Blue Cross Clouds the Picture

A Sunday piece in the Lowell Sun, written by John Coughlin of Blue Cross, manages to indirectly criticize Governor Patrick’s push to give greater flexibility to municipalities by giving them the option to join the GIC, by saying that we might all be better off with local control over health plans. The column was carefully crafted, but ultimately totally misleading.

Coughlin’s column, essentially a rehash of a piece he did for Commonwealth Magazine, did not note, as he did in the magazine piece, that Blue Cross considers itself a competitor to the GIC. He makes the following claims in the Sun column:

This is a good story, if only it were true. The truth is the GIC is no panacea and the facts show that, for many communities, moving to the GIC would increase costs, not lower them.

It is true that something must be done to control municipal health-care costs, which now amount to almost 20 percent of local budgets in certain areas. Some communities have opted to join the GIC in the years since it was opened up by the Legislature, and some of them have saved money doing so.

However, to say that all communities will save money if the Legislature mandates cities and towns join the GIC is wrong.

Lets look at that claim. An important point to consider is that the Governor’s plan does not mandate municipal entry to the GIC, and localities have never clamored for a mandated entry to the GIC. What the Governor’s bill does is to force localities to produce a local plan that, on a cost basis, is functionally equivalent to the GIC. Entry is mandated only when the locality cannot meet that test. Coughlin puts up the straw man of some local plans being more cost effective than the GIC. Those plans, if the localities so choose, would remain local.

Coughlin, in his opening, points to the recent study by the Massachusetts Taxpayers Foundation on unfunded municipal retiree health care costs. He chooses to ignore the Foundation report, (with the Boston Foundation) detailing the cost differences between the GIC and municipal plans overall. Lets look at what that study says about the savings to municipalities from joining the GIC.

This study has found that municipalities across the state stand to save as much as $100 million in fiscal 2009, $750 million in fiscal 2013, and $2.5 billion in fiscal 2018.

Pretty impressive savings statewide by joining the GIC, notwithstanding the fact that a few local plans may have cost parity. And what about the comparison in costs over a defined period between the GIC and municipal plans?

In comparison to the health care cost increases of 84 percent for municipal employees and 72 percent for Boston employees from fiscal 2001 to 2006, the state’s employee health care costs, as managed by the GIC, increased only 47 percent.

So over that five year period the GIC health care costs rose by substantially less than municipal plans, including Boston. The fact that there are outliers does not allow escape from the numbers, which are clear and unambiguous.

The balance of the article talks about things that municipalities can do to try to restrain costs. The only major suggestion, which is incorporated into the Governor’s proposal, is to mandate that eligible municipal retirees enroll in medicare. His other suggestions, like wellness programs for employees, naturally should be done, but will have minimal impact on costs in the immediate future. His other suggestion, about better usage of existing health benefits, is a goal in any municipality that is honestly trying to reduce costs with a local plan in place. That suggestion is subject to collective bargaining.

I did not see, in either the Sun article or the Commonwealth piece, any reference to Governor Patrick’s efforts in the cost control area. The Governor is moving forward with some policy ideas that are going to spur some big debate in health care circles, including the idea of replacing our current system of “fee for service” with a “global payment” system. That is where real cost containment will either occur or not. Instead of subtly attacking a bill that will save municipalities hundreds of millions of dollars Blue Cross should tell us what ideas they have for real cost containment in health care. Maybe that is coming in the next Sun op-ed.

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