April 1, 2005 • www.einternalmedicinenews.com Practice Trends 77 California Health Care Purchaser Rejects HSAs

BY JOYCE FRIEDEN unaffordable,” he said. CalPERS partnered tices that they were in danger of being switch their primary care physicians. Al- Associate Editor, Practice Trends with California Blue Shield to do an analy- dropped from CalPERS’ provider network though the move resulted in complaints sis of the costs. unless they dropped their costs and agreed from members as well as the California WASHINGTON — Despite their grow- “Blue Shield came up with what was to undergo performance assessments. The legislature, Mr. Buenrostro has no regrets. ing popularity, health savings accounts then a shocking discovery: In many cases proposed change would have saved the “It will save tens of millions of dollars are not a good solution to the problem of there was no correlation between price plan $36 million in the first year and $50 for our members and the taxpayers [who rising health care costs, at least not for and quality,” he continued. “I thought million for the next few years. pay our salaries], and the decision helped California state employees and retirees, they were kidding.” For example, they After negotiations with the hospitals us keep our HMO and PPO premium in- Fred Buenrostro said at a health care con- found that the cost of chemotherapy and scrutiny from the state insurance de- creases for members under 65 at 9.9% gress sponsored by the Wall Street Jour- could range from $135,000 to $300,000. partment, CalPERS ended up dropping 24 without any takeaways or any increases in nal and CNBC. As a result of the analysis, CalPERS no- hospitals and several physician practices as copays or deductibles,” he said. “We’re Mr. Buenrostro is chief executive officer tified 38 hospitals and 17 physician prac- of January, forcing 32,000 members to pretty proud of that.” ■ at the California Public Employees’ Re- tirement System (CalPERS), the second largest health care purchaser in the coun- try. CalPERS, based in Sacramento, pro- vides health benefits to more than 1.2 million employees, retirees, and family members. Log on to NEJM CareerCenter at In California, out-of-pocket health care premiums have nearly tripled in 5 years, A network of nejmjobs.org and see how easy it is and Gov. Arnold Schwarzenegger (R) is to find the right job. With our Early seeking to cut the amount of premium as- sistance the state gives to employees and re- Job Alert service, you can leave the tirees. So “CalPERS, like other employers, is hearing the opportunity. searching to us. Just enter your ‘We are resisting’ call of con- criteria and we’ll send you fresh leads HSAs for sumer-driven health care,” in- that match your specifications. With California cluding health employees, savings ac- a timely and confidential job seeker counts, Mr. because ‘we Buenrostro said. on the case, you’re free to relax. oppose putting “We are re- sisting it be- our members at cause we don’t nejmjobs.org risk in such a want our high- way workers, complex, broken our police offi- market.’ cers, our fire- fighters, our of- fice workers, to switch from our defined benefits health care model to a defined contribution model. We oppose putting our members at risk in such a complex, broken market,” he said. Under a defined benefit plan like those that CalPERS offers, employers agree to pay for a particular level of benefits, no matter what the cost of the plan is. But un- der a defined contribution plan, the em- ployer pays only a certain amount toward the cost of an insurance policy; any addi- tional costs must be paid by the enrollee. So CalPERS is trying other ways to cut health care costs. One technique is to avoid doing business with providers that the plan perceives to be too high cost. “Two years ago, we dropped two big HMO partners because their prices went over the top,” Mr. Buenrostro said. The plan is also using generic drugs in 95% of cases, and giving members incen- tives to buy mail-order drugs. CalPERS has extended the length of its PPO contracts to improve its negotiating position, and is encouraging members to use “centers of excellence” for various procedures. CalPERS also is talking with other pur- chasers about price inequities of health care in local markets, and plans to convene NEJM CAREERCENTER a conference of purchasers on this issue later in the year, Mr. Buenrostro said. Quality Practice Opportunities One big part of controlling CalPERS’ from a Website You Can Trust. costs has been getting the best price for hospital services. Between 2001 and 2003, hospital prices rose 60%, which was “just