Silo Thinking and the Runaway Train on Retiree Health Care

The current rush to adopt a Medicare Advantage plan, probably by next month, is a perfect illustration of "silo thinking."* Basically, the issue is being driven by cost - although, as we have pointed out - the cost information seems to be provided by a UCOP-hired consultant. The new committee that was hastily set up (after the original retiree health committee was abruptly killed) has no independent means of verifying what it is being told about the proposed privatization.

You cannot separate retiree health care from other forms of compensation. In the end, it's all compensation. Focusing on just one form of compensation and calculating supposed cost savings is silo thinking. Retiree health care is a significant benefit for active employees. Apart from legal issues of vesting, it figures into attraction and retention. If it didn't, why was it created in the first place?

Over the years - certainly at UCLA - there have been efforts at UCLA to encourage long-service, older faculty to retire. Various forms of phased retirement have been offered. Yours truly has participated as a presenter at an annual conference encouraging such faculty to consider their retirement options. The availability of retiree health insurance is important in such decisions. Ignoring the consequences of degrading retiree health care on such behavioral aspects and focusing on cost is silo thinking.

Of course, the problems that arise from silo thinking occur only if there is a degrading of the retiree health care offerings. The official word has been that everything will be much the same, that it is possible to save $40 million - or whatever the latest estimate is - without a degrading. So it is important to reproduce UCOP's own words from its FAQ (Frequently Asked Questions) document:

Q:  Are similar services covered under MA PPO plans as traditional Medicare? 

A: Yes, MA PPO plans are regulated by Medicare and required to cover the same services as traditional Medicare. One difference is that in traditional Medicare, the Medicare program makes decisions about whether a service is ‘medically necessary,’ which is not universally defined. Under an MA PPO plan, the insurer offering the plan makes those decisions. High-quality evidence does not currently exist concerning how, if at all, medical necessity decisions differ between traditional Medicare and MA PPOs. In both traditional Medicare and an MA PPO, patients have the right to appeal any decision that they believe is made in error.

Source: https://files.constantcontact.com/0c822253501/fc0386ad-a1c7-4d7c-a6ee-0523240d4cec.pdf 

If there is no high quality evidence about the impact of shifting the definition of what is medically necessary, wouldn't it be a good idea to gather some? The shift from Medicare decision-making to private insurance carrier decision-making is the key aspect of a Medicare Advantage plan. All the rest is frills, even if ostensible coverage is widened. Isn't it more likely than not that the $40 million comes from this aspect of privatization? Looking at bids and ignoring the impact of privatizing is silo thinking.

We'll have more to say about this issue in the future.

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*Past postings on this subject:

http://uclafacultyassociation.blogspot.com/2019/06/yet-more-on-retiree-healthcare-runaway.html

http://uclafacultyassociation.blogspot.com/2019/06/footnote-on-runaway-retiree-healthcare.html

http://uclafacultyassociation.blogspot.com/2019/06/timetable-of-runaway-train-on-retiree.html [Includes previous links.]