What happens when the WGU ("World's Greatest University," as Harvard is affectionately known around Boston), decides to redesign the health benefits plan that applies to the faculty and other non-union employees? The short answer: A vote (pending this Tuesday) by the Faculty of Arts and Sciences to stop its implementation.
Here's a quick summary of the HMO plan:
[E]mployees would become responsible for annual deductibles of $250 per individual and $750 per family, and coinsurance equal to 10 percent of costs, for hospital expenses, surgeries, diagnostic testing, and outpatient services, effective January 1, 2015. The individual out-of-pocket maximum for such expenses is $1,500 per year; for families, the ceiling is $4,500 (present limits are $2,000 and $6,000). Above these thresholds—toward which continuing copayments for office visits and prescriptions will count, too—Harvard resumes paying 100 percent of the costs. As mandated by the Affordable Care Act, preventive care (annual physical and gynecological exams, well-baby care, immunizations, annual screenings for cholesterol, and so on) remains covered at 100 percent.
Before you jump to conclusions--thinking that people are upset solely because their own benefits have been changed or their direct costs have been increased--read more here at the Harvard Crimson:
[History professor Mary] Lewis and several other faculty members have said that they primarily take issue with the introduction of deductibles for non-routine health appointments and the institution of copays up to $4,500 a year for families. They argue that the new plans are “regressive” and will disproportionately burden junior faculty members and faculty members with families.
The Administration takes issue with that characterization:
[Harvard President Drew} Faust, for her part, indicated that she maintains her support for the new plan in an interview earlier this month. She commended the University Benefits Committee for the care it put into designing the plan, which she said was only finalized after 55 meetings of the committee.
Let's just pause here. Fifty-five meetings!? I can't resist relating the story of the Committee on Calendar Reform which spent six months trying to achieve uniformity in the academic calendar across the various Harvard schools (so students could easily cross-register) and failed. ("The Committee recommends that decisions concerning the adoption of common calendar guidelines be deferred. . . .") At least here, they reached a consensus.
To continue:
Defending these changes, Faust said that in the past other changes to the policy have been made to mitigate effects on employees, but that in order to sustain a “generous” policy, more visible changes had to be made.
Faust also challenged the assertion that the policy is “regressive,” saying, “we have quite explicit provision for lower-income employees, lower-income reaching quite high actually in what is defined as lower-income to mitigate the impact of these, and I think that prevents it from being regressive.”
I'm not going to opine on this back-and-forth (although we could spend a lot of time on the effects of co-pays) because I'd rather focus on a more subtle issue. A colleague writes:
A key unstated motivation of the plan seems to be to make sure that Harvard faculty and highly paid administrators can go to the high costs Partners hospitals--as opposed to other lower cost hospitals--at no additional cost. This is implicit in the plan design. After you meet your co-pay, Harvard picks up the rest. So if a patient needs a procedure that costs $100K at the BIDMC or Tufts or Lahey but $150K at MGH, there is no difference in cost to the patient. This is counter to the latest thinking on healthcare benefits, thinking that encompasses population health and also provides effective price signals or other incentives to utilize lower cost (and equally high quality) providers.
These are good points. Many employers have offered their staff a choice of plans, including those that offer limited low-cost networks. Ironically, the article cited from Harvard Magazine contains this reference:
Eckstein professor of applied economics David M. Cutler—a former member of the UBC, and now a member of the Massachusetts Health Policy Commission (an independent agency charged with developing policies to reduce the growth of healthcare costs and improve the quality of care)—has written extensively about this mechanism. Last December, in the New England Journal of Medicine, he and two coauthors—writing about the deceleration in the growth of U.S. healthcare spending—observed that patients could be rewarded “for choosing providers and organizational arrangements…that are associated with better outcomes and lower costs of care. Tiered networks constitute an early version of this approach to consumer engagement.” A month earlier, in “Hospitals, Market Share, and Consolidation,” published in the Journal of the American Medical Association, Cutler and Fiona Scott Morton (of the Yale School of Management) wrote of tertiary-care institutions, “[F]lagship academic medical centers offering perceived higher quality care often wield enormous market power.” They cited a report by the Massachusetts attorney general finding wide differences in pricing but “no correlation between hospital price and quality” in Harvard’s market area. Cutler and Morton suggest insurance programs with differential cost-sharing: “routine surgery could involve higher consumer cost sharing if provided at the dominant health system in a market than in a less expensive one”—a tiered network.
