Can’t anyone here solve this mess? (continued)
	Up, up, and away Without more cost-control, the health-care tab will continue to soar THE LEAPING EXPENSE of health insurance means that family coverage for Rhode Islanders working in large firms costs nearly $9000. A worker’s share of that premium may be as much as $3300. Why? Experts say one reason is that medicine is better at treating illness, and therefore use of the health-care system has increased. "Health-care can do more all the time, and as it continues to do more, these costs add up," says Gary Claxton, vice president for the Health Care Marketplace Project at the Kaiser Family Foundation. Hospital costs, both inpatient and outpatient, are going up faster than they have in the recent past. The increase in drug costs has slowed, but is still going up, Claxton says. New drugs, plus new surgical and other technologies, generally are more expensive then those they replace, he says. As effective new strategies come into play, they get more use. Fresh approaches make it possible, for example, to perform some operations on elderly or frail people who may not have been good candidates for operations in the past, Claxton says: "As we learn how to do more, they do more and it costs more." There are also fewer restraints, he says, with the decline of managed care, which helped to hold back costs, but became unpopular because of restrictions on patient choices. Benefits Unlimited, a Cranston-based brokerage with 500 clients, says a preliminary survey of costs showed a 15 percent hike last year in the cost of premiums at larger companies, and a nearly 18 percent boost for firms with fewer than 50 workers. On average, larger Rhode Island firms require workers to shoulder 37 percent of family plan premiums. The Kaiser foundation’s annual national survey found that family insurance premiums cost nearly $9100 a year in 2003, about a 14 percent increase from the year before. Workers paid about $2400 of the premium, or 27 percent, and companies about $6700. These costs play a direct part in the increasing number of people who don’t have any insurance. The US Census Bureau’s latest figures show that in 2002, there were 43.6 million people without health insurance, about 2.4 million more than in the previous year. That’s about 15.2 percent of the population. Rhode Island has one of the nation’s best records, with 8.8 percent of the population uninsured. One reason is the state’s program for low-income families, RIte Care, covering about one in 10 residents. In contrast, other New England states have higher levels. Maine, Connecticut, and Vermont are above the 10 percent mark; New Hampshire and Massachusetts are above nine percent. Paul B. Ginsburg, president of the Center for Studying Health Care System Change, reported last year that health costs are growing at nearly three times the cost of living. "Without more effective cost-control measures," Ginsberg says, "the rising cost of health insurance will make coverage unaffordable to more and more Americans." — Brian C. Jones

EMPLOYERS BEGAN OFFERING health insurance as an incentive during World War II, according to some experts, when wage and price controls were in effect. After the war, unions bargained successfully for improved benefits, which at the time were cheaper than straight wages. But as insurance costs spiked, employers began requiring workers to pay some of the costs, a process that has accelerated in Rhode Island in the past four to five years.

Now, according to the federal Bureau of Labor Statistics, only 10 percent of workers nationally have fully paid premiums when they choose family plan coverage, although 22 percent of workers get fully paid premiums for individual-only plans. Carcieri, in his State of the State address to the General Assembly last month, picked up on that trend: "Unlike most Rhode Islanders, state employees do not currently share the cost of their premiums."

On the government side, Rhode Island is one of six states that pay the entire cost of family coverage, according to the National Conference of State Legislatures. The others are New Hampshire, New Jersey, North Dakota, Oregon, and Pennsylvania. Meanwhile, 16 states, including Rhode Island, cover 100 percent of the cost of individual-plan premiums

Some national experts say the debate over whether workers should pay part of their premiums is misleading, since employers have a limited amount of money for overall worker compensation. In the long term, they argue, workers end up shouldering health costs with money that otherwise would show up in their wages. Henry J. Aaron, a senior fellow in economic studies at the Brookings Institution, a Washington think tank, is one of those who supports that view. "I don’t think there is any right or wrong as to whether there is cost-sharing or not," Aaron said. "You look at the total compensation package."

But critics say there are two big problems with premium-sharing.

One is that while wage hikes are generally steady and often reflect the trend of inflation, the health increases have been explosive and unpredictable. Thus, shifting premium costs to workers is a transfer of risk, as well as dollars.

The other is that low-paid workers get hit hard by premium sharing. Unless health plans have provisions to cushion the impact of premium costs by scaling back payments required for lower-paid workers, those at the bottom of the pay scale pay a disproportionate cost once premium-sharing has begun. That’s because the health-care premium is generally the same for all workers. It’s a major benefit to poorer workers who get 100 percent coverage, and a big hit when premium-sharing begins.

IN SOME CASES, high premiums have driven workers away from health plans altogether. A Bureau of Labor Statistics survey last year found that the proportion of workers covered by private employer-sponsored plan has fallen over the years. In 2003, 45 percent of workers were enrolled in their employers’ plans, compared to 63 percent in 1993.

Rhode Island faced a related problem several years ago when low-paid workers found it cheaper to steer clear of their workplace insurance, and instead joined the state’s well-regarded program for low-income families, known as RIte Care. As a result, the state launched a "RIte Share" program, in which it subsidizes premiums if workers remain in their workplace programs — although it does so only in cases where it’s cheaper for the state to pay premiums than to support RIte Care enrollees. About 4500 people are covered by RIte Share, compared to 120,000 in RIte Care.

