Just before the Fourth of July, the Wisconsin State Senate approved a budget provision – called "Healthy Wisconsin: Your Choice, Your Plan" – that would guarantee all Wisconsinites good health insurance, lower employers’ health costs and cut property taxes by over $500 million.
The numbers work, despite critics’ best efforts to twist the facts.
The independent Lewin Group, a highly regarded team of experts who have evaluated dozens of health care initiatives around the country, found that "Healthy Wisconsin" would:
- Reduce the number of uninsured in Wisconsin from 476,000 to 15,000 (meaning we’d have the lowest percent of uninsured in the country by far).
- Reduce costs of currently insuring private firms by over $600 million.
- Reduce costs of government by over $1 billion.
The Senate’s “Healthy Wisconsin” plan builds upon Gov. Jim Doyle’s excellent "BadgerCare Plus" proposal, which would expand Medicaid to low-income childless adults and expand BadgerCare itself to additional lower-income families. It leaves Medicare untouched.
But for the vast majority of us in the "middle" – for those not poor enough to qualify for Medicaid or BadgerCare, but not yet old enough to join Medicare – Healthy Wisconsin would bring about the major changes we urgently need, while preserving the current health care system where it’s working well.
The critics complain that Healthy Wisconsin is too bold, or hasn’t been thought through enough, and so forth. What Wisconsin needs, they say, is … inaction. Despite over 475,000 uninsured and health care costs rising at two to four times the rate of inflation, some critics claim we really don’t have a health care crisis after all. And if we do have a crisis, they say, the solution is to wait … and debate … and wait … and debate … and wait and debate some more.
They have problems with Healthy Wisconsin, yet they have no coherent plan of their own to ensure all Wisconsinites good health care coverage or lower costs. All they’ve got is complaints – complaints about the status quo and complaints about Healthy Wisconsin – plus a smattering of ideas that (while sometimes worthy) don’t come anywhere close to a solution.
We’ve waited long enough. Healthy Wisconsin is a bold and good measure. The State Senate deserves credit for adopting it. It’s now time for the Legislature as a whole to enact it into law.
The case for Healthy Wisconsin is overpowering.
For virtually all of the 3.8 million Wisconsinites who, according to the Lewin Group, would not qualify for BadgerCare Plus because of our incomes and who don’t yet qualify for Medicare because we’re under 65, the Healthy Wisconsin plan would guarantee health insurance, good benefits, and freedom to choose our doctors
Wisconsinites would have health insurance whether or not we had a pre-existing medical condition like asthma or diabetes or hypertension. Today, these health care problems, which are typically beyond our control, deprive many of insurance coverage.
We’d have insurance regardless of marital or family status.
We’d also have health insurance even if we lost our jobs, or could only find part-time employment, or low-wage work.
And we’d remain insured, as long as we stayed in Wisconsin, until age 65.
As a result, some of the most perverse incentives in the current system would disappear. Today, couples have an incentive not to get married, or even to get a divorce, in order to lower their incomes enough to qualify for BadgerCare health care benefits. Parents often feel compelled to leave their newborn (or older) children to take a job just for the health insurance. Under Healthy Wisconsin, no one would feel pressure to refrain from marriage or get a divorce, or reject a job or a pay raise, just to stay on BadgerCare. And no one would have to give up caring for his or her children at home simply in order to have good health insurance. The current system’s perverse incentives would be replaced by healthy, pro-family values.
And it is indeed good health insurance.
Under Healthy Wisconsin, our health care benefits would be almost identical to what state legislators now receive. The plan provides coverage for medical services, hospital care, and prescription drugs. It covers mental health services, and alcohol and other drug abuse services. All of us would have the same types of coverage, and the same level of coverage, that the State of Wisconsin already provides (using our tax dollars) to our state legislators, the governor, state judges and all the professors in the UW system.
Cost-sharing under the Healthy Wisconsin plan – in other words, what we’d have to pay out-of-pocket before insurance benefits kick in – would be very reasonable. To begin with, there would be no cost-sharing at all – no deductible, and no co-pays – for kids, or for preventive care, or for people with chronic illnesses who successfully participate in a chronic care management program. (The only exception would co-pays for prescription drugs.)
Otherwise, a modest $300 deductible ($600 for families) would be paid each year. After that, each visit to a doctor or other health care provider would cost only $20. There’s also a small $5 per prescription co-pay for generic drugs, or $15 for brand-name drugs on a formulary developed by medical experts, or $40 for brand-name drugs off the formulary.
