Foley: Health care costs can be cut 15% with no benefit loss

Tom Foley doesn’t like the federal health reform law–he’d rather see it repealed and replaced with something that cuts costs. He believes the state budget needs to shrink by at least 10 percent. And in health care, which accounts for nearly a third of state spending, he sees a plum source for savings.

“It wouldn’t take that much to reduce health care costs in Connecticut by 15 percent,” the Republican nominee for governor said during a recent interview.

First in a series

Foley believes the savings – up to $1 billion – could be achieved through wellness programs, electronic record keeping, changes to the medical malpractice system, reducing unnecessary emergency room visits, allowing less-expensive out-of-state health plans into Connecticut, and increasing the use of community-based care for elderly and disabled people.

Doing so wouldn’t require reducing benefits, Foley said.

But it would represent a significant reversal in spending trends at a time when health care costs continue to rise and demand for state medical assistance grows.

While Foley believes much of the savings can come from wellness programs designed to impact behaviors, evidence of their effects on health care costs is limited, and some research suggests that clear-cut, short-term savings are hard to demonstrate. Programs aimed at preventing conditions like obesity might be cost-effective–producing health benefits that justify their costs–but not cost-saving, some experts say.

And Foley wants to increase one area of state health care spending: the rates paid to health care providers who treat Medicaid patients. He sees it as a way to lower health care costs for the private sector, ultimately making it less expensive to employ workers in Connecticut.

“Anything that drives down health care costs in Connecticut is something I’d be in favor of,” Foley said.

 

Revising Reform

 

That’s one of the reasons he opposes the Patient Protection and Affordable Care Act. Foley believes it will raise costs and drive private insurers out of the market, ultimately producing a single-payer system.

The law is “a bad deal for Connecticut,” Foley said. Because the state has a relatively low rate of uninsured residents – 10 percent in 2008, according to the U.S. Census Bureau – people here won’t see much expansion of coverage for the added cost, he said.

“Connecticut residents are going to be paying for this program, and there’s no benefit to anyone in Connecticut because people are already covered,” he said.

But as governor, Foley said, he would do what is required to implement the law.

“I’m not somebody who says ‘hey, we’re going to completely reject this,'” he said. “I think we need to be responsible and do what we are required to do, but I would be very diligent about making sure that Obamacare doesn’t burden us with any more costs than are absolutely necessary.”

Foley does support certain changes in the reform law, such as eliminating the ability of insurers to exclude people with pre-existing conditions. But he said he does not support any changes to the health care delivery system that reduce people’s choice.

Finding $1 Billion

 

The idea of saving 15 percent on state health care costs stems from the federal health reform debate. Projections for an earlier reform plan suggested such savings were possible, Foley said.

“I would assume in Connecticut, because we have such a high-cost system, there may be more opportunities for reducing costs,” he said.

Much of the savings can come from wellness programs aimed at reducing obesity, drug and alcohol use, and promoting healthier lifestyles, he said.

“If you can provide incentives and encourage people to take better care of themselves, we could do a lot to bring down health care costs,” he said.

Wellness programs have gained popularity among employers in recent years, although research suggests that cost savings can be difficult to achieve in the first few years and experts have expressed skepticism about their usefulness as a quick way to save money. Behavioral changes like quitting smoking or losing weight can take time to achieve, while large-scale prevention efforts that involve screening large groups of people can cost more than the savings from preventing disease in the smaller number of people who would have gotten sick.

Some studies have found savings from wellness programs, although many of them use methods that researchers consider limited, such as comparing outcomes for people who choose to participate to people who did not without accounting for other differences between the two groups.

The bulk of state health care money goes to medical assistance programs like Medicaid. In his calculations for finding $1 billion in health care savings, Foley also includes health care costs for current and retired state workers, which are expected to run the state an estimated $1.13 billion this fiscal year.

But it’s not clear how much additional savings are achievable there. State workers already receive wellness programs as part of their health plans, including a smoking cessation program and discounts for weight loss programs and gym memberships.

“That has been done,” said Matt O’Connor, spokesman for the State Employees Bargaining Agent Coalition. “It’s an ongoing process that’s been in place.”

As for the prospect of cost-cutting in state employee health care, O’Connor noted that state workers agreed to changes last year including increased premiums, limits on eligibility for retiree health benefits for workers with less than 10 years of state service, and requiring workers with less than 5 years of state employment to contribute to a trust fund for retiree health care.

