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Pay no attention to the people behind the curtain

Monday, July 26, 2010

Zombie Lies, MPS Edition

by folkbum

Among the left blogosphere, something is a "zombie lie" if it is held as true by significant numbers of politicians, media figures, or regular people, no matter how many times it's killed. The classic example is the lie that Social Security is going bankrupt and people my age won't see a dime. This is, sadly, both a total falsehood and believed by 6 in 10 Americans.

Today's zombie lie concerns the Milwaukee Public Schools and it comes to us by way of the Heartland Institute's Brien Farley (not to be confused with the MacIver Institute's Brian Fraley, who has repeated the lie himself--just not today). Here's the Heartland Farley:
The Milwaukee Teachers’ Education Association dismisses as “simply false” reports that Milwaukee taxpayers could save $47 million a year by renegotiating the teachers’ health insurance plan. [. . .]

“The MacIver Institute published the Milwaukee Public Schools (MPS) Administration’s math on how nearly $48 million dollars in health insurance savings could be achieved,” notes MacIver President Brett Healy. [. . .] The school system’s own numbers, as reported by MacIver, reveal the cost difference between the teachers’ current Preferred Provider Organization (PPO) and the proposed Exclusive Provider Organization (EPO) is $4,512 for single plans and $7,380 for family plans.

MPS currently pays for 2,610 single PPOs and 4,810 family PPOs. Switching plans, therefore, would save MPS $11,776,320 on single plans and $35,497,800 on family plans, for a total savings of $47.3 million. With annual salary and compensation costs currently at about $100,000 per teacher, $47.3 million could pay for some 472 positions.

MTEA, however, insists that the switch in plans would save only $7 million, salvaging no more than 50 teacher jobs.
We have been through this. Not that long ago. It is very simple, even though this lie--thanks to people who should know better at MacIver--is almost everywhere. It started with Alan Borsuk and a politically motivated board that has more to win from bargaining in the media than bargaining with its employees. (The board provided last week material related to bargaining health care costs that the union requested nearly six months ago, for example.) The was recently in a Wall Street Journal editorial, for example, and repeated uncritically by this reporter who, as it's her job to cover MPS for the state's largest daily paper, should know better.

MacIver does simplistic math with complex numbers without bothering to try to understand where the numbers come from. The trick here is that MPS fully self-funds its health care, with Aetna (for the PPO) and United Health Care (for the EPO) acting simply as administrators. (That's why the cheaper plan is an EPO and not an HMO, technically, because UHC doesn't "manage" anything but shuffled paperwork.) So the cost of each MPS health plan is based on the total utilization of the members of that plan.

And here's the uncomfortable (for those who like the lie) truth: The people who choose the plan with the broader options for care--the PPO--are the people who either have more severe health care needs or think they might. Yes, the PPO has slightly higher reimbursement fees for doctors (why does MacIver hate Milwaukee's doctors?), and that's why MTEA agrees that there would be some savings. However, once all the people with higher utilization rates jump to the EPO, the average cost of the EPO plan will rise to nearly the level of what the PPO is now--patients are unlikely to change their health conditions when they change their health plans.

So while the math that Borsuk and the board and MacIver and Farley all do is arithmetically accurate, it is conceptually false. They all make the same fundamental error by not considering the way MPS's health care plans actually work.

Now can we please, please, please let this zombie die for real now?

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