House Majority Policy Committee
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House Majority Policy Committee Hearing Testimony of Matthew Kearney, Secretary of the Delaware Valley Health Care Coalition March 28, 2007 Mr. Chairman, Members of the Committee: My name is Matthew B. Kearney and I am Secretary of the Delaware Valley Health Care Coalition, Inc. The Delaware Valley Health Care Coalition, Inc. ("DVHCC") is a group of Union Multi Employer Health and Welfare Funds who have joined together to improve each Fund's individual purchasing power. At the present time, we represent ninety-one (91) Union Funds located in the Commonwealth of Pennsylvania representing one-hundred ninety thousand (190,000) Members; and, when one includes Member dependents, we easily have in excess of four hundred thousand (400,000) participants lives. An extremely conservative estimate of the DVHCC overall annual hospital/doctor spend for calendar year 2006, is approximately one billion, five hundred million dollars ($1,500,000,000). The DVHCC Member Funds are located across our Commonwealth from Pittsburgh to Philadelphia and most counties in between. It is also part of our mission to research, evaluate and creatively develop programs that improve the quality and efficiency of health care and various health care delivery systems. As trade unionist, we support universal health coverage for all workers and their families, but we need to be vigilant and make certain that employers, who currently provide health insurance to their employees, are not adversely affected by Governor Rendell's Cover All Pennsylvanians (CAP) Health Plan. After review of the bill as proposed, I present these additional comments for your consideration. Discounted coverage creates an unfair competitive position for employers offering the same coverage. This is the most important issue we need to track and address for our employers who contribute to our Member Funds. The CAP program is a state subsidized program that would be funded in one-third equal parts by employer and employee contributions, higher tobacco taxes and expected federal government contributions. The CAP program proposes a 3% tax on the wages of each employee whose employer fails to provide health insurance. As proposed, CAP provides that employers of less than 50 employees whose workers earn, on average less than the state's average annual wage of approximately $39,000.00 would pay about $130.00 per employee per month. Employees would pay $10.00 to $70.00 depending on the level of the employee's income. These rates are much lower than what our contributory employers currently pay for private health insurance, which can range from approximately $400.00 to over $1,500.00 per month depending on many of which employ less than fifty employees - coverage levels and plan design. Thus, the subsidy would put our contributing employers at a competitive disadvantage when bidding for work against other companies receiving subsidies. Alternatively, it seems more prudent and equitable to develop competitive-neutral strategies, such as, employment size, profit and industry type. Despite its name, CAP does not cover all Pennsylvanians only those who are not currently covered. Currently, 767,000 Pennsylvania residents are uninsured. Pennsylvania state officials predict that after four years, 431,300 formerly uninsured residents will be covered by the program. Consequently, even if it reaches the number of uninsured residents that the state predicts, almost half of the residents currently uninsured will remain without coverage. The legislation needs to address how greater coverage can be achieved. There is no evaluation or consideration given to profit margin of any employer not currently offering health coverage to their employees prior to receiving the CAP discounted coverage. Participation is open to all employers not presently providing health insurance to their workforce. It benefits any employer, without consideration of the employer's ability to provide coverage on its own without the subsidy. That means that a company operating with a 20% profit margin receives the same subsidy as one operating with a 1 % profit margin. Such a result is unjust and may facilitate anti-competitive behavior and needs to be addressed in the legislation. Proposed tax credit for employers currently offering coverage to their employees is not financially adequate. As currently drafted, the bill only allows an employer who provides health insurance for its employees a credit up to the amount of the "Fair Share Tax." The Fair Share tax is pegged at 3% of wages. Many of our contributing employers are paying more than 3% of wages for health insurance coverage. Even though our contributing employers can deduct the full amount paid for health insurance from income, before their competitors enjoy subsidized health insurance benefits, it is only fair that any employer paying the full amount of benefits should be allowed to receive a credit for the full unsubsidized amount paid and not be limited to just the 3% of payroll wages. Possible lack of insurance provider competition. The CAP program as currently drafted does not address how it will provide for competition between the Blues and other potential providers of health insurance services. Competition between health care insurance providers must be incorporated into the legislation. The stated goal of lowering health care cost will not be achieved without competition between insurance providers. Option to opt out of existing coverage to accept the CAP plan could create a budget crisis with the proposed funding amount and further reduce coverage to covered employees. The CAP program assumes that the percentage of employers currently providing coverage will remain constant. If the competitive disadvantages discussed above are not addressed, many employers that currently provide unsubsidized coverage may rethink their health benefit package, cancel their current health insurance plans and opt to join the subsidized CAP program. When the cost of the CAP program skyrockets, the ultimate result could be fewer Pennsylvania residents receiving health benefits, the reverse of what the legislation seeks to accomplish. Any new legislation should focus on the following areas:
