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State Health Plan, SustiNet, Could Save Taxpayers $200 Million A Year By 2017

Dan Haar

November 19, 2010

Everyone has assumed all along that SustiNet, the state's long-planned public health insurance plan, would cost a fortune as it reduced the ranks of Connecticut's uninsured.

Not only is that false, according to a new report, but figures show SustiNet actually netting the state coffers hundreds of millions of dollars — assuming the plan helps to bring down costs.

Here are the key numbers: Just by covering the core groups of state employees and retirees, plus HUSKY and Medicaid clients, SustiNet would save the state $73 million in 2014, $108 million in 2015, $148 million in 2016, and on up to $302 million in 2019.

The SustiNet board saw its consultants' report for the first time Thursday. Those savings numbers are based on an "optimistic" scenario in which SustiNet succeeds in slowing the growth of health care costs for its customers by 1 percentage point a year.

That may be easier said than done, of course, as slowing medical costs makes the quest for the Holy Grail look like an Easter egg hunt. But here's the good news: The "pessimistic" scenario, with no cost savings, still nets out at no extra cost for Connecticut to set up SustiNet, the report showed.

And, said Stan Dorn, senior policy fellow at the Urban Institute, who prepared the report, some researchers believe the same ideas SustiNet intends to implement could cut the growth rate by two percentage points, not one.

"We were trying to err on the side of being conservative," Dorn said.

How does it work? Federal health care reform is part of the answer. SustiNet's latest architecture takes full advantage of the subsidies built into the federal reform, starting in 2014. One huge influx of money is a move from the current Medicaid rate of 50 percent reimbursement for very low-income adults with no children to a 95 percent reimbursement for a far larger group of low-income adults.

That is money the state will get whether or not we adopt SustiNet, so I'm not including it in the savings — although the report includes that money as part of the savings, since it would be part of SustiNet.

The SustiNet-only savings would come from a four-part system designed to create new incentives for saving money without rationing care. The first of those is adoption of so-called patient-centered medical homes, which is a fancy way of saying managed care done the right way. For each patient, designated doctors, nurses or social workers would take a look at his or her overall care, and that usually leads to better results.

"Yes indeed, there's an upfront cost," Dorn said, "but it's vastly recouped by reduced hospitalization."

Second is the automation of records, which everyone in the industry is talking about for its obvious benefits. "The key is to use it as part of a broader strategy in controlling cost growth," Dorn said.

Third is creating incentives for "evidence-based medicine," which means using those electronic systems to guide docs in their decisions. Again, easier said than done in the real world.

Finally, SustiNet aims to reform payments to prod health providers to work together more efficiently. This means making one payment, perhaps, to a hospital and group of doctors in, say, a heart surgery — and letting them carve up the money among themselves.

None of this is going to work without friction and glitches, huge ones. But it's a step in the right direction, and if it works, the state could expand SustiNet as a sort of local public option.

That expansion, too, could come at little or no cost to Connecticut taxpayers thanks to federal health reform. Here's how: Remember, a big part of the reform calls for sliding-scale subsidies to families making as much as four times the poverty rate — about $44,000 a year. Those families would be free to buy whatever health plans suit them best, and SustiNet aims to be one of the options available.

Expanding SustiNet would give the program the bargaining power with doctors and hospitals that it would need to actually carry out its reform agenda.

The SustiNet board has a lot of decisions to make between now and January about how to run the plan. Then lawmakers and Gov. Dan Malloy will decide what to do.

As long as Congress doesn't dismantle the payments built into reforms — a very real threat — the hope is that Connecticut's public option becomes part of the overall solution.

Private insurers will argue that they can do it better, and they might be right. But nothing will prod them better than having Connecticut and other states setting up systems to do the job if they can't, or won't. It's all about incentives.