Recent massive consolidation of hospitals, physicians, and insurers has driven up costs and worsened patient care. Neither market competition nor effective regulation has inhibited health care organizations from passing on these costs to residents in their service areas.
This consolidation has resulted in unsustainable increases in medical service prices, which are the primary drivers of insurance premium increases. A 2017 Health Care Cost Institute study demonstrates that, excluding pharmaceuticals, Wisconsin, at $5,374 per capita, is the 5th most expensive state in the continental US for hospital and physician services for employer sponsored insurance.
The healthcare systems in the Fox Valley are neither transparent nor accountable to the communities they profess to serve. We have witnessed local health system reluctance and refusals to share their bylaws which describe how their boards of trustees members are selected. These trustees are unelected, unaccountable (to the wider community beyond management) and self-perpetuating.
The major healthcare systems in the Fox Valley are not-for-profit, meaning they pay no property tax, no federal or state income tax and no sales tax. The idea of exempting nonprofits from paying taxes in the first place is based on the belief these entities provide charity for the underserved and underinsured who would otherwise require the government to lend a helping hand. As the percentage of uninsured declines as a result of the ACA, the justification for tax exempt status is being called into question. What role does tax exemption serve if not to provide “real” help for the needy? A significant share of hospital system revenue has been spent on executive compensation, investment in expensive facilities, and the purchase of physician and competing health care provider practices.
By sidestepping property tax payments to the county, city, or school district in which non-profit hospitals reside, they are shifting the financial burden for essential services and infrastructure onto the backs of local residents and business owners. Based on the information provided to us by Outagamie County, since 1991 medical care costs per contracted county employee has risen more than six times faster than the income of the median household in the county. Recent data for Calumet County, Winnebago County, and the Appleton Area School District show similar patterns. (See the available chart for details.)
There is only one market in Wisconsin where there exists even moderate competition for medical and hospital services. In Dane County a large purchasing pool—The State of Wisconsin Employee Trust Fund—obtains proposals from the areas integrated health systems on an annual basis and rewards both low cost and high quality partly through a transparent system for communicating that information to consumers. A recent study disclosed that insurance premiums for state employees in Dane County are nearly $2,000 less costly annually than premiums for similar plans in Winnebago County. These results combine three forces: bargaining power based on volume(V), appropriate incentives(I), and delivery system competition (C) - VIC principles.
The Fox Valley Health Care Transformation Initiative () believes that Calumet, Outagamie, and Winnebago counties, along with local municipalities and school districts, could spearhead an effort to reform our health care market in a manner similar to that which has operated in Dane County since the mid 1980s.
A Fox Valley effort to employ VIC principles would require the creation of a health insurance purchasing cooperative, in accordance with Chapter 185.99 of the Wisconsin Statutes, to bring market power—through a large purchasing pool—that would provide incentives to the existing and other Wisconsin providers to compete on the basis of both price and quality. This process would ultimately yield lower costs, improved quality of service and better outcomes.
The cooperative, funded by membership fees paid by members, would issue an RFP to the domestic provider systems for a “Value” plan that would differ from existing benefit plans primarily in the way the providers are paid: a global budget or “capitation” that would reward quality and efficiency and punish low value, high cost care. Primary care based provider systems from throughout the state would be invited to submit bids in response to the RFP. Ultimately any individual resident or organization in the Fox Valley would be able to join the cooperative and purchase only the “Value” plan sponsored by the cooperative. Employer members of the cooperative (for-profit and not-for-profit) could offer traditional (“Choice”) plans in addition to the “Value” plan; however, the employer contribution would be capped at the amount of the “Value” plan.
Copayments and deductibles for coop members enrolled in the “Value” plan would be dramatically reduced.
Lower and subsequently more predictable medical / health insurance costs for members of the cooperative.
Greater ability for local governments to predict and control that portion of the tax levy dedicated to employee medical care benefits.
Incentives for new employers to locate in the Fox Valley and existing ones to remain.
Transparency and accountability in an industry that sorely lacks it.
Ultimately improved health outcomes and redirected resources from the acute care sector to other determinants of health (employment, income, nutrition, etc.).
More discretionary income for individual cooperative members, particularly those in the “Value” plan, given the lower copays and deductibles, to direct to other businesses—retail, hospitality, etc.— and other household needs (education, housing, etc.)
Goodwill for the public sector in the face of challenges from Act 10.