Some of the following comments and ideas are taken from the Harvard Business Review article entitled, Redefining Competition In Health Care by Michael E. Porter and Elizabeth Olmsted Teisberg. Ensuring fair and appropriate competition Competition in the health care system occurs at the wrong level, over the wrong things, in the wrong geographic markets, and at the wrong time. Competition has actually been all but eliminated just where and when it is most important, particularly, in the Commonwealth where the status quo favors a "closed system". Legislation that promotes a system of equitable medical charges for all would promote competition in the areas of efficiency of care. In most industries, competition drives up value for customers over time as quality improves and costs fall. It is often argued that health care is different because it is complex, because consumers have limited information, and because services are highly customized. Health care undoubtedly has these characteristics, but so do other industries where competition works well. Costs are shifted from the payer to the patient, from the health plan to the hospital, from the hospital to the physician, from the insured to the uninsured, and so on. Health plans, hospital groups, and physician groups have consolidated primarily to gain more clout and to cut better deals with suppliers or customers. Health plans and care providers restrict patients' access to medical innovations or limit the services that are covered. The most fundamental and unrecognized problem in health care today is that competition operates at the wrong level. It takes places at the level of health plans, networks, and hospital groups. It should occur in the prevention, diagnosis, and treatment of individual health conditions or co-occurring conditions. It is at this level that true value is created-or destroyed-disease by disease and patient by patient. It is here where huge differences in cost and quality persist. And it is here where competition would drive improvements in efficiency and effectiveness, reduce errors and spark innovation. Focus on comprehensive quality care that is efficient Providers should compete to be the best at addressing a particular set of problems, and patients should be free to seek out the providers with the best trade records given their unique circumstances. In the current environment, where patients' treatments are determined by the networks they are in, network providers are all but guaranteed the business. To this end the DVHCC is attempting to establish a Centers of Excellence program that rewards the facilities with the best risk-adjusted outcomes for differing diseases or conditions (with high medical costs), such as cancer, cardiovascular disease, high-risk pregnancy/prenatal care, transplants, et al. The Centers of Excellence would be a network of the best performers regardless of geographic location. For example, a facility like MD Anderson in Texas may have the best overall outcomes for certain cancer conditions rather than any local facility. Further, the best outcome means fewer complications resulting in lower medical costs that would far exceed the travel costs associated with going to MD Anderson. Legislation that allows for "pay for performance" will reward quality. Additionally, the DVHCC in conjunction with the Pennsylvania Health Care Cost Containment Council ("PHC4") is establishing an Exclusive Provider Network to evaluate the best medical facilities in the Commonwealth of Pennsylvania based on the following risk-adjusted medical outcomes: mortality, length of stay, infections, hospital re-admittance (for any reason), hospital re-admittance for infections, misadventures and costs. If our legislators were to first concentrate on the medical quality provisions of this legislation - infections and misadventures - the savings to all Pennsylvanians, either insured or uninsured, would be tremendous (the PHC4 reported that in 2005 in Pennsylvania "misadventures" accounted for sixty one million dollars in additional charges and hospital-acquired infections resulted in an additional cost of approximately one billion). Then the legislators could address the problematic portions in this legislation as earlier expressed. Taking the time necessary to resolve these matters, this CAP legislation could truly be a superior benefit to every citizen of our Commonwealth. Thank you for giving me the opportunity to review this important piece of legislation. To repeat, The Delaware Valley Health Care Coalition, Inc. supports universal health coverage for all workers and their families, but we must be vigilant and make certain that employers, who currently provide health insurance to their employees are not adversely affected by Governor Rendell's proposed CAP Plan. The ultimate legislation should reward, not disadvantage, the decent employers who currently provide health insurance benefits to their employees without government assistance. |