But the UBC decided to foreclose this opportunity. Why? I clearly did not attend any of the 55 meetings, but I bet one reason was that tiered options would single out some of the Harvard-affiliated hospitals as being among the highest cost in the region. How embarassing or awkward would that be, for the University to make transparent that some hospitals associated with Harvard Medical School offer less value to patients and families than others? Instead, in going down this lowest common denominator path, the UBC has built in unnecessarily high health care costs for the University.
Here's a quick summary of the HMO plan:
[E]mployees would become responsible for annual deductibles of $250 per individual and $750 per family, and coinsurance equal to 10 percent of costs, for hospital expenses, surgeries, diagnostic testing, and outpatient services, effective January 1, 2015. The individual out-of-pocket maximum for such expenses is $1,500 per year; for families, the ceiling is $4,500 (present limits are $2,000 and $6,000). Above these thresholds—toward which continuing copayments for office visits and prescriptions will count, too—Harvard resumes paying 100 percent of the costs. As mandated by the Affordable Care Act, preventive care (annual physical and gynecological exams, well-baby care, immunizations, annual screenings for cholesterol, and so on) remains covered at 100 percent.
Before you jump to conclusions--thinking that people are upset solely because their own benefits have been changed or their direct costs have been increased--read more here at the Harvard Crimson:
[History professor Mary] Lewis and several other faculty members have said that they primarily take issue with the introduction of deductibles for non-routine health appointments and the institution of copays up to $4,500 a year for families. They argue that the new plans are “regressive” and will disproportionately burden junior faculty members and faculty members with families.
The Administration takes issue with that characterization:
[Harvard President Drew} Faust, for her part, indicated that she maintains her support for the new plan in an interview earlier this month. She commended the University Benefits Committee for the care it put into designing the plan, which she said was only finalized after 55 meetings of the committee.
Let's just pause here. Fifty-five meetings!? I can't resist relating the story of the Committee on Calendar Reform which spent six months trying to achieve uniformity in the academic calendar across the various Harvard schools (so students could easily cross-register) and failed. ("The Committee recommends that decisions concerning the adoption of common calendar guidelines be deferred. . . .") At least here, they reached a consensus.
To continue:
Defending these changes, Faust said that in the past other changes to the policy have been made to mitigate effects on employees, but that in order to sustain a “generous” policy, more visible changes had to be made.
Faust also challenged the assertion that the policy is “regressive,” saying, “we have quite explicit provision for lower-income employees, lower-income reaching quite high actually in what is defined as lower-income to mitigate the impact of these, and I think that prevents it from being regressive.”
I'm not going to opine on this back-and-forth (although we could spend a lot of time on the effects of co-pays) because I'd rather focus on a more subtle issue. A colleague writes:
A key unstated motivation of the plan seems to be to make sure that Harvard faculty and highly paid administrators can go to the high costs Partners hospitals--as opposed to other lower cost hospitals--at no additional cost. This is implicit in the plan design. After you meet your co-pay, Harvard picks up the rest. So if a patient needs a procedure that costs $100K at the BIDMC or Tufts or Lahey but $150K at MGH, there is no difference in cost to the patient. This is counter to the latest thinking on healthcare benefits, thinking that encompasses population health and also provides effective price signals or other incentives to utilize lower cost (and equally high quality) providers.