Cost sharing stops long before it threatens to eat up our savings. Once annual total costs reach $2,000 per adult (or $3,000 per family), cost sharing stops entirely, and insurance pays 100%. No longer will families go bankrupt, or deplete their college funds or retirement assets, in order to pay catastrophic medical bills.
It would be one of the best insurance packages in the country. And any employer that wanted to offer an even better insurance coverage would be free to provide supplemental benefits.
Wisconsinites care not only about health care security, but also want to be in control of their health care. Healthy Wisconsin puts you in the driver’s seat. That’s why it’s called, "Your Choice, Your Plan."
First of all, the proposal would let us choose from among different, competing health care networks. A health care network is a coordinated group of health care providers (comprised of primary care doctors, medical specialists, physician assistants, nurses, clinics, hospitals) who agree, in exchange for a fixed payment per month, to provide enrollees with all the benefits spelled out above. Under Healthy Wisconsin, you could choose to enroll in any health care that submits a bid.
Networks would compete – not in turning people away (they couldn’t), but to see who could provide the most efficient, highest-quality care at the lowest price. If you chose to enroll in the lowest-cost network – or even one that’s close to the lowest in cost – you wouldn’t pay any extra premium to join. But if you wanted instead to enroll in a higher-cost network, you’d be free to do so, provided you agreed to pay the extra premium equal to the increased cost.
Luckily in Wisconsin, we already have several health care networks in operation: DeanCare, Physicians Plus, the two Group Health Cooperatives and Security Health Plan are among the networks not available. As Healthy Wisconsin gets ready to take effect, we’relikely to see more networks form.
Some Wisconsinites, however, will not want to enroll in a health care network. Healthy Wisconsin thus provides yet another option, the so-called fee-for-service option. Under this option, you would have direct access (without needing to select an intermediary organization that’s put together a health care network) to every doctor or hospital that accepts the rates set by the program’s board of trustees. Enrollees in the fee-for-service option would get the exact same benefits. In addition, they’d be required to select a primary care provider, who’d coordinate their medical care. Enrollees who select the "fee-for-service option would pay no extra premium if this option turns out to be the lowest-cost choice or close to the lowest in cost. Only if the fee-for-service option turns out to be higher cost would enrollees be required to pay an extra premium – but even here, the extra premium is capped at no more than $100 per month ($200 per month per family).
It’s no surprise that a program that guarantees health insurance to virtually all Wisconsinites will dramatically lower the number and percentage of uninsured.
What is surprising to some is that Healthy Wisconsin will also greatly lower the cost of health care – for Wisconsin as a whole, for families, for most private employers and for government employers.
In doing so, Healthy Wisconsin makes it possible to enact one of the largest property tax cuts in our state’s history – over half a billion dollars in a single year!
The Lewin Group, an independent team of expert economists and health care analysts based in the Washington, DC, area, has estimated that at the same time that “Healthy Wisconsin” dramatically shrinks the number of uninsured, it will also lower overall health spending by over $750 million, save families $432 million, save currently insuring employers $686 million, save government employers $1,360 million, and thus permit property taxes to be cut statewide from over $8 billion to under $7.5 billion.
Following are the key numbers from the Lewin analysis (using 2007 as the base year):
- Uninsured population drops. The number of uninsured would be reduced from 476,000 to 15,000–from 9% to well under 1% of Wisconsin’s population.
- Total spending declines. Total health care costs would decline by $751 million, with a large increase in spending for the uninsured more than offset by reductions in administrative & other costs. Over ten years, compared to the status quo, "Healthy Wisconsin is estimated to save $13.8 billion."
- Families save money. Wisconsin’s families as a whole would save $432 million, because the new assessment paid by employees and others is more than offset by reductions in current premium payments, reductions out-of-pocket payments, and reductions property taxes. Families with annual incomes under $75,000 – which constitute 77 percent of all families in Wisconsin- would see reductions in health spending (depending on income category) ranging from $1,328 per family to $262 per family.
- Private insuring employers save. Private employers that currently provide insurance would save $686 million. Not surprisingly, non-insuring private firms would experience an increase in costs. But even employers that now insure fewer than 75 percent of their workers would see, as a group, a modest $50 million reduction in their costs. And those employers that currently insure 75 percent or more of their workers would see, as a group, a very large, $631 million reduction in costs.
