University Times

Low cost should not be only consideration in decision on health care plans

To the editor:

Based on the articles in recent issues of the University Times, I am becoming increasingly concerned that the University administration and the Medical Rates and Program Committee are about to put our health care plans — and thus an important aspect of the well-being of faculty, staff and their families — in the hands of the lowest bidder or bidders. To all of you who have some authority to determine what is going to be done: please don't forget the maxim that you get what you pay for. Low cost should not be the only consideration. As costs get lower, sooner or later two things are inevitably going to suffer: quality and freedom of choice. It is essential that University administration and the Medical Rates and Program Committee guard against the increasingly frequent practice of insurance companies deciding what medical treatment we're going to get rather than our doctors. That is the greatest threat to our well-being.

I would like to see the University offer its employees a true health insurance plan. The current plans are a combination of insurance and prepaid health care. I (and I suspect many others) would rather pay low premiums in exchange for insurance that covers only medical catastrophes. That was the original purpose of health insurance, as it is with all insurance: to spread large losses among a group composed of individuals who cannot afford to bear large losses. Because those individuals can often bear smaller losses, insurance policies generally have a deductible. At this time, I have a much larger deductible on my auto and homeowners insurance than I can get on my health insurance. This helps to keep my premiums low. An important reason why larger deductibles lower premiums is that they eliminate a very large number of small claims that are responsible for high administrative costs.

Those who prefer prepaid plans have been able to get one at Pitt for 20 years by joining an HMO. But those of us who want an insurance plan have never had a real one offered to us. The largest deductible that any of the Pitt plans offer is $500, plus 20 percent coinsurance, but even the coinsurance amount is capped at $1,500, thus making this plan merely a variation on a prepaid plan but not a true insurance plan.

Alan Meisel

Professor School of Law

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Darlene Lewis, associate vice chancellor for Human Resources, responds:

Professor Meisel has asserted that the University, and specifically, the Medical Review Committee is operating based on assumptions that are not beneficial to our employees. Furthermore, he states that quality and freedom of choice will suffer at the hands of lower costs. The University offers employees five medical plans to choose from; three of which provide for employees to choose virtually any physician they like. The Comprehensive Deductible Plan offered through Blue Cross allows access to any acceptable provider at an annual net premium of $600 to cover an employee and his or her family. Given these facts, it is difficult to understand the assertions by Professor Meisel. Employees are able to freely choose whomever they wish at a reasonable cost.

Professor Meisel asserts that we should treat medical insurance like homeowner's insurance. Comparison of house insurance versus medical insurance is flawed. We buy homeowner's insurance for a catastrophic event versus medical insurance for preventive care. Further, if a "catastrophic" plan was offered, the premiums may be lower, but the ultimate cost would most likely be the highest of all medical options for our employees. In short, conditions that could have successfully been treated in earlier stages would go unnoticed or unattended until the condition had fully manifested itself. Over time, this would undoubtedly increase the use of the "catastrophic" plan.

Finally, I would like to take this opportunity to reassure all employees that the Medical Review Committee, which consists of faculty, staff and administrators, is meeting regularly to finalize a recommendation of this very complicated issue. I am proud of the dedication and time that your colleagues of the Medical Review Committee have devoted to addressing all the issues.

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UPMC, the medical school and University health care plans

To the editor:

Increased competition in the health care industry is bringing both opportunities and challenges to the University community. It is important that we address both appropriately.

As consumers, we have much to gain by aggressively promoting competitive bidding among various health insurance providers. I was surprised to learn that the initial proposals we received from Blue Cross/Blue Shield came at their initiative, rather than in response to a RFP that we drafted and sent to all health insurance providers. I applaud the more appropriate pro-active position that Human Resources has now adopted. (University Times, Jan. 19, 1995) Increased competition also presents the University with a challenge. It is well known that, to date, some health maintenance organizations have not signed provider agreements with UPMC. The loss of potential patients to other hospitals and doctors outside UPMC has put a significant financial burden on UPMC hospitals and their affiliated clinical staff. The hospitals have responded by reducing personnel levels and taking other measures to reduce their costs so as to make them more nearly price competitive. While it has not been a matter of public discussion, surely our clinical professors of medicine, who have UPMC practice plans, must be experiencing similar financial burdens.

It is important to the entire University community that the medical school be able to attract and retain sufficient numbers of high quality clinicians. This, in turn, depends upon the value to a clinician of having an affiliation with UPMC hospitals and UPMC practice plans. The University must carefully consider the most appropriate actions it should take to insure the long run viability of the UPMC practice plans.

In my view, it is ill-advised to tie health insurance for University personnel to any service provider agreement between the insurance company and UPMC. Such a tie may give UPMC a guaranteed patient base that would produce an indirect subsidy from all University employees to UPMC. But it will do nothing to insure the long term viability of UPMC. UPMC's long term viability depends upon its hospitals and physicians being able to attract patients from the entire market. To date, it has not been able to do this because its rates are not competitive. Its rates are not competitive because its costs are too high. To effectively compete over the long run, UPMC must reduce its costs. Giving them a guaranteed patient base of University employees will do nothing to achieve this objective. It will, however, impose real hardships on those University employees who find their choices restricted and long term relationships disrupted. There is nothing to be gained and much to be lost by tying the purchase of insurance to a requirement that UPMC hospitals and physicians be recognized providers under the agreement.

Indirect subsidies are extremely inefficient, unfair and unnecessary. It may well be that the medical school is having, or will soon have financial difficulties because of the competition UPMC faces from other health care providers. If the medical school is in such a situation let them document it and submit a long term plan to take them back to a position of financial viability. If the plan makes sense, then the appropriate course of action is to consider transferring monies from the University general funds, for a limited time, to help them through the adjustment in a timely and orderly fashion.

Jack Ochs

Professor

Department of Economics

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Jeffrey A. Romoff, president of the University of Pittsburgh Medical Center and senior vice chancellor of Health Administration, replies:

Professor Ochs misperceives certain facts. The University of Pittsburgh Medical Center hospitals "subsidize," that is, provide direct financial support in excess of $100 million per year to the University and, in particular, the Schools of the Health Sciences. This is the sole reason why it is more expensive than community hospitals with no academic responsibility. Some for-profit HMOs, including Health-America, will not pay that premium for academic activities, reserving excess funds for shareholders and executives. When the University uses its fringe benefit pool to pay HealthAmerica for services that exclude University facilities, it is directly harming itself — the University. In this regard, Professor Ochs mistakenly expresses concern for the viability of the University of Pittsburgh Medical Center. Rather, his concern should be for the viability of the academic programs of the Schools of the Health Sciences that it supports. As hospitals without academic obligation, the University of Pittsburgh Medical Center would be among the most efficient and economically attractive. As an academic medical center it is more expensive, but proud to provide the most sophisticated care, research and training and to be ranked among the top 10 University centers in the country. We should all share in that pride.