Gov. William Donald Schaefer has called on his budget secretary to devise a kinder, gentler way to break the news to 87,000 state workers that $40 million in subsidies must be cut from their health-insurance plans. His personnel secretary botched the job last week, but that doesn't change the fact that a 20 percent rise in these annual costs is unacceptable to both Mr. Schaefer and to those who ultimately foot the bill -- the taxpayers.
This problem has been evident for a year. A decision was made last year, though, to delay drastic steps to rein-in health-care expenses because the governor felt workers had already been hit hard -- no pay raises, furlough days, longer work weeks, increased workloads. Yet that delay precipitated the current crisis. Last year's modest red-ink problem is a much bigger one now.
The crux of the difficulty is that the state's self-funded health insurance program is open-ended. The state pays 85 percent of premiums for its members, regardless of whether they opt for the high-end preferred provider plan, the comprehensive plan or one of six managed-care options. Nearly two-thirds, or 58,000, favor the preferred provider option, under which individuals pay $15 (not $10 as we incorrectly stated in an earlier editorial) per medical visit within the network of doctors -- and more for visits to doctors outside the plan.
Workers apparently have used this higher-cost plan far more often than expected, leading to a $40 million shortfall in the health-insurance account. To reverse that trend, personnel officials wanted to eliminate the state's open-ended liability and instead contribute a set amount. Eighty-five percent of HMO costs would have become the benchmark. That would then have been translated into money amounts for every other health plan. Workers would have paid all remaining costs.
But switching by Jan. 1 would have meant 500 percent increases in the preferred provider rates for 58,000 state employees and retirees. No wonder there was an outpouring of fury. Now budget officials have to come up with a new plan that still saves the state $40 million.
Annual 20 percent rises in the state's health-care expenses are unsupportable. If left unchecked, it would mean a $60 million rise next year. Without bringing these costs into line there is little chance of a pay raise for state workers, who have gone four years without any across-the-board increase.
The trend toward managed-care health programs is clear. Private industries have made the shift with encouraging results. The Clinton administration is focusing its health reform proposal on managed care. The state of Maryland has taken initial steps in this direction, but employees are understandably unhappy about abandoning the traditional system. Yet there are few realistic options. Whatever the governor devises, he's going to make a lot of state workers unhappy.