Monday, 29 July 2019 13:44

OP-ED: Secret contracts drive up health care costs

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The North Carolina Department of State Treasurer is responsible for providing health care coverage to more than 720,000 teachers, active and retired state employees and their dependents through the State Health Plan. In the Richmond Observer’s coverage area there are nearly 108,000 members on the Plan.

Over the past 10 years, Plan members have seen premiums, co-pays and deductibles steadily increase. Family premiums have nearly doubled. Starting teachers, troopers and other public workers must often choose between having health insurance through the Plan, and mortgage payments or food. 

We did not create these problems, but we have a fiduciary duty to the members of this Plan and to the taxpayers of the state to try and solve them.  The realty is that the Plan, at the current spending and funding levels, will run out of money in less than 4 years. Kicking the can down the road is not an option. Every extra dollar spent on health care is a dollar that cannot be spent on schools, roads, public safety and the other core functions of government.

Secret contracts and dark money are driving up medical costs. With every other purchase in your life you know the cost and the value of what you are getting. Whether a cup of coffee or a gallon of gas, you can readily see and understand the price and decide whether there is “value” to purchase. Not so with health care. Prices are hidden behind secret contracts between providers and insurance companies. All you see is a bill and an Explanation of Benefits statement that does not explain anything and is of no benefit.

Last year, we met with hospitals, doctors and stakeholders and asked them to help us to save the Plan for current and future state employees. We noted that the Institute of Medicine has estimated that up to 30 percent of all medical spending is wasted and asked them to come back with ideas to save just 15 percent. We heard nothing.

There are three “levers” that we can use to save the Plan. One, the governor and general assembly can increase funding; two, we can increase premiums, co-pays and deductibles; or three, we can cut costs – that is our job. 

We introduced the Clear Pricing Project to cut costs while, at the same time, provide transparency to medical pricing by setting our prices to a percentage of Medicare which is a widely publicized and understood baseline. Our most recent proposal pays, on average, DOUBLE what Medicare reimburses providers. In addition, we have opened the sign-up period from July 26 to August 1 for additional medical providers and hospitals to join the 27,000 others that have already signed up. 

We are asking Plan members and the public to call their hospitals and medical providers and tell them to join us in saving the State Health Plan for current and future state workers. Pulling the other “levers” could make the Plan even less affordable for members or cost taxpayers millions more to support increased medical spending. The time to act is now.

 In 2018, taxpayers spent more than $3.3 billion in medical and pharmaceutical costs for public service workers. That’s more than is spent on the entire university system of public safety. Yearly costs to the Plan continue to increase by seven to nine percent, while the governor and legislature’s budget has provided only a 4 per cent increase year over year. 

How did we get here? How did health care costs get to be over 15 percent of the state’s gross domestic product at more than $72 billion? Why is paying for health care the number one cause of bankruptcy in the United States? The answer is we do not consume health care it consumes us.


Dale Folwell is state treasurer of North Carolina.


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