“Part of what we’re looking for in this next administration is a different approach,” O’Connor said. “We’ve been there, done that, so now it’s a matter of looking at other ways in which savings can be achieved and are out there.”

Foley sees another source of savings in shifting much of the state’s long-term care from nursing homes to community or home-based care.

The state spends nearly $2.5 billion in Medicaid long-term care costs for about 40,000 people. Forty-seven percent of them live in nursing homes, which tend to cost more than receiving care at home.

Research has suggested that the state could save between $600 million to $900 million a year by “rebalancing” the way long-term care is delivered – that is, delivering 75 percent of the long-term care in home and community-based settings, with the remaining 25 percent in nursing homes, by 2025.

Some industry experts are skeptical about the prospects of making such a large shift. Foley acknowledged that the state does not yet have the capacity to make such a sizable move toward community-based care and must build it. He said one hitch in making changes has been the unions representing nursing home workers.

“The unions are very powerful in nursing homes and they don’t want the Medicaid patients moving out of nursing homes,” Foley said. “But it’s far less expensive to care for the elderly in community-based care and it’s better for them, they do better, they live longer. So that’s a pretty easy one for me.”

“Stealth Tax”

The state’s other Medicaid programs have been growing steadily in recent years, with more than 500,000 state residents now receiving the public coverage. The federal government reimburses the states for at least 50 percent of Medicaid costs and has been providing a higher level of matching funds since the federal stimulus program began.

Increasing the rates paid to health care providers who treat Medicaid patients could reduce private-sector health care costs, Foley believes.

The existing Medicaid rates pay doctors and other health care providers less than the cost of delivering care. Providers typically make up the difference by charging commercial insurance plans more, a cost-shift that Foley said raises the price of private insurance.

Foley said the government should instead pay the full cost of care for Medicaid patients, “and let the taxpayers decide whether or not the expense of that is something they want to cover.” He acknowledged that it would mean an increase in state spending, but said the alternative is a “stealth tax” on people with private insurance.

“I’m against the government imposing costs on citizens that they can’t see,” he said.

Changes to the medical malpractice system could also save money, Foley believes. Many physician groups believe malpractice issues account for considerable health care costs, although some studies suggest it has a more modest effect on expenses.

A few changes could cut costs without requiring comprehensive reform, Foley said. He supports a $250,000 cap on awards for non-economic damages, similar to what California has, and cited other options including using special courts to handle malpractice cases, employing a non-adversarial process, and providing guidelines for compensation for medical errors and malpractice.

Trimming Government

But even with $1 billion in health care savings, Foley said, the state would have a long way to go toward fiscal stability. He supports privatizing state institutions if the private sector can provide the same or better service for less money.

His philosophy for making cuts to health and social service programs?

Start with ones that have no negative impact. The $1 billion in savings he believes is possible would fall in that category, he says, providing the same benefits at a lower cost.

After that: “You look at things that have some adverse impact on people but they’re not devastating,” Foley said. “Where people can adjust and people are adjusting to the new reality in the private sector…in the public sector, though, people haven’t really adjusted to the new reality. That’s going to happen one way or the other.”

One cut Foley would be happy to see: The SustiNet Health Partnership.

“I’d like to see it go away,” he said.

SustiNet grew out of an effort to achieve universal health coverage in the state with a public health insurance plan. The plan that legislators ultimately passed – and later resurrected after a veto – was a scaled-down version, with no funding attached. More than 150 people are now developing a plan, which they hope will ultimately be offered as a coverage option for state employees, Medicaid enrollees and the public.

“It was created for a purpose that no longer is needed,” Foley said. “The people involved are trying to find a role for it. We don’t need new costly things looking for a purpose.”

Foley also has reservations about using state money to fund stem cell research, although he said it is not something he has examined closely. Lawmakers in 2005 committed the state to funding $100 million in grants for stem cell research over 10 years. The money comes from a tobacco trust fund, but last year, Gov. M. Jodi Rell proposed putting off the stem cell grants and using the money to help offset the budget deficit.

“That’s what the private sector’s for, if you’re talking about coming up with new technologies and innovation. Governments aren’t good at that,” Foley said. “I’m not sure why Connecticut is subsidizing it, because I think the private sector would pay for it if they were left free to do it.”

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