Eckstein professor of applied economics David M. Cutler—a former member of the UBC, and now a member of the Massachusetts Health Policy Commission (an independent agency charged with developing policies to reduce the growth of healthcare costs and improve the quality of care)—has written extensively about this mechanism. Last December, in the New England Journal of Medicine, he and two coauthors—writing about the deceleration in the growth of U.S. healthcare spending—observed that patients could be rewarded “for choosing providers and organizational arrangements…that are associated with better outcomes and lower costs of care. Tiered networks constitute an early version of this approach to consumer engagement.” A month earlier, in “Hospitals, Market Share, and Consolidation,” published in the Journal of the American Medical Association, Cutler and Fiona Scott Morton (of the Yale School of Management) wrote of tertiary-care institutions, “[F]lagship academic medical centers offering perceived higher quality care often wield enormous market power.” They cited a report by the Massachusetts attorney general finding wide differences in pricing but “no correlation between hospital price and quality” in Harvard’s market area. Cutler and Morton suggest insurance programs with differential cost-sharing: “routine surgery could involve higher consumer cost sharing if provided at the dominant health system in a market than in a less expensive one”—a tiered network.
But the UBC decided to foreclose this opportunity. Why? I clearly did not attend any of the 55 meetings, but I bet one reason was that tiered options would single out some of the Harvard-affiliated hospitals as being among the highest cost in the region. How embarassing or awkward would that be, for the University to make transparent that some hospitals associated with Harvard Medical School offer less value to patients and families than others? Instead, in going down this lowest common denominator path, the UBC has built in unnecessarily high health care costs for the University.
6 comments:
Just to clarify, the new Harvard thresholds of $1500/$4500, though technically "lower" than the old ones ($2000/$6000), are functionally higher because the old ones only applied to co-pays (fixed fees when you visit the doctor, usually $20 per visit), whereas the new thresholds include "co-insurance" which the insured now pays for diagnostic tests, procedures, hospital stays, surgery, etc. While it would take 300 co-pays to reach the old $6000 family threshold in a year, it is comparatively easy to reach the new $1500/$4500 threshold - a procedure or two (including childbirth) and you're there.
I don't pretend to understand the relationship between Harvard and all its hospitals, but on the face of it this appears to be the world's most obvious case of an employer's failure to use its clout to protect its employees from predatory health providers. Instead, they all take the route of forcing the employees, who have no clout individually, to pay more of the freight.
Other than a few like Walmart contracting for specific surgeries, etc., employers have largely been asleep at the switch on this issue. I don't understand it, since it would benefit their bottom line as well as gain them LOTS of appreciation from their employees.
In Harvard's case, there seems to be a conflict of interest involved, no?
Great post, Paul! You are clearly right.
Your point is the most interesting one, but let me call your attention also to the HDHP point - high deductibles are inherently regressive, and they have other deficits TNTC (medical jargon, usually for microscopic urinalysis - Too Numerous To Count.) My policy paper for the AAP, published in Pediatrics earlier this year, looks to be the most complete critique on HDHPs at this point. These things are just poison! I think many people are now experiencing them for the first time directly themselves and coming to realize how awful they are.
There are two issues that trouble me about this aside from the high prices commanded by certain Harvard affiliated hospitals and the plan’s failure to address that. Both apply to employees in many organizations, not just Harvard. The first is that, in my opinion, too many employees view health insurance as pre-paid healthcare instead of the transfer of actuarial risk from the employee to an insurer, including a self-funded insurer. That tends to lead to a preference for lower deductibles and coinsurance than is probably appropriate, especially for higher income employees.
The second is either the employees don’t understand that money spent by an employer for health insurance is part of their total compensation and tends to crowd out the ability to raise wages if health insurance costs are rising faster than general inflation. Alternatively, employees may indeed prefer more of their total compensation in the form of health insurance benefits mainly because of the employer tax preference. That’s an issue that should be addressed as part of broad based tax reform.
As for the suggestion that high deductible health plans are regressive, perhaps that impact could be mitigated by Health Savings Accounts into which the employer would deposit a sum of money inversely related to income. I don’t know whether or not the law would even allow such an approach, however.
I don't understand the health care system at the level of some of the other commenters, but these hospitals employ Harvard Medical School faculty and teach HMS students. I think it's a good idea to drive down - or at least make transparent - these costs. But the effect will be on the wallets of HMS-affiliated doctors and may be on the student access to these top teaching/research institutions.
Stop whining.
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