State panel targets big savings in health care, but avoids worker concession debate

The legislative panel charged with improving state government efficiency tentatively endorsed more than $250 million in new cost-cutting measures Monday, particularly targeting state health care services for the poor and elderly.

The Commission on Enhancing Agency Outcomes, whose final report is expected Dec. 15, also issued recommendations regarding state contract awards, energy costs, agency consolidations and tax enforcement.

But the panel steered clear of one of the largest and most controversial state budget components, opting not to recommend specific wage or benefit reductions for unionized state employees.

“I think we’ve got a very significant and very serious set of recommendations,” Sen. Gayle Slossberg, D-Milford, co-chairwoman of the commission, said after the panel backed proposals estimated to save $153 million this fiscal year, and an additional $101.7 million starting in 2011-12.

Created by the legislature last year, the commission was directed to find $50 million in savings to the 2010-11 budget by Dec. 31, 2010.

Gov. M. Jodi Rell accused the group several times this past summer and fall of not meeting its charge, arguing a specific plan should have been adopted and submitted to the full legislature before the current fiscal year began on July 1.

Slossberg and her fellow co-chair, Rep. James F. Spallone, D-Essex, insist they met it this past spring when they endorsed more than $70 million in annual savings tied to Medicaid benefits for state welfare clients–a change the legislature built into the current budget.

But regardless of who received the credit for that change, Slossberg said Monday that “I’m confident we have gone way beyond our charge with this” latest report.

Though the group is scheduled to give final approval on Dec. 15, more than $140 million worth of the proposals given tentative approval Monday centered on health care.

Chief among them was a plan to cut $70 million from annual prescription drug costs for Medicaid patients by following a system similar to the managed-care networks that have been used to control costs in health insurance programs for the poor. A third-party administrator would be hired by the state to process patients’ drug claims, and to negotiate purchase prices with pharmaceutical companies.

Another $24.5 million could be saved, the panel says, by finding ways to increase generic drug use among patients by at least 5 percent.

Nursing home care represents more than $1.3 billion in a statewide Medicaid budget that exceeds $4 billion, and the commission estimated that $34 million could be saved annually through a more aggressive effort to move more nursing home patients out of facilities and into assisted living programs in their homes.

Another large target for potential savings involved state contracts.

The commission estimated $38 million could be saved annually through creative purchasing, relying more heavily on multi-state purchasing cooperatives and taking greater advantage of “reverse auctions.” The latter suggestion involves a more dynamic form of competitive bidding in which approved vendors are given a limited time frame during which they can view their competitors’ contract bids and lower their own, in hopes of submitting the cheapest price and winning the award.

Michael J. Cicchetti, Rell’s deputy budget director and a commission member, said the administration has saved over $18 million on energy costs by using reverse auctions.

A net $37.6 million, the commission recommended, could be saved annually if the legislature restores funding for the State Contracting Standards Board and other entities charged with reviewing government contracts to weed out waste and inefficiency.

The legislature and Rell cut nearly all of the $950,000 proposed for the standards board this fiscal year.

Rep. Mary Mushinsky, D-Wallingford, said that unless the state is prepared to expend even modest dollars on a contract watchdog, wasteful spending in this area won’t be stopped.

“Let’s be honest,” she said. “”If there’s nobody over there, it’s not going to happen.

The commission also estimated about $20 million could be saved annually if all agencies could reduce energy costs next fiscal year by 10 percent, and as much as $4 million more in net savings could be achieved by expanding tax auditor and enforcement staffing to pursue delinquent accounts.

All recommendations by the group are expected to be reviewed by the General Assembly during the 2011 session, which begins Jan. 5.

The new legislature and Gov.-elect Dan Malloy must craft a budget for the 2011-12 fiscal year that is projected to face a built-in deficit of as much as $3.67 billion.

Some have argued a significant portion of that shortfall should be closed with wage and benefit concessions from state employees, but the commission stopped short of recommending any on Monday.

“The commission recognized that without specific changes, the current system is not sustainable,” Spallone said, adding that the final report will acknowledge that fact.

But does that mean the cost of providing salaries and benefits should be met with increased taxes, wage and benefit cuts, or some combination? And if there should be cuts, how should they be made?

While Spallone and Slossberg said it wasn’t their group’s charge to tackle that subject, two key Republican lawmakers on the Democrat-controlled panel disagreed.

Reps. Craig Miner of Litchfield and John Hetherington of New Canaan, said the problem deserves more attention from the commission.

The panel reviewed a wide range of proposals from the Rell administration and others to trim pension and health care benefits as well as longevity bonuses paid to senior employees. “I would have liked to have seen a more affirmative referral of some of these recommendations,” Hetherington said. “If they don’t get a good push out of here, I think it’s going to be very difficult” to achieve them.

But Slossberg said it would be counterproductive for the panel to publicly endorse or reject specific concessions, given that any changes would be subject to very sensitive negotiations between Malloy and the unions.