SEIU Testifies on Dillon Health Care Bill

September 11, 2009

On Thursday, September 10, 2009 SEIU Local 517M Executive Vice President Phil Thompson testified before the House Standing Committee on Public Employee Health Care Reform.  This committee is chaired by Representative Pam Byrnes (D-Chelsea) and is currently reviewing the public employee health care reform proposal sponsored by Speaker Andy Dillon (D-Redford Township).  This proposal would pool health care for all public employees at the statewide level and not allow for individual units and employers to bargain over health care.  SEIU is opposed to this concept.

View the testimony below:

TESTIMONY BEFORE PUBLIC EMPLOYEE HEALTH CARE REFORM COMMITTEE
SEPTEMBER 10, 2009
by: Phillip L. Thompson, SEIU

Madam Chair & Committee Members:

I would like to express my appreciation to you for giving me the opportunity to make a few comments before the Committee this afternoon.

My name is Phil Thompson and I appear before you as President of the SEIU (Service Employees International Union) State Council which collectively represents approximately 80,000 employees here in Michigan, including about 14,000 classified state employees and another 6,000 school, county and municipal employees. In addition, I am also honored to be an International Vice President with SEIU.

As you may, or may not know, the Service Employees International Union is the largest union representing health care workers, including doctors, nurses, hospital aides, nursing home and home care workers, in the United States. In addition, SEIU is the second largest union of public employees, with over one million members throughout the United States, Canada and Puerto Rico.

The convergence of health care issues with potential impact on public employees and employers, is of primary importance to our membership.

As I understand the charge of this Committee, you have been asked to review issues, involving potential cost savings and efficiencies in Michigan public employee health plans.

It appears that the initiative to jump start this Committee’s activity was the concept of “pooling” all public employees in Michigan - the so called “Dillon Plan” that was released in general concept in July. I want to say at the onset that SEIU has worked with Speaker Dillon on several issues and projects in the past and all of us at SEIU have great respect for his leadership, insightfulness, and his ability to approach issues in an innovative manner. We simply disagree on this approach.
Having said that, we respectfully believe that this most recent proposal to massively overhaul the state of Michigan’s public health plans is an overly simplified and overly optimistic approach to developing health care reform or any meaningful savings. In addition, the unintended consequence of this proposal is a direct assault on the ability for workers to have a meaningful voice in the development and cost of their health plans.

I have reviewed the sixteen page “Summary” several times to try to understand exactly what Speaker Dillon’s proposal is trying to accomplish – and the process for meeting these projected goals.

There are three basic concepts to the Dillon Proposal:

1. Establish a large “pool” to cover all of Michigan’s public employees health insurance;
2. Establish a Board or Committee to work with the Office of the State Employer (OSE) to Officially develop a very limited number of health plan options for public employees to choose from;
3. Generate an estimated $600-900 million per year savings through a combination of administrative efficiencies and benefit standardization – which all of labor views as a code phrase for benefit reductions.

The underlying assumption seems to be that public employee health benefits are just too costly when compared to comparable employment settings in other state public plans as well as within the private sector.

However, two fairly recent reports issued to the Michigan Legislature – the 2007 House Fiscal study and the 2009 Professor Charles Ballard study - seem to refute this assumption. [Ballard Study attached].

Even if, at some time in the past, the State Employee Health Plans were on the high side of the cost equation, many of these differences have been successfully addressed on numerous occasions through the collective bargaining process between the state employee unions and the Office of the State Employer. [Exhibit 1].

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However, there continues to be very rational reasons why some of the state employee plans still seem more costly than other statewide plans. I believe Phil Powers identified comparisons to some selected states but quickly pointed out that no in-depth analysis had been done in his report.

I believe a large portion of these higher costs can be attributed to the following:
a) dumping of health care costs on to the state plans (examples);
b) original 10-year vesting schedules which have long ago been converted to 30 year schedules (3% per year);
c) an aging workforce which, by definition, incurs higher health coverage costs. There has been very little hiring in recent years to help balance out the average age in state employment.

All three of these cost drivers have either already been remedied in some manner or are simply well beyond the scope of any “pooling” concept.

The plain fact is that virtually all Michigan public employees with health coverage are already in sizeable pools - examples being the AFL Public Employee Trust; MESSA; and large Blue Cross Group Plans. There is serious reservations that there are any additional economies to scale when a group gets beyond ten to twenty thousand covered lives, and some studies set this level as low as 2,000 - 5,000.

There simply isn’t any additional “squeeze” for savings by collapsing existing large, cost effective group plans into one super pool.

One additional point bears mentioning as it pertains specifically to state employees in Michigan. The Michigan Constitution, Article XI gives what is often referred to as “plenary” authority for all compensation and benefit levels to the Michigan Civil Service Commission - a bi-partisan Commission established in the 30's, reinforced in the 40's, and reiterated in the 1963 Constitution with the sole constitutional authority for establishing wages, benefits and conditions of employment for state employees. [Emphasis added]. The Michigan Legislature may not have the legal authority to unilaterally pool over 50,000 state employees into a huge public employee group. [Exhibit 2].

My final comments deal with any projected savings from the administrative efficiencies generated by removing the responsibilities for plan development and collective bargaining from local municipal, township, county, and school board officials. The simple fact is that virtually all of these administrative positions will still be needed, and heavily relied upon to negotiate and administer the balance of all the benefit plans and bargaining agreements. No serious proposal would suggest that most, if not all, of these positions could be eliminated just because health plans were removed from local officials.

The collective bargaining process at the local level best fosters cost savings, innovative ideas, and the development of plans that meet the needs, priorities and desires of that local group.

The priorities and cost-sharing ideas for a group of school lunch aides in Niles is much different than those of a hundred school bus drivers in Flint, or DPW workers in Royal Oak.

No state level super-group will be able to judge the pulse or priorities of hundreds of small, or large communities across this great state and force feed them in to five or six huge pool plans. It just doesn’t work.

All efforts should be made to continue to allow workers at the local level to have a real voice in determining their health plans. This is best done through the collective bargaining process. Equal voices - mutual respect - and a sense of local priorities.

So far I have commented on what SEIU considers very serious short comings, and in some cases mis-representations of what this pooling proposal accomplishes.

It is important for all of us to focus on the real culprits driving double-digit cost escalation of all of our health plans:

a. Excessive and duplicative medical procedure costs
b. The impact of almost fifty million uninsured or seriously under-insured people in this country
c. The built-in incentives in medical service and procedural costs instead of focusing on prevention and wellness goals;
d. the explosion of drug costs.

Michigan will not, and cannot, address these issues in a vacuum. They must be addressed at the National level. This gut wrenching process is now happening at this historic time in Washington DC – as it should be.

The Michigan Legislature should hold off any massive overhaul of any health plans – public or private – until we understand the full impact resulting from National Health Care Reform. All parties to this debate want reform. The President has said that there appears to be agreement on eighty percent of a national reform package. The goal is a comprehensive, cost-savings plan yet this Fall.

Thank you, again, for allowing me this opportunity to address this Committee.