Public-Employee Healthcare: The Sweeney Plan vs. the Christie Report

State Senate president asserts that his own proposal calls for nothing less than eliminating the conventional fee-for-service payment model

Gov. Chris Christie (left) and State Senate President Stephen M. Sweeney
A pilot program that Senate President Stephen Sweeney put forward last month seeks to find savings in the ever-increasing part of the state budget that’s devoted to paying for public-employee healthcare.

That’s also the goal of a big section of a report issued about a week later by the commission of experts Gov. Chris Christie impaneled to study the cost of public-employee benefits, including healthcare coverage and pensions.

But the comparisons should stop right there, says Sweeney (D-Gloucester).

The report from Christie’s panel is simply looking to shift more of the cost of healthcare onto the employees through things like higher copayments and deductibles, Sweeney said, while his proposal looks to save on costs by changing the whole delivery system, such as ending the traditional fee-for-service payment model.

“They are dramatically different,” Sweeney said during a recent interview with NJ Spotlight. “What I’m proposing is not sacrificing healthcare. It’s making healthcare more affordable.”

A spokesman for Christie did not respond when asked for comment on the issue yesterday.

The pilot program proposed by Sweeney, who is also an International Association of Ironworkers official, would start out with 60,000 public employees spread out evenly across the state. The employees would sign up for the program voluntarily.

Doctors participating in the pilot program would be paid not for individual services rendered, but on a salary basis with bonuses for keeping their patients healthy. Doctors would also see fewer patients than the current statewide average to give them more time to build up relationships and get to know their patients’ needs.

Such “patient-centered healthcare” saves between 5 percent and 15 percent in annual costs, according to America’s Agenda, a national nonprofit representing labor, insurance, pharmaceuticals, and hospitals that has been working with Sweeney on the pilot.

“At the end of the day you’re going to see a cost savings, and you’re going to have a healthier workforce, which is going to save you (money) long-term,” Sweeney said.

The Christie report issued on February 24 also projected some pretty hefty savings for the state in the area of employee healthcare. Changing coverage plans could save $2 billion in the first year, which would be nearly half the $3.73 billion the panel said the state will end up spending on employee healthcare during the fiscal year that begins July 1.

The commission is also proposing taking that savings and using it to pay down the state pension system’s debt, currently between $37 billion and $83 billion depending on which accounting standards are used. Local governments would also realize employee healthcare savings and use a portion to help the state pay down its pension debt, under the commission’s plan. Voters would be asked to approve a constitutional amendment to ensure the pension debt is paid off.

But while Sweeney’s proposal focuses on changing the delivery model and reducing overall costs to save money, the commission’s report achieves savings by moving employees from what is considered platinum-level coverage by the federal government to a plan that would be considered gold-level.

What that effectively means is that workers would likely contribute more out of pocket than they do now for their benefits, something the commission said would better align public-employee benefits with those offered by companies in the private sector in New Jersey.

“The foundation for the Commission’s proposed reform is the use of a benchmark plan with coverage equivalent to that provided by major private-sector employers in the State,” the panel wrote in its report.

“This benchmark would be used as the starting point for a collaborative plan design process intended to result in the adoption of health benefit reforms providing quality benefits while also yielding sufficient savings to provide funds for the existing pensions and warrant adoption of a constitutional amendment creating a certain pension funding obligation,” the report said.

The commission also envisions some of the savings coming from things like wellness programs and “other initiatives that focus on beneficiaries’ health rather than pay-per-service compensation of providers.” But the commission’s report also notes that wellness initiatives alone won’t achieve the full savings.

“There will also be a place in the process for traditional plan design techniques of adjusting in-network and out-of-network deductibles, copays, and maximum out-of-pocket expense limits,” the report says.

That’s where Sweeney says the commission’s plan basically becomes a shifting of more costs onto the employees instead of a true reduction of the costs themselves.

“It’s a cost-shift, it’s not a plan,” Sweeney said. “Instead of just decimating healthcare, find other ways to reduce costs.”

Officials from several New Jersey public-employee unions were at Sweeney’s news conference in the Statehouse last month to show their support for his pilot program. But so far, only the New Jersey Education Association has come forward as being willing to consider even the broad goals of Christie’s commission.

Steve Wollmer, communications director for the teachers union, said Christie’s commission is only offering “less benefits for a lower price,” while Sweeney’s proposal is trying to save money while also improving wellness and overall healthcare.

“Trying to compare them is pretty much an apples and oranges exercise,” Wollmer said.

In the past, Sweeney and Christie have been able to find common ground on the issue of employee benefits. It was Sweeney’s cooperation with Christie in 2011 in the face of labor opposition that led to the passage of a reform law that, among other things, increased employee contributions for their health coverage and pensions.

But that reform effort also included a commitment from the state to step up its employer pension contributions, and Christie has broken that pledge by underfunding the pension system by a combined $2.45 billion to solve budget problems over the past two fiscal years. The unions have challenged those pension cuts, and a judge ruled last month that
Christie and lawmakers need to find another $1.6 billion for the pension system before the current fiscal year ends June 30.

The governor’s proposed $33.8 billion budget for the fiscal year that begins July 1 would contribute $1.3 billion into the pension system, not the roughly $3 billion Christie previously committed the state to paying.

For Sweeney, this time things are different. Christie’s stewardship of the economy has failed to produce the revenue they projected when the original deal on benefit reform was struck, and he’s now trying to make the public-employee benefits the problem instead of his economic policies and decision to break his word on the pension contributions, Sweeney said.

“This guy has been so good at convincing people this is what the problem is,” Sweeney said. “The problem is the economy.”

“It is the economy today, it was the economy four years ago,” Sweeney said.

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