Homer Alaska - Business

Story last updated at 11:28 AM on Wednesday, November 30, 2011

State looks for ways to cut health costs



By Pat Forgey
Morris News Service - Alaska

JUNEAU — Explosive growth in Alaska's health care costs, recently about 9 percent a year, are threatening to cripple future state budgets, but officials are hoping some new strategies can bring those increases down.

"If we could get our cost curve down from 9 percent to 2 percent, that would be almost miraculous," said Mike Barnhill, deputy commissioner of the Department of Administration.

Barnhill's department, which oversees health care coverage for most state employees and retirees, is looking to beef up state "wellness" programs.

It is hoped those as-yet-undefined efforts will lower costs to the state as healthier employees will need less medical care, but similar programs have brought criticism as well.

"You incentivize employees to take better care of themselves," Barnhill said.

Alaska's program hasn't begun being designed yet, but other wellness tries have included things like gift certificates for health clubs, he said.

Wellness can go far beyond incentives, Barnhill acknowledged.

In some cases, they can include penalties for unhealthy behaviors, but that is not now the plan, he said.

"We're not going to start with penalties," he said.

Elsewhere in state government the approach is much more aggressive.

The University of Alaska system has instituted a mandatory surcharge on smokers to encourage them to quit that dangerous behavior, said, Beth Behner, human resources manager for the system.

The health care surcharge for employees who smoke will be $600 year she said, divided over each pay period. It also applies to dependents who smoke, she said.

"This is a good motivational tool to get them to consider what their risky behaviors are," Behner said.

The decision to institute the surcharge was made last year, but implementation was delayed a year to give UA employees a chance to try to quit smoking. It will begin during the next fiscal year, beginning in July, although for many that means the next academic year.

"Sometimes it takes quite a while for people to stop using tobacco," she said.

Even after the tobacco usage surcharge takes effect, employees will be able to quit mid-year and save part of the surcharge, and can get a waiver if they begin a cessation program during the years, she said.

"Some employees feel it is a very harsh measure," she acknowledged, given that tobacco is legal to use and is a personal lifestyle choice.

Barnhill said the state's other branches aren't taking such a stance yet.

The Department of Administration began advertising for a consultant to help it develop a wellness program this fall, and hopes to sign a contract early next year.

While the state has tried to promote healthy living for its employees in the past, Barnhill said the hope is that a beefed-up program will help the state get a better handle on those rising health care costs.

Many private sector companies already do wellness, he said, and while the is strong anecdotal evidence of the value of those efforts it is hard to predict what doing it in Alaska might accomplish.

"I'm not aware of any empirical study that shows definitively that wellness program save costs," he said.

Adding a wellness program would almost certainly have at least some benefit, Barnhill said.

"We want our employees to be healthier than they are," he said.

It is difficult to figure out what kind of return dollars invested in wellness might bring the state given all the factors involved, Barnhill said.

"What we have is anecdotal evidence that there is a return," he said.

It was some disturbing health care trends that prompted the state to act, he said.

The instance of diabetes among retirees triples, while hypertension triples or quadruples, Barnhill said.

It is those kinds of trends that we want to reduce, because ultimately the state retiree plan is going to pay for that, he said.

Barnhill said that despite the possible health gains, university-style penalties are not being talked about now -- but he didn't know what might happen in the future.

"I can tell you that one path that some wellness programs have taken is they start with incentives in place, for years maybe, and then they tell people at some point they are going to start instituting penalties."

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