Public sector budgets are under significant threat, as COVID-related shutdowns strangled the economy and state/local tax collections. The Center on Budget and Policy Priorities (CBPP) now projects that over the next fiscal year, state governments will face a $615 billion shortfall, with damaging cuts needed to balance budgets already kicking in.
There has never been a more important time for government agencies and policymakers to find operational efficiencies that are more than just code words for “cutting staff/services.”
It can be done.
The City of Kirkland, Washington found a way to save $2,400 for each and every one of its 600 employees.
Florida’s Pasco County Schools saved $117 million over the course of nine years.
Colorado’s rural Bennett School District with 114 staff members slashed their health care costs by a full third over the course of seven years. At the other end of the spectrum, a consortium of school districts around Pittsburgh with over 45,000 staff members spends 40% less than their counterparts in Philadelphia even with a dominant health system well-known for their price-gouging.
The state employee health plan saved over $1.6 billion in three years just in drug spending.
The common thread? These organizations all understood that health care isn’t expensive. After all, clinicians only receive $0.27 of every $1 ostensibly spent on health care. What is expensive is price-gouging and profiteering. Working with aligned benefits advisors, they delivered health benefits to their employees that had improved health outcomes at an overall lower cost.
Across the country, there are billions of dollars of potential savings to be realized without making the sacrifices to the other budget areas many mayors and governors are presently considering. Rather than disinvesting in education, infrastructure and social services, the leaders mentioned above prove that the public sector can actually lead the way to change.
It all boils down to leaders refusing to keep funding a catastrophically broken healthcare system. The United States’ healthcare system profits off of issues occurring, rather than keeping small health problems from ballooning into bigger, more expensive ones. It’s a system that’s incredibly reactive, even though it behooves both patients and budgets for it to be proactive instead.
It pays for beneficiaries’ problems to be properly addressed the first time. If, for instance, someone is showing signs of obesity and a provider works with them to change their lifestyle and lose weight, think of how much money is saved in terms of prescriptions to potentially keep blood sugar, blood pressure and cholesterol in check. Or, dollars saved because that person was able to reduce the likelihood of them suffering a heart attack, stroke, or needing some sort of related surgical procedure.
Fortunately, there are already value-based organizations out there making it their mission to buck the status quo and provide this kind of care. And it’s with these value-based physicians – who are paid for how well they do their job rather than how many tests it may or may not take to do that – that leaders should forge a new path and partner.
Value-based primary care was largely behind the city and school districts’ savings mentioned earlier. The City of Kirkland, Washington hired the near-site value-based primary care practice Vera Whole Health to make sure city employees’ health needs were being met. Pasco County Schools created its own on-site health and wellness center, through which employees could receive care and pick up their prescriptions. And Bennett School District also hired their own primary care provider, whom they incentivized employees to visit by waiving deductibles.
There was work each had to do before hiring or creating their own value-based primary care practice, however. First, they had to make sure they had the freedom to do so by making sure that their health plan was self-insured instead of a carrier-controlled insurance plan. Sadly, many public sector entities are still suffering under carrier-controlled insurance plans that have fueled record earning for carriers during the Covid-19 pandemic. The leading health insurance actuary, Milliman, estimated a drop in healthcare spending ranging from $85 billion to over $550 billion.
Rather than public entities able to redirect that money to support their community, the only community that benefited was the Wall Street community through extraordinary carrier profits. It’s as unseemly as it sounds – carriers are benefitting from the pandemic.
Once self-insured, it’s critical for leaders to surround themselves with the right resources. That means first checking to see if their benefits advisor is working in their best interest – easily done by asking that they disclose any commissions and bonuses they may receive from various insurance carriers (we have found as many as 17 undisclosed revenue streams that employers were unaware of).
Then, it requires that leaders find an equally transparent, carrier-independent third-party administrator to process claims and assist with other administrative responsibilities, plus purchase stop-loss insurance. With stop-loss insurance, leaders protect themselves from going over budget by putting a limit on how much money they are able to commit, after which point insurance kicks in.
With these supports, employers can proceed with seeking out the best, most affordable physicians in their community. Many are willing to engage in what’s called reference-based contracts, where a benefits advisor and their client agree to pay a percentage that’s more than what Medicare would pay, but less than the average PPO network – which usually charge around 260% Medicare or more.
Clearly, of all the areas in every public sector budget, health benefits are ripe for disruption – in the best kind of way. States, cities and school districts from coast to coast not only need to free up previously squandered dollars, they need to provide better health benefits to their employees as we continue to fight COVID-19 and await its lingering effects. Finally providing better, more affordable health benefits accomplishes both.
Dave Chase is co-founder of Health Rosetta, which aims to accelerate the adoption of simple, practical, nonpartisan fixes to the U.S. health care system, and author of “The CEO’s Guide to Restoring the American Dream” (Health Rosetta Media)