Compared to the $9,191 billion that currently insuring private employers (of all types) are now spending on employee health care, the amount that Healthy Wisconsin actually requires them to pay – that is, the $7,769 million assessment – would actually result in an enormous $1,442 million savings. And when the $169 in property tax cuts is added to this, the savings for currently insuring employers mount to $1,588 million. But Lewin’s methodology requires them to assume that certain voluntary spending to provide supplemental health care coverage – both contractual commitments that employers have voluntarily entered into, as well as voluntary spending that is not required by contract but that Lewin assumes employers will commit to in order to maintain their competitive position – will cut into this $1,588 in savings, ultimately reducing currently insuring employers’ net savings to the $686 million figure initially mentioned.
In its analysis, Lewin frequently applies a concept called "wage effects," which assumes that (1) employees bear in the form of lower wages any extra health care costs their employers incur, while (2) employees also receive in the form of higher wages – less applicable payroll taxes – any reduction in health care costs that their employers experience. After applying this "wage effects” methodology to both insuring and non-insuring private employers,
Lewin concluded that the Healthy Wisconsin plan would actually save currently non-insuring private employers $24 million! This is because non-insuring employers are assumed to pass on to their employees, in the form of lower wages, the entirety of their new health care assessment, but will get to keep for themselves a $24 million slice of the overall property tax cut that “Healthy Wisconsin” generates. Meanwhile, currently insuring private employers would continue to experience savings: $73 million for those firms that insure fewer than 75 percent of their workers (a higher figure than before "wage effects"), and $354 million (a lower figure than before "wage effects") for firms that insure 75 percent or more of their workers. All in all, after "wage effects," Lewin estimates that private employers as a whole will save $378 million.
Government employers would save more than any group. Even after local and state governments guarantee their employees receive the same total benefit package by supplementing the Healthy Benefits benefit itself with "wrap-around" coverage, Lewin estimates that government employers would save $1,360 million.
The Healthy Wisconsin plan requires that 50 percent of this savings – total of $680 million – must be passed on to households and businesses in the form of a property tax cut.
Such a property tax would significantly reduce the overall property tax levy in Wisconsin. According to the Wisconsin Legislative Fiscal Bureau (LFB), the 2005 property tax levy (for 2006) totaled $7.7 billion.
Recently, property tax levies have been rising somewhat more than 5 percent per year. Thus, it is reasonable to assume that the 2006 levy (for 2007) would be somewhat over $8.1 billion. If this statewide levy were reduced by $680 million, the 2007 levy would decline from $8.1 billion to $7.4 billion.
Healthy Wisconsin would clearly be very good for Wisconsin.
It would dramatically reduces the number of uninsured, putting Wisconsin in the lead as the state with the lowest percent of uninsured by far.
It would ensure that virtually every Wisconsinite has good health insurance – regardless of medical condition, family status, or employment status.
It would provide nearly 4 million people – those who don’t quality for Medicaid or BadgerCare, and who aren’t yet eligible for Medicare – with the same, excellent benefit package that taxpayers now provide to state legislators, the governor, and the courts.
It would also guarantee that we are in control. Under Healthy Wisconsin, we choose the health care network we like best (or the non-network "fee-for-service" option), and we choose which doctors we want to see and which hospitals we want to use. Healthy Wisconsin also guarantees that we get to keep our health care choices, even if our health worsens, our family status alters, or we lose a job or switch employers or venture out to start up our own businesses.
Finally, by putting consumers in control of the choice of health care plans; by giving consumers a strong economic incentive to choose a less costly plan and to seek out preventive and primary care; and by providing "health care networks" and providers a powerful incentive to focus on prevention and primary care, operate efficiently, lower costs, and improve quality; Healthy Wisconsin properly aligns – at long last – the incentives in our health care system.
Today, the incentives are all messed up. Consumers today have little reason to seek out low-cost, high-quality care (since high-cost, low-quality care costs them the same). Meanwhile, providers have no incentive to offer low-cost/high-quality care (since they actually make less money by preventing illness, doing primary care, and seeing healthy patients infrequently than they can make by bypassing prevention and seeing sick patients as frequently as possible). Little wonder that, with today’s incentives so misaligned, the system’s costs are out of control.
Healthy Wisconsin gets the incentives right, and also reduces administrative costs because of its simple design and avoidance of wasteful functions. That’s the reason why the Lewin Group found that, "Healthy Wisconsin" will have such enormous positive impacts on the people, families, employers – and taxpayers – of Wisconsin.
Healthy Wisconsin will save money for families as a whole, and for the average family.
It will save money for employers as well – especially for private employers that provide good insurance and for government employers.
And, to top things off, Healthy Wisconsin will result in the largest property tax cut in recent history – more than half a billion dollars – that working families, middle class homeowners and businesses can use to improve their living standard and invest in Wisconsin’s future.
David Riemer is the director of the Wisconsin Health Project.
