CalPERS Weighs Overhaul of Health Benefits Program

From Reuters

CalPERS, which ranks behind only the national government in the amount it spends on health care, is considering a radical overhaul of its benefits program that would tie premiums and fees to the quality of hospital care, a spokesman said Friday.

The health benefits committee of the California Public Employees' Retirement System will consider the proposed changes Tuesday as part of an ongoing effort to rein in soaring health-care costs.

CalPERS, which administers benefits on behalf of public employees in the state, is closely watched because the steps it takes on health care can set the trend for the industry.

"It takes us in a whole new direction," CalPERS spokesman Clark McKinley said. "We can't single-handedly restrain costs, but we can get better value."

The proposed changes come as the CalPERS staff estimates that the $131-billion pension fund could face steep premium increases that may top the 25% rise it saw last year.

McKinley said that the proposals were in the early stages and that the staff would present elements of its health-care plan over the next three months.

Many of the key proposals involve spurring patients to use doctors and hospitals that have track records for providing good care. One way would be lowering out-of-pocket fees for members who use higher-rated hospitals, McKinley said.

"This would be real care management where we would try to match the needs of the patient with the most effective technology, treatment and hospitals to get better value," he said.

CalPERS also wants to make health providers more accountable in justifying the costs they pass on by requiring the plans to provide more data than they have in past years.

Another aspect of the proposals includes a push to better manage patients with costly chronic diseases -- such as diabetes and heart conditions -- that can require long hospital stays and expensive treatment, McKinley said.

For example, this might include early screening for certain diseases and then lowering co-payments to encourage members to take part in preventive treatment programs.

Doctors and providers that offer good care also would get bonuses under the plan, McKinley said.

"We are trying to bring competition to the hospitals and the doctors," he said. "The key is to keep people out of the hospital."

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