Washington Research Council Blog

Governor wants state workers to pay more for health care benefits...they decline

State workers enjoy significantly richer health care benefits than do most private sector employees, as documented in this Thrive Washington paper.

Currently, Washington pays 88 percent of the premium costs for state employees for individual or family coverage.  In 2003-05, state employees paid, on average, 16.3 percent of the cost of their coverage (up from 6 percent in FY2001).  In 2005, the first budget enacted after public employees were allowed to bargain collectively, the state employee share of premium costs was reduced to the current 12 percent.

By comparison, the 2010 survey of employer health benefits conducted by the Kaiser Family Foundation and Health Research and Education Trust found that “on average (covered workers) contribute 19 percent of the total premium for single coverage (up from 17 percent in 2009) and 30 percent for family coverage (up from 2 percent in 2009).”

The latest collective bargaining agreement boosted the 12 percent to 15 percent - the governor had proposed workers pay 26 percent. Still, as the Kaiser Foundation reports, state employees have an uncommonly good deal.

The governor yesterday asked to reopen the contract to reduce state costs in the face of a $2 billion shortfall. Union groups quickly declined her invitation. According to the Seattle Times,

The governor's office said it still proposes to reduce by $16 million the state's contribution to employee health-care benefits this biennium. Gregoire's office maintains that would not affect the benefits because workers are tapping their insurance at a lower rate than previously anticipated, so that money would be missed.

Sounds like a pretty easy giveback - the money's apparently not needed to cover benefit costs anyway. Yet, the WFSE says,

 Federation Executive Director Greg Devereux told the WashingtonStateWire.com on Wednesday:

“‘State employees have given as much or more than anyone else in our state, and they are tired of this administration and the Legislature feeling like there are an endless amount of takeaways,’ he said. ‘All [the governor] has to do is look out the window and see Occupy Olympia, Occupy Seattle, Occupy Spokane. People are fed up.’ [Ed. note: That's a heck of a view from the dome.]

“Devereux said it makes more sense for the Legislature to order a three percent cut in all corporate tax breaks. ‘I think if we do that the $2 billion deficit goes away. Let’s just have a 3 percent across the board cut on all tax breaks.

Washington Policy Center analyst Jason Mercier notes the politics and the implications:

The unions' refusal to cooperate with the Governor's request is not surprising. Unions exist to fight for their members, not to advocate for policy that is in the best interest of taxpayers. This why it is incumbent on the Legislature to have the authority to weigh all spending requests equally in the context of the priorities of all taxpayers and citizens and not be cut out of budget decisions totaling millions of dollars.

All of which underscores the point made in a thoughtful editorial in the Herald of Everett.

 

If [proposed new revenue is] not accompanied by meaningful budget reforms that minimize the chance of further shortfalls, though, good luck getting it past skeptical, recession-battered voters.

 

Yes.

Governors expect tough times to linger

News from the National Governors Association summer meeting in Salt Lake City was decidedly grim. State governments, beneficiaries of stimulus dollars that sustained spending during the worst days of the recession, continue to face ongoing fiscal challenges. As the governors watch the debt and deficit debates in D.C., most acknowledge the end of federal assistance.

In the New York Times, Gov. Gregoire, outgoing NGA chair, summed it up the general sentiment.

“It’s like falling off a cliff,” said Gov. Christine Gregoire of Washington, a Democrat. “And we’re going to be at the bottom of that cliff for a long time in our relationship with the federal government. And whatever they’re going to decide in the way of cuts, I hope they understand the implications to the states and what it’s going to mean on the ground out here.”

Gregoire expresses deep regret for the policy decisions the recession forced on state government, from reducing higher education funding to deep cuts in human service programs.

For Wisconsin Gov. Scott Walker, who acted decisively to curtail compensation costs by pulling back on collective bargaining, the recession taught a different lesson. He tells the Washington Post:

Wisconsin Gov. Scott Walker’s (R) conclusions about the budget fight that prompted outrage in his state and drew national attention are no less personal than Gregoire’s, but far different in how he assesses what was done...

Walker says he did what was necessary, but should have handled it differently.

Walker said he came into office with the mindset of both a county executive and a small-business owner. “Identify a problem. Identify a solution. And you just do it,” he said. He set a fast pace in January with the legislature, without preparing the public. That might have worked in other settings, but it backfired on the new governor.

