Bill Manzi.com

The Legislature convened a hearing on municipal health care yesterday, which I was unable to attend.The Mass Mayors had Scott Lang of New Bedford, Kim Driscoll of Salem, and Tom Menino of Boston, amongst many, speaking for giving municipalities health care plan design authority. On Monday leaders of multiple state unions offered what they called a “compromise” on muni-health in advance of yesterday’s hearing. Lets start with the hearing.

Both management and unions were out in force, and legislators heard both sides. The problem that the unions have is that the numbers are not subject to change or spin. From the State House News Service:

But committee members heard over and over that health insurance costs are making other investments impossible.

Since 2000, the cost of employee health care has wiped out increases in state aid from 1993 to 2000 that brought school districts up to targeted funding levels, according to Linda Noonan, executive director of the Massachusetts Business Alliance for Education. From 2000 to 2007, annual health care costs in school budgets grew by $1 billion, $300 more than the rise in Chapter 70 school aid, the chief pot of state funding for local schools, she said.

I covered that study in an earlier blog post, but those numbers are a cold slap in the face. Mike Widmer was at the hearing, and spoke how unsustainable the numbers are.

Massachusetts Taxpayers Foundation President Michael Widmer said reforms are necessary to preserve local government services and jobs and noted the pending proposals don’t even attempt to address billions of dollars in unfunded municipal retiree health care liabilities. Widmer said taxpayers are footing the bill for “the most generous health plans in the state” while seeing their own health insurance benefits and local services erode and paying increased property taxes “They are being hit four ways,” he said. “This is an absolute unsustainable situation.”

This situation has been covered relentlessly, but the municipalities, who have seen local aid cut by 40% over the past four years, need relief. And that relief, in the form of health care plan design, would save cities and towns about $100 million per year. It would also allow us to use those savings to retain municipal workers and continue to provide core services to our citizens.

The unions so called counter-offer was dissected pretty effectively by Globe columnist Scot Lehigh, who picks apart the key components of the proposal.

This plan is so silly it doesn’t even merit respectful consideration.

Under labor’s proposal, if unions and municipal management couldn’t agree to an unspecified and non-mandatory — and thus easily sidestepped — “benchmark’’ for health care savings, some kind of binding arbitration would decide the issue. (That idea should be an immediate red flag, given the Menino administration’s experiences with binding arbitration in disputes with both the firefighters and the police union.) Half of any savings through possible plan design changes or joining the state’s Group Insurance Commission would go to union members, at least in year one.

In exchange for those (totally inadequate) provisions, labor proposes limiting the GIC’s mid-year plan-changing flexibility — and increasing labor’s representation on the commission to half (!) the members.

The unions seek half the “savings” from introduction of lower cost plans in municipalities, and then seek to bring to the state GIC what they have brought to localities, which is health care gridlock. They ignore the fact that any reduction in the increase of health care costs to municipal taxpayers will inevitably be spent on job retention, which means that they are getting 100% of the so called “savings”. Their attempt to gain a veto over the actions of the GIC would mean that the state health care system, which provides excellent care at costs substantially lower than municipalities, would likely suffer dramatic costs increases to state taxpayers. I wonder how the state legislature will feel about that proviso? Labor’s proposal probably goes a bit further than they have in the past, but it does not at all come close to solving the problem. Both the Tribune and the Globe wrote editorials pointing out the inherent flaws in the union proposal, and urged the Legislature to move to real muni health care reform. With local aid cuts looming large again the Legislature needs to act in this area. Nothing is more important statewide for localities.

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.