MATERGRAVY

More on Daniels Indiana Health Care cost reform:

Hoosiers and Health Savings Accounts
An Indiana experiment that is reducing costs for the state and its employees.           

           
        By MITCH DANIELS

As Washington prepares to revisit the subject of health-care reform, perhaps some fresh experience from Middle America would be of value.

When I was elected governor of Indiana five years ago, I asked that a consumer-directed health insurance option, or Health Savings Account (HSA), be added to the conventional plans then available to state employees. I thought this additional choice might work well for at least a few of my co-workers, and in the first year some 4% of us signed up for it.

In Indiana's HSA, the state deposits $2,750 per year into an account controlled by the employee, out of which he pays all his health bills. Indiana covers the premium for the plan. The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.

Unused funds in the account—to date some $30 million or about $2,000 per employee and growing fast—are the worker's permanent property. For the very small number of employees (about 6% last year) who use their entire account balance, the state shares further health costs up to an out-of-pocket maximum of $8,000, after which the employee is completely protected.

The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America. Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%.

What we, and independent health-care experts at Mercer Consulting, have found is that individually owned and directed health-care coverage has a startlingly positive effect on costs for both employees and the state. What follows is a summary of our experience:

State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative. In the second straight year in which we've been forced to skip salary increases, workers switching to the HSA are adding thousands of dollars to their take-home pay. (Even if an employee had health issues and incurred the maximum out-of-pocket expenses, he would still be hundreds of dollars ahead.) HSA customers seem highly satisfied; only 3% have opted to switch back to the PPO.

The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state's total costs are being reduced by 11% solely due to the HSA option.

Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an average lower cost per prescription of $18. They were admitted to hospitals less than half as frequently as their colleagues. Differences in health status between the groups account for part of this disparity, but consumer decision-making is, we've found, also a major factor.

Overall, participants in our new plan ran up only $65 in cost for every $100 incurred by their associates under the old coverage. Are HSA participants denying themselves needed care in order to save money? The answer, as far as the state of Indiana and Mercer Consulting can find, is no. There is no evidence HSA members are more likely to defer needed care or common-sense preventive measures such as routine physicals or mammograms.

It turns out that, when someone is spending his own money alone for routine expenses, he is far more likely to ask the questions he would ask if purchasing any other good or service: "Is there a generic version of that drug?" "Didn't I take that same test just recently?" "Where can I get the colonoscopy at the best price?"

By contrast, the prevalent model of health plans in this country in effect signals individuals they can buy health care on someone else's credit card. A fast-food meal costs most Americans more out of pocket than a visit to the doctor. What seems free will always be overconsumed, compared to the choices a normal consumer would make. Hence our plan's immense savings.

The Indiana experience confirms what common sense already tells us: A system built on "cost-plus" reimbursement (i.e., the more a physician does, the more he or she gets paid) coupled with "free" to the purchaser consumption, is a machine perfectly designed to overconsume and overspend. It will never be controlled by top-down balloon-squeezing by insurance companies or the government. There will be no meaningful cost control until we are all cost controllers in our own right.

Americans can make sound, thrifty decisions about their own health. If national policy trusted and encouraged them to do so, our skyrocketing health-care costs would decelerate.

Mr. Daniels, a Republican, is governor of Indiana.

rutrow wrote:

That is quite an accomplishment for a republican in Indiana. My father was a staunch democrat and a burly veteran of the Army. I never seen him cry except when a few tears eked out of his eyes when President Kennedy died.

Its quite an accomplishment for any Governor, R or D.  Too bad California doesnt have a leader like Indiana does.....and as for Republican, Indiana has always been basically a fairly conservative state.

I'd tear up if any President got assassinated.  I remember very well when Kennedy got killed. All of us at work heard it and thought it was just a rumor, and of course, it was not. It was truly a sad day. Same way when Reagan got shot, or that crazy woman tried to kill Ford.

Indiana Gov. Mitch Daniels urges Indiana members of Congress.

INDIANAPOLIS (March 16, 2010) -The U.S. House of Representatives is preparing to vote later this week on health reform legislation.  Although a few modifications have been made by President Obama, the enormous costs and impact to Hoosier taxpayers have not changed. Governor Daniels has sent a letter to Indiana members of Congress to urge them to reject the bill. The letter reads:

"A few months ago I expressed the view that the health care bills then pending before Congress were hopelessly misguided, unaffordable, and dangerously adverse to the interests of Hoosiers today and tomorrow.  I have hoped that these schemes would be modified and improved given their clear defects and the public's quite sensible rejection of them.  Instead, they have become, if anything, even worse.

Again I ask your leadership in preventing this disastrous national mistake.  You will soon be presented with the most anti-jobs, anti-taxpayer, anti-Indiana measure you may ever see in your Congressional career, and I hope you will represent us well by voting against it."

The governor also shared an Indiana impact statement with the House members. Here is a copy:

    * Through a massive expansion of Medicaid, half a million (500,000) new Hoosiers would become eligible, costing Hoosier taxpayers billions more in state taxes.  One in four Hoosiers would be on public assistance.
    * Without a costly increase in the Medicaid provider reimbursement rates, there will not be enough health care professionals to care for this huge new influx of Medicaid patients. 
    * The Healthy Indiana Plan (HIP) would be eliminated as the new federal rules would force the 45,000 families who are currently covered into the Medicaid fee-for-service delivery model, losing the cost saving and quality advantages of consumer-driven health care.
    * Many Hoosiers who currently have health insurance will pay higher premiums - the Congressional Budget Office estimates an average increase nationally of $2,100 for some families, and a study of the effects in Indiana showed premium increases ranging up to 78 percent. Premiums will continue to rise because the drivers of rising costs in the health care system are exacerbated rather than controlled by the legislation.
    * A growing and job-creating life sciences sector in Indiana will be hit with huge new tax increases: at least $20 billion for the device manufacturers and $90 billion for pharmaceutical companies.  These costs will be passed to consumers and will result in job losses in Indiana.
    * A job killing tax of $2,000 per employee will be levied on many companies which cannot afford or choose not to provide coverage to their employees, including Indiana.
    * The costs for this massive entitlement expansion are vastly and misleadingly understated:  An honest estimate would show an addition of more than a trillion dollars to the national debt.

IMO - considering the current political climate in the electorate I can't see any member of Congress getting elected President any time soon.