“We didn’t do enough of a job of making the case for what we were doing and why it was needed,” he said.

The Wisconsin experience was intensely partisan. Yet, governors generally claim to have achieved bipartisan successes. Politico reports on how the governors contrast their accomplishments with the partisan dysfunction unfolding slowly in the nation's capital.

Yet, as the NYT reports, Republican and Democratic governors divide on how they want the debt/deficit crisis resolved. In part, the urgency depends on how deeply states have been affected by the erosion of stimulus dollars. We're among the states most sharply affected, according to Stateline.org.

,,,the drop from the stimulus cliff was steeper for some states than others, according to a recent report by Federal Funds Information for States. Hardest hit was Hawaii, which saw a 16 percent drop in funding. Now, the feds are picking up about 52 percent of the state's $1.3 billion Medicaid program.

The next-most adversely affected were Louisiana (13 percent), Washington State (13 percent), Alaska (12 percent) and Nevada (12 percent). The states with the smallest adjustments were Kentucky and Alabama, at 9 percent each. The variation is primarily due to a disproportionate share of stimulus money going to states with big increases in their unemployment rates.

Hard times indeed.

K-12 Employee Health Care Savings

Washington State Wire has a good article by Erik Smith today on K-12 employee health care. As he notes, the state auditor recently released a report on the subject (the executive summary is here).

State employees get their health insurance through the Public Employees Benefits Board (PEBB); school districts may participate in the PEBB plans, but most choose not to.  In fact, according the to report, only two percent of active school employees were enrolled in a PEBB plan in 2009-10.  Instead, employees are spread among "1,000 separate benefits-funding pools that pay for more than 200 different medical plans offered through 10 different insurance companies."

The auditor found that the system could be streamlined, coverage levels standardized, and costs reduced--"changes that, depending on how they are structured, could save up to $180 million per biennium--enough for salaries and benefits for about 1,000 teachers."

One of the opportunities for improvement the auditor identifies is to restructure the health benefits system, by creating "a separate, statewide, self-funded program with its own governing board."  Bringing all school employees under such a program could save up to $90 million a year.

We made a similar recommendation in the Thrive Washington paper on state health care spending:  Bring K-12 employees health coverage under the PEBB or require school districts to purchase health care as a group.

As we were saying about compensation comparisons ...

... they're not easy to get right.

USA Today headlines today that Wisconsin is one of 41 states where public workers earn more than their private sector counterparts. According to the paper's analysis of data from the U. S. Bureau of Economic Analysis,

State, city and school district workers earned an average of $50,774 in wages and benefits in 2009, about $1,800 more than in the private sector. The state ranked 33rd in public employee compensation among the states and Washington, D.C.

The paper's national ranking table showed Washington public employees earning an average of $59,288, about $532 more than the private sector, and ranking 14th in public employee compensation.

It's an imperfect comparison, as the paper acknowledges.

The analysis included full and part-time workers and did not adjust for specific jobs, age, education or experience.

Liberal critics cite another problem.

Economist Jeffrey Keefe of the liberal Economic Policy Institute says the analysis is misleading because it doesn't reflect factors such as education that result in higher pay for public employees.

A related issue that's not received much analysis would get into the way the heavily unionized public sector uses education as a vehicle for adjusting wage scales, almost as a flawed surrogate for performance-based compensation.

At Crosscut, Dick Lilly, a policy advisor with the City of Seattle, looks at compensation, presents a different view. He acknowledges the complexity of comparisons and notes the now-common finding that, generally, workers without college degrees do better in government than in the private sector. (There's a floor for the education premium in the public sector.) Then he argues that the public sector does a better job of providing family-wage jobs than does the private sector and that wage disparities in government are not as great as in business. He sees both as benefits of public sector unionism.

That the higher paid public sector jobs result in higher taxes for private sector workers dealing with lower compensation in the recession gets short shrift in the Crosscut piece.

A large disparity in compensation comes in pension benefits. The New York Times today reports that the playing field may be leveling as states look into more reliance on defined contribution plans. As the article points out, there are transition costs.

We are, nonetheless, seeing transitions ... in all areas of compensation.

