News: Quick Takes

State treasurer looks to save $1 billion by reducing medical provider rates

Update: This story was updated at 3:06 Monday, May 14, to include a comment from Blue Cross and Blue Shield of North Carolina.

State Treasurer Dale Folwell has placed a number on a money-saving change he has talked about since taking office — $1 billion.

That’s how much savings might be generated by a 15 percent reduction in medical provider rates Folwell directed Blue Cross and Blue Shield of North Carolina to make. The insurer is a third-party administrator of the State Health Plan. It processes claims, arranges a network of medical providers, and establishes payment rates. Its contract was renewed in September, and runs through 2021.

“For years, health care costs — and therefore premiums — have been rising dramatically,” BCBSNC says in a statement. “By 2026, CMS projects health care spending will make up nearly 20 percent of the U.S. economy. We share Treasurer Folwell’s concern about the cost issue and hope that health care providers will partner with us to make health care affordable for all consumers, not just the State Health Plan. As we do so, we should not increase costs on others to offset any potential savings within the State Health Plan.”

The Treasurer’s Department oversees the State Health Plan, and pays claims with taxpayer funds. In 2017 the plan spent $2.5 billion to doctors and health-care systems providing services to more than 550,000 teachers, state employees, non-Medicare retirees, and their dependents.

In a press release issued Monday, May 14, Folwell said the reductions could generate some $300 million a year, potentially totaling close to $1 billion over the next three years.

The savings would be plugged into an area Folwell repeatedly has warned is in need of attention — lowering family premiums.

“Our family premium is unaffordable for most beginning teachers, troopers, correction officers, DOT workers, and other kinds of state employees,” Folwell said in October. Generally speaking, the family premium amounts to five days’ monthly pay for entry-level state employees.

Folwell said then negotiating lower insurance rates would help to attract more younger, healthier people to enroll in the State Health Plan, thus increasing its financial stability.

Some of the projected savings would help to narrow the gap in long-term health care liabilities.

“We have a $34 billion unfunded health care liability for retiree coverage that has been growing for 40 years,” Folwell said in February.

“We’re going to be asking a little from a lot of people, and a lot from a few,” Folwell said in the release.

“Many believe that medical providers can achieve at least 10 percent in savings. I believe it’s more,” Folwell said. “I’m asking medical providers in the state to help us sustain this plan for the future. We’re in a medical arms race that is driving up costs, and we need partners to work with us to reduce costs for all.”

The State Health Plan is North Carolina’s largest purchaser of medical and pharmaceutical services. Folwell has made it clear in past comments that its size and volume have not been used as leverage to achieve better contracts and drive down medical costs.

“I believe we can make a generational difference by allowing those who teach our children, protect us from crime, and pave our roads to have more affordable health care for their families,” Folwell said. “At the same time, we can pay down our long-term health care liabilities so that we can keep the promises made to hard-working public employees.”