What happens when the WGU, "World's Greatest University," as Harvard is affectionately known around Boston, decides to redesign its faculty and employee health benefits plan?
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:
Employees 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 cost 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.
Paul Levy is the former President and CEO of Beth Israel Deaconess Medical Center in Boston and a patient-driven healthcare advocate. He blogs at Not Running a Hospital.