Medicaid: A Budgetary Problem for Many States

An article in the Wall Street Journal today, "Governors Scramble To Rein in Medicaid," talks about the concerns both Republican and Democratic governors (including our own) have regarding rising Medicaid costs--especially given widespread budget problems:

About eight million Americans joined the Medicaid rolls between 2007 and 2010, many because they lost jobs. The federal government picks up 57% of states' Medicaid tab, on average. But in July, $26 billion in additional federal Medicaid funding will expire, leaving states to plug a big budget hole.

At issue is a provision in the health-overhaul law enacted in 2010 that says states can't limit Medicaid eligibility or else they'll lose federal funding.

As a result, every one of the country's 29 Republican governors has asked the federal government to waive the requirement, with New Jersey penciling a waiver into its budget. Some states with Democratic governors, including Washington, are also quietly pressing for the change.

"We're asking for cooperation…so that we can work our way through what is a very challenging time for us," Washington Gov. Christine Gregoire said at a meeting of the National Governors Association in Washington this weekend, where curbing Medicaid costs was a top issue.

Also:

The state of Washington wants flexibility in the rates its pays health-care providers that treat Medicaid patients, the services it offers and its eligibility requirements.

"In our state, the least attractive of those tools is to just cut people off the program," said Jonathan Seib, a health-policy adviser to Gov. Gregoire, who is chairwoman of the National Governors Association. "But it's an authority we'd like to have in order to manage our budget."

Such flexibility is one of the main recommendations we made in our Thrive Washington health care paper.  Indeed, medical assistance (the largest of the programs funded by Medicaid) spending in Washington state has increased 113 percent since 1997-99.  The onset of federal health care reform and its eligiblity maintenance provisions will only exacerbate the problem.

Health Care Hot Spots

Last week's New Yorker has an article about the idea that we can lower health care costs by focusing on the neediest patients.  It profiles a Camden, N.J. doctor who took the medical billing records of the local hospitals and set about mapping the areas of the city whose residents had the highest hospital costs.  He found that one percent of Camden's patients accounted for 30 percent of the costs.  Then he approached doctors and took on their costliest patients, making regular visits and addressing all the problems affecting their health.

The article goes on to describe why finding some way to lower health care costs is such a big deal:

Yet the stakes in health-care hot-spotting are enormous, and go far beyond health care.  A recent report on more than a decade of education-reform spending in Massachusetts detailed a story found in every state.  Massachusetts sent nearly a billion dollars to school districts to finance smaller class sizes and better teachers' pay, yet every dollar ended up being diverted to covering rising health-care costs.  For each dollar added to school budgets, the cost of maintaining teacher health benefits took a dollar and forty cents.

Sound familiar?  As we detailed in our Thrive Washington report on health care, health care spending is growing rapidly, displacing funding for other priorities, including education.  For example, from 1997-99 to 2009-11, Medical Assistance payments (the largest program funded by Medicaid) increased 113 percent, while K-12 spending increased 52 percent.

Thrive Washington suggests positive ideas to put state on sustainable budget path

Thrive Washington, a research and communications partnership between the Research Council and Washington Roundtable, has looked at budget reforms, contracting out, and health care policy. This series of white papers provides a good platform for responsible state budgeting in hard times. And, these proposals will accelerate the transition to better times.

Sunday, the Herald of Everett carried an op-ed by Jim Warjone, chair of the Washington Roundtable and a member of the WRC board of Trustees. He details some of the recommendations from the "Nine Steps to Budget Sustainability" Thrive WA paper, making a convincing case for structural reform. Read the whole thing.

Also, Wednesday's Seattle Times carries this op-ed reviewing the most recent Thrive WA paper, Containing Health Care Spending While Improving Outcomes.

Please read the two pieces, share with your friends and colleagues, and let lawmakers know that there are positive steps they can take now to prepare the state for a solid economic and fiscal recovery.

Washington ranks in top 10 for health insurance mandates

The Council for Affordable Health Insurance recently released Health Insurance Mandates in the States.

Here's why it's important:

Policymakers are increasingly focused on how to reduce the number of uninsured Americans and lower the cost of health insurance," stated CAHI Executive Director J.P. Wieske. "While some state and federal legislators continue to pass new mandated benefit laws, others recognize that mandates drive up the cost of health insurance and make health insurance policies unaffordable for millions of Americans. As implementation of the new federal health insurance law further drives up the cost of health insurance, the cost of adding new mandated benefits will become a more important issue.”

Washington, with 57 mandates, just misses being in the top 5.