07/2001: The Pulse
The editor of Employee Benefit News, David Albertson, notes it is difficult to tell if employers are really interested in defined contribution, or if the interest is just wishful thinking on the part of D-C proponents. Albertson’s article reflects arguments made by Paul Fronstin in a recent EBRI Issue Brief—especially how D-C is a lot tougher to do in health than it was with retirement programs.
According to Albertson, a recent EBN-Hay Group study shows only 8 percent of employers are "actively considering" moving to D-C. If employers were really interested in moving towards a more consumer-driven system, Albertson writes, they would start by "lobbying in favor of legislative and regulatory changes needed to make flex plans more valuable."
What Albertson misses is that defined contribution is not primarily a political/legislative issue. It is a market issue. D-C doesn't need legislation, it needs an attitude adjustment by employers, as is reflected in another article in the same issue of Employee Benefit News.
Craig Gunsauley reports on a recent meeting held by the Washington Business Group on Health. He quotes WBGH President Mary Jane England as saying, "(Employers are) going to have to partner more with employees so they can take more responsibility for their health care"—in other words, employers need an attitude adjustment, need to recognize the role employees should play in their own health care decision making.
Jean Wodarczyk of Pricewaterhouse Coopers also addressed the meeting. She predicted interest in D-C health plans would remain high among employers, noting several factors are contributing to that trend: use of the Internet for transactions (not just information), the popularity of D-C retirement plans, rising health care costs, and the growing popularity of benefits outsourcing.
Gunsauley’s article also mentions a presentation by Larry Becker, director of benefits at Xerox. It seems Xerox has not backed away from its intention to move toward a "total pay" compensation system, despite press reports to the contrary. Becker says the company is "not exiting the health care business, but it's not a core competency for us." He said, "we want to convert our health care contributions back to pay and put them where employees can use them best."
Source: http://www.benefitnews.com/health/detail.cfm http://www.benefitnews.com/subscriber/01_04_15/health2.htm
A Mixed Bag of Issues
What we are calling "defined contribution" is a huge, complex set of issues that encompasses the problems of the uninsured, health care inflation, new information and medical technologies, labor markets, third-party payment, portability, mandates and patient rights, tax policy, access to care, workforce diversity, and many other specific issues. Here's a sampler from the news in just a single week:
- The Cincinnati Business Courier reports the area's "growing uninsured population is pushing our local health care system to the breaking point." The article chronicles problems with health care providers trying to serve more uninsured, with fewer resources. It cites a number of individuals who can't afford to keep paying premiums and are facing devastating medical conditions. It mentions a dental clinic that has a waiting list of 3,000 people, and employers who can't afford to pay for comprehensive benefits.
The story doesn't suggest solutions, but clearly refundable tax credits, MSAs, and employers who are able to contribute what they can afford would all help.
- Uwe Reinhardt lashes out at defined contribution proposals in an article in the Health Forum Journal. He seems particularly annoyed that the "health care conference circuit" is "abuzz" with such "visions." While Reinhardt agrees the idea is attractive "in the world of theory," he wishes to enlighten us to "another world" in which "employers and employees dwell."
According to Reinhardt, in that other world—with which Princeton economics professors are so intimately familiar—workers prefer to have their employers treat them like parents treat children (the Parental Model). Employees will reject the "Mature Adult Model," he says, because it is "much more radical."
"Employees will insist that the approach remain embedded in the 'parental' model of managed competition to which they have been accustomed for half a century," Reinhardt predicts.
- The Galen Conference on Transformative Change through Market-Driven Health Care conference was a big success by any measure. The attendance was strong with an interesting mix of people. The presenters were terrific, and there was a lot of media presence. Most of the initial media reports centered on Tom Scully's first speech as HCFA Administrator, but there were between five and 10 reporters on hand for the whole day, so look for additional articles in the trade press.
Scully's remarks were written up in the Washington Post, New York Times, and many other papers. The Post emphasized his intention to issue comparative performance data on providers, though the article said he was going to "rate" providers, which he did not say. The Times was more interested in his hope to increase the numbers of Medicare beneficiaries enrolled in Medicare+Choice plans (though he said he hates the name "Medicare+Choice”).
- Unimpressed by the Galen conference was Reason magazine's Sam MacDonald. In his view, "the event drew heavily on the political habit of invoking change as a way of sidestepping it entirely." His article focuses on Scully's promise to change the name of HCFA, and other speakers' talk of "streamlining" and "bipartisanship." MacDonald concludes, "in Washington, the band plays on."
In making these points, MacDonald actually reinforces the point of the conference: that serious health care reform is not going to come from Washington, but it is already underway outside the beltway. In fact, at this point the federal government has very little to contribute to the movement.
An Odd Duck
Dr. Alain Enthoven, the father of "managed competition," has joined the Board of eBenX. John Davis, president of eBenX, calls Enthoven "one of this nation's health care visionaries." And Enthoven says eBenX's technology is key to "the vision of managed competition that emerged from the Jackson Hole Group." Man, talk about your kiss of death - whew!
Source: For more information contact Susan Busch (763/614-2126, or email@example.com)
Little Mention by the Media
There has been little mention in the press about President George W. Bush’s budget proposal to allow up to $500 of an individual’s unspent FSA account to rollover each year. Writing in Business Insurance, Jerry Geisel reports the administration would allow employees to cash-out and pay taxes on the balances during the course of the year, or roll year-end balances into an MSA, 402(k), or into next year's FSA.
Here’s A Must-Read
If you’re at all interested in the concept of defined contribution health insurance, you must get your hands on . . . and read . . . a new publication from the Evergreen Freedom Foundation, titled Primer on Defined Contribution Health Plans: Enabling Employee Choice—A Practical Resource for Employers. The publication’s lead author, and manager of the Defined Contribution Project at Evergreen, is Stephen Barchet, MD. Lynn Harsh, executive director of Evergreen, provided overall direction from inception to publication.
Greg Scandlen is senior fellow in health policy as the National Center for Policy Analysis located in Dallas, Texas. To sign up for his free weekly e-newsletter send an email to: HealthPolicyWeekfirstname.lastname@example.org. Scandlen can be contacted at GMScandlen@aol.com.