Still, with more people paying part their health premiums, how can Rhode Island’s state unions argue for continued full coverage?

Marti Rosenberg, of Ocean State Action, a labor-backed public policy group, says one argument is that a bad deal for most workers doesn’t mean all workers should be similarly penalized. A better step, she says, would be to attack the underlying costs of health-care, such as reining in administrative costs, creating a system that is fair for employers, workers, and providers of health-care.

And despite the relatively high average pay of local state workers cited by the federal survey, union backers say the average is skewed by higher pay at the top of the scale, to management and similar workers, and doesn’t reflect the reality that many are relatively low paid, as indicated by the figures supplied by Council 94. "We are not talking about high-income people," Rosenberg says. "We are talking for the most part about people making not a lot of money."

At the same time, union officials argue that the fully paid premiums are the result of years of negotiations in which the unions knowingly traded off pay benefits in favor of solid medical coverage.

Jack Callaci, director of collecting bargaining for United Nurses & Allied Professionals, which represents health-care workers and about 140 state workers, says there have been several years in which wages were frozen for state workers. In January 1991, workers had a one percent raise; then from that April until July 1993, they had no pay raise, according to figures from the state Budget Office. The following year, the workers went another six months without a pay hike, and there’s been no raise since July 2003. "If you sit at the bargaining table, and negotiate a wage freeze, everybody on the other side of the table knows what I’m getting and not getting," says Callaci, explaining that for state workers, "health-care has been part of the bargain."

As the tug of war between Carcieri and the unions plays out, the solution is bound to be a mixture of political muscle and financial problem-solving.

On the muscle side, the unions play a powerful role in state government and the legislature, while Carcieri has public opinion on his side, as well as lean state finances at a time when few are eager to hike major taxes.

At the same time, the basic argument is over money, so the solution is not necessarily the specific means of how to find the savings. It’s possible that schemes other than premium-sharing could emerge.

Unions that have wrestled with premium-sharing say cost-control is a better solution than simply shifting the burden of who pays for health insurance.

Rick Brooks, director of United Nurses & Allied Professionals, says in its latest contract with Rhode Island Hospital, UNAP agreed to a cooperative approach with management to hold down health-costs. A first step is looking at prescription drugs, Brooks says. The parties are discussing steps such as mail-order drugs, and prescriptions bought at the bulk rates that Rhode Island Hospital pays for patients’ medications.

IBEW official McGowan argues along the same lines, that the union understands how health costs are hurting Verizon, and that the company and the phone workers must work together to lower the costs. The union, for example, campaigns to get its workers to develop healthier lifestyles.

Cooper, of Benefits Unlimited, says one possible reform is designing health plans so patients will be encouraged to shop for price even as they seek out good health-care, a concept known as "consumer-driven health-care."

For example, he says, health plans might provide a set amount of money for routine care. A patient, to avoid exceeding the limit, might question possible unnecessary expenses. Cooper suggests a hypothetical case in which a patient has been diagnosed with a suspected illness, and a doctor suggests a battery of tests. The patient, trying to conserve his routine care nest egg, suggests having just one test, to see if it confirms the doctor’s initial diagnosis. If that test fails, then more laboratory tests can be run to explore other possibilities. "When you just transfer the cost of premiums to employees, it’s not the most effective way" to attack higher prices, Cooper says. "If you really look at the problem of why health costs go up, it’s because utilization is going up."

There are other possible approaches. Cooper recalls that in 1994-1995, Rhode Island’s state government offered several plans to state workers. A basic "Chevrolet" plan offered fully paid premiums; but a higher-priced "Cadillac" plan required workers to pay the extra premium cost. That changed later when the state negotiated a single plan, set to expire at the end of the year, with Blue Cross.

In the formal bargaining between the Carcieri administration and the unions to replace contracts that expire July 1, negotiators may examine such techniques.

The governor’s "Fiscal Fitness" program designed to search for efficiencies in state government, reported earlier this year that the administration hopes to negotiate changes in the health plan design. And likewise, administration budget documents note that Carcieri plans to put the current Blue Cross health contract out for bid when it expires in December, and to offer workers "a choice of plans."

In the meantime, the unions and the administration are saying little about the specifics underlying the negotiations. The surface calm shouldn’t underestimate how those in and out of government are seething about the issue.

Carcieri and his supporters complain about how health insurance costs are hurting taxpayers — with the proposed tab this coming year totaling $154 million. But union supporters fume about the unfairness of the governor’s plans to levy a $10.6 million "tax" on state workers.

Pride, as well as money, is riding on the outcome.

A former corporate CEO, Carcieri has staked a lot on his identification of premium-sharing as a demonstration of his business-like approach to government cost-cutting. Unions long have counted health-care as one of their most-prized and historic benefits.

Short of a convincing compromise, one side risks being branded the loser.

Brian C. Jones can be reached at brijudy@ids.net.