LANSING – In light of a new study exposing the huge gap between the cost of health care for employees in Michigan's private and public sectors, House Speaker Andy Dillon (D-Redford Township) called on the Governor and fellow legislators to review his proposal to save an estimated $900 million a year by overhauling the state's public employee health care system and work together to advance it.
"This new research shows what we've known all along in Michigan – that we have got to change," Dillon said. "We can't keep protecting the status quo just because that's the way it's always been done. Once again, I invite all groups to come to the table to work on reforming our state's public employee health care system and start directing this $900 million a year toward turning our state around."
A new study by the Agency for Healthcare Research and Quality (AHRQ), a division of the U.S. Health and Human Services Department, reveals that the average cost of health care premiums for private companies in Michigan that employ more than 1,000 workers is $11,926 a year per employee for family coverage. Dillon used a more conservative estimate of $13,000 to $14,000 a year from AHRQ's 2006 survey to calculate the $900 million in savings. In contrast, the average cost of health care premiums for Michigan's public employees generally ranges from $16,000 to $17,000 for family coverage, according to public information.
Dillon's health care reform plan will consolidate the hundreds of different health care plans offered by the state as well as counties, cities, townships, school districts and other local units of government. Michigan's more than 400,000 active employees, plus hundreds of thousands of retirees and part-time employees, participate in different plans that vary in cost and quality and assess their own administrative fees.
Overhauling this inefficient, disjointed system will ultimately save taxpayers about $900 million a year – an estimate based on extensive research. The savings will come in three areas:
- Consolidating the planning, delivery and administration of health care in the Office of the State Employer will cut administrative costs by almost $100 million.
- Representing such a large pool of customers will allow the state to negotiate the most cost-effective health care plans and purchase prescription drugs at lower cost, saving nearly $200 million a year.
- Standardizing the health care plans available to public sector employees and aligning them more closely with those in the private sector will save up to $600 million a year.
In addition, the plan will ensure that all health care plans serving public sector employees and retirees follow best medical practices, which will increase patient safety and prevent unnecessary treatment, generating additional savings.
Residents and businesses will have the option of participating in the state health care plans, driving down the costs of health care in the private sector and making it more affordable and accessible for all.
The health care overhaul is the first in a series of reform proposals from Dillon that will change state government to increase efficiency and generate long-term savings. Details and data on Dillon's proposal can be found at NewIdeasForMichigan.org.
"We have to bring the costs of health care for public employees in line with the private sector in order to take Michigan off the fiscal roller coaster that we ride year after year," Dillon said. "It's crucial that we act today. We cannot afford more layoffs among police officers, firefighters and teachers and the loss of scholarships and other programs that are vital to creating jobs and revitalizing our economy."
Note: The new study is available at http://meps.ahrq.gov/mepsweb.