Sunday, August 9, 2009

Problems With Speaker Dillon's Plan

From August 4, 2009

Concerns with Speaker Dillon’s Health Care Proposal include:


We do not believe Michigan should be initiating major changes in the structure of health care at a time when a national health care reform is among the highest priorities for President Obama and the United States Congress.

  • It makes more sense to see what transpires at the federal level and then determine what Michigan should do to take full advantage of any opportunities provided.


The information on local units of government is particularly questionable and we would like to see the data that supports the $880 million savings.

  • This plan will not reduce the 2010 fiscal budget year deficit.
  • The cost estimate of $15 - $20 million to administer health benefits for all school districts, community colleges, and local government employees and retirees as well as the other new and major responsibilities for the State Employer seems extremely low.
  • Given the large number of school districts, community colleges, and local employees, most of any savings that occur would accrue to these employers and not help the state with its budget deficit.
  • These employers, as well as the State of Michigan, (as an employer) are already seeing savings through benefit cuts and cost sharing, to the financial detriment of public employees.
  • The $400 - $600 million savings your plan estimates comes from reduced coverage and cost shifts.


The November 2008 HFA Study on "Civil Service Salary and Benefit Comparisons" is cited extensively on page 4 of the proposal; however, little notice was paid to the same report indicating the overall costs of state employee health care now falls below private sector health care costs.

  • As the report notes, starting in October 2008 state employees began to pay "more than double the amount paid in the previous year."

The Kaiser 2008 “Employer Health Benefit Survey” and Michigan State Benefit websites clearly show that Michigan active state employee benefit plans are about average when compared to state employee plans in the surrounding states.

  • A savings of $400 - $600 million cannot be realized by reducing Michigan public employees’ benefits levels to the average of the surrounding states, because they are already receiving average benefit levels as compared to surrounding states.


It is an inherent contradiction to speak of a single "portfolio of health care plans" while stating that the proposal will maintain the process of collective bargaining for public sector employees, whether they are covered under the Public Employees Relations Act, PA 312 or Civil Service rules.

  • As your report implies, there are thousands of different collective bargaining units across the state.
  • These cover a wide spectrum of employment responsibilities, some of which have intrinsic medical risks.
  • What kind of process could be envisioned to bargain with all of these bargaining units and their employers?


In many instances, public employers have had financial reasons for supporting the trade-offs between wages and benefits that occur.

  • Insurance costs, unlike salaries, are not subject to FICA and are not included in the compensation used to determine pensions.
  • Forcing employee health care costs into a "one size fits all" or even "several sizes fits some" mode will reduce the ability to make such tradeoffs, which have been helpful in preserving the relatively amicable labor relationships Michigan's public sector has enjoyed during the past decade.
  • Public sector employees have negotiated millions of dollars in concessions including unpaid furlough days and workforce reductions to protect their health care.