment because the idea was, ‘OK, well what we will do is we will have the state begin to set the rates in the program, rather that the MCOs going out and negotiating. We’ll just set the rates.’ What we learned very quickly was that the delivery side adjusts to that and they figure out ways to essentially net what they were netting before—either though increased utilization or other kinds of ways. So, those solutions, while they seem like they’re right there at your fingertips and can be helpful, at least in our experience as they played out did not get to the hardcore issues of: How do you manage the population? How do you manage cost? We had to go back, roll up our sleeves and say, ‘What do you have to have to be successful?’ And we have some thoughts on that, which I can share as we go along.
McLaughlin: In talking about a public option in the health reform plan and the experience of TennCare, I think the word was ‘offloading’ some privately insured people to a public plan. So I’d like to ask Larry, how do you think your coalition members, your business members would react under such a scheme?
Boress: I think, again, it depends. There’s not just one employer—there’s large employers, there’s small, union-based employers, there’s manufacturing, service industries. They all take a different perspective and that doesn’t count the culture, internally, of the organization. In general, employers offer benefits for two reasons: to recruit, retain talent, and to have a productive work force.
The human capital element is critical to compete on a global marketplace, but healthcare cost is what’s preventing employers from being competitive in this country. So if there’s a way to deal with that cost, which is perhaps the one raw material that they can’t get their arms around, they might move it up, but what we’re finding, at least among large employers, is every population is so different demographically and agewise, sexwise, etc.
A company—a high-tech company—that has young people has certain healthcare needs, and they have certain kind of benefits. An old-time manufacturer, average age is 50 and has a lot of other chronic diseases, will have certain things. So, the idea of letting—sending the people over for some kind of base plan that may or may not address the issues of their populations and keep them productive—is not as attractive. We don’t see many employers—at least larger employers—interested in turning their people over to a plan or dropping off.
Clearly if they can remove some cost, a portion of their populations—the retiree, the pre-65, the part-timers—I think you’ll see that. Again, it was like the discussions on Part D Medicare. There was a great fear: Would employers drop all their retiree benefits? And so the subsidy was created.I think as long as employers are given some incentive to keep benefits for certain kind of people, they’ll do so. But there’s no doubt that if you can remove that major cost element—particularly as a smaller or midsize employer—you’re going to look forward to doing so.
Burda: Vicky mentioned how TennCare had to be retooled because it created all these things you didn’t anticipate. What were some of the things that had to be retooled? And what lessons are there for any new federal insurance program?
Gregg: There were many lessons for sure. And try to keep in mind that TennCare was implemented almost 15 years ago, so there’s a lot of things that have changed in the environment since then. It came on the heels of the Clinton health reform (proposal) and was done in a way to try to get something fast, through quickly. I think in Tennessee, our governor looked at what had happened with the Clintons and believed they gave too much detail. And the actual legislation that enacted TennCare was about a page long. Total.
The result of that, and I think the lesson to learn there is that people didn’t have an opportunity to really buy into what became that program. So as it began to show some weak links in it and when problems began to emerge, there wasn’t a sense of real ownership on the part of many of the participants. And it was very easy to begin to point at the program and point fingers.
I think quite honestly we see something different emerging in Massachusetts where there was a bit slower and a lot more around-the-table discussion of what the program’s going to be and a real sense of ownership and a need to make it successful. We didn’t enjoy that in Tennessee. It really was everyone feeling put upon. It ultimately got referred to as the ‘cram down.’ So I think making sure that you have people active and involved—feeling ownership—is important.
I think this issue of making sure that it doesn’t become the plan where people move the bad risk. That certainly, I think, torpedoed the TennCare program. One lesson is I think a single state trying to do it by itself is a problem. We were a state with eight borders, and it didn’t take the people who lived across the state line very long to figure out that if they were uninsured, uninsurable, needed a subsidy and good coverage, they could move across the border and get that very quickly.
So, we saw people moving in for transplants and HIV drugs, and a whole host of things. So I think making sure that you think through what the incentives are and what the potential outcomes can be for that kind of a program, is important.
Some of the good things that we learned: I think we saw that subsidies combined with reducing barriers to enrollment can actually get you substantial coverage. Our state at the time was somewhere around 12% uninsured, I believe, back in 1994. By the time the program rolled out, two, three years later, we actually were somewhere in the mid-’90s in terms of the population actually having coverage, which is a huge win. So we proved that you could expand coverage successfully through subsidies and removing barriers to enrollment, making it easy. What we were not successful in doing was sustaining that.
So I would say the third lesson is back to, you really do have to figure out how you’re going to manage that cost curve. And if you can’t manage that cost curve, you’ll find yourselves in the situation that we did where you could either raise taxes substantially, which was politically not acceptable. You can reduce benefits, which we did, but couldn’t do it enough. Or you can take people off of the rolls, which is ultimately what we as a state found ourselves doing, removing the subsidies, and today we find ourselves right back around 12-14% of our population uninsured.
Burda: Allan, do you want to react to what Vicky is saying?
Baumgarten: I think part of the point that Vicky makes is the crucial issue of how you take national initiatives and implement them in the context of local markets. And Tennessee is so much more—is somewhat different than Minnesota, and Minnesota is so different than Arizona. And it’s not just on the coverage and access issues.
As another example, Larry spoke about the implementation of additional health IT. That’s a very different issue in a state like Wisconsin where there’s a historic culture and environment of group practice, of multispecialty group practice, of an openness to using technology and so on.
Contrast that to a state like Arizona where a very high percentage of physicians practice in small clinics of fewer than five doctors. Where when you talk to those doctors about the introduction of health IT, they say, ‘Why would I want to do that? Where would I find the capital to do that?’ So, any number of these issues, whether it’s access, implementation of health IT, cost containment, measurement of effectiveness and disseminating data on that, all these will have to take place in much different local markets.
Boress: I have just a comment, just the issue of state reforms vs. the federal. One of the positive things of a national plan would be you have consistency across all the states. Many employers, even smaller ones, have people in a variety of ZIP codes around the country. And to try to meet the different requirements of every state, and different premiums and different benefit designs is just incredibly complex. It would really raise the cost of care for these organizations.
You know, a company like Target or General Motors that has people in almost every ZIP code in the country, to try to deal with that is—would be very difficult. So, that’s why, for us, it’s important to have consistency as much as you can and a national plan that sets the rules, sets the metrics, sets the measurements, sets them both would be a much favorable approach, if you’re going to go that route.