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Stringer Looks at Health Care Cost Projections Differently

by Kristen Meriwether, Jun 05, 2014
 

Scott Stringer

Comptroller Scott Stringer gives a budget briefing (@scottmstringer)


When Mayor Bill de Blasio unveiled a contract deal with the United Federation of Teachers (UFT) in early May, he vowed the UFT, in conjunction with all the city's other municipal labor unions, will have to realize $3.4 billion in health care savings between this year and 2018. The UFT is contractually obligated to meet its share of those savings, the two sides announced, meaning that if it falls short, the City can take the union to an arbitrator to enforce the deal.

But according to Comptroller Scott Stringer, nearly a quarter of the savings may materialize by 2018 simply based on a slower rate of health care cost growth than de Blasio is projecting. In the executive budget, the mayor's office projects an annual rise of 9.7 percent, a number Stringer showed is a generous estimate based on recent trends.

"The last three years, health care costs have grown more slowly," Stringer said during his budget analysis on Wednesday, June 4. "If that trend continues through the upcoming years, that could get us a third of the way towards our target savings in fiscal year 2018."

The City will in fact "save" $3.4 billion. It is a hard number, bound by contract. But how the City came to its cost projection the savings will be based on is a matter of question. According to Stringer's report the difference in the projected growth estimate given by the City and the one based on the three-year trend is $743 million ($110 million in FY 2016, $240 million in FY 2017, $393 million in FY 2018).

De Blasio has essentially said the health care costs will rise at a rate that is not based on the pattern of the last three years identified by Stringer.

If the numbers put forth by Stringer's office - which are based on the last three years - hold true, nearly $1 billion worth of union health care savings will not be realized through the "menu of options" the administration outlined through the UFT deal. That chunk of savings will instead be there based on generous projections.

"If costs came in under the fiscal plan projections, those savings would accrue towards the $3.4 billion," a spokesperson for City Hall said by phone on Wednesday. "Simultaneously, if health care costs rise more than anticipated, further savings would be required to meet the targets."

The spokesperson said the projections used for the union deal were from a third party actuary who based the estimates on history as well as current trends in health care costs.

"The exercise should be about getting real health insurance savings that bend the cost curve," said Maria Doulis, Director of City Studies at Citizens Budget Commission (CBC). "These kind of re-estimates should not be included as part of the savings. It is not real health savings."

Numbers provided by CBC show that since fiscal year 2006, the annual growth of health care costs has hit 9.7 percent just twice, in FY 2012 when they were up 9.7 percent exactly and in FY 2007 when they grew by 11.2 percent. These figures reflect how much money is put into the budget for health care costs.

The City Hall spokesperson challenged the CBC numbers saying the numbers OMB uses show an increase over 9.7 percent in four of the last six years. These calculations use the Health Insurance Plan of New York (HIP) rate (which determines overall health care payments) combined with a change in headcount. Numbers provided by the Independent Budget Office yielded similar results. This rate more accurately shows what the City paid in health care premiums, but not the dollar value that goes into the budget.

As it stands, assessing union health care savings will depend on which cost projection you choose to use.

***
by Kristen Meriwether, Gotham Gazette
@MeriwetherK

 


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