Harvard’s Health Benefits Unfairness
The Harvard Crimson, November 12, 2014
Last week, the Faculty of Arts and Sciences voted unanimously in favor of a motion asking the President and Fellows to suspend changes to the health benefits offered faculty and non-union staff for 2015. In justifying the benefits changes, the University offered four main explanations for its addition of deductibles and co-insurance: (1) the cost of benefits relative to the overall budget; (2) parity with peer institutions; (3) social science on containing health care costs and (4) the future financial health of the University. In advancing these explanations, the University has offered information that is incomplete, incorrect, deeply misleading, and ethically troubling.
The second argument offered in favor of the health benefits changes has been that we need to remain in line with our peers. We contend that the only peer pressure Harvard should heed is that which makes us a better research university. Increasing salaries and benefits might do this if it allowed Harvard to recruit and retain the brightest minds in our fields of research and teaching, as well as the post-doctoral fellows and staff needed to support these research and teaching endeavors.
Perhaps the most distressing argument advanced in favor of the changes, however, has been one that draws on a social science experiment from the 1970s to suggest that a co-insurance system, where the insured must pay a percentage of after-deductible costs, is the best way to contain health-care costs. At the November FAS meeting, Provost Alan M. Garber ’76 and members of the University Benefits Committee asserted that because the RAND Health Insurance Experiment, or HIE, demonstrated a reduction in healthcare utilization without decreasing overall well-being, the new Harvard plan will do likewise.
We assert that, on the contrary, the HIE is irrelevant to the present benefits proposal before us.
The HIE randomized individuals into different insurance plans (some received health insurance free of charge, while others faced a range of co-insurance options). It found that those paying a higher percentage of costs visited primary care physicians less frequently and reduced their health-care expenditures as a result. But copays for regular physician visits have long been standard and are already part of Harvard’s plan. What Harvard now proposes is further extending cost-sharing to hospitalizations, surgery, and diagnostic testing via co-insurance.
The HIE’s measurement of outcomes is also irrelevant to the matters that concern all of us. The study looked at indicators of general health such as blood pressure, visual acuity, and propensity to smoke. The relevant question for today’s Harvard is not whether going to one’s primary care doctor more often makes one smoke less, but whether a diagnostic test ordered by that doctor could save one’s life, or detect an illness in time to allow for a less invasive, and perhaps in the long run, less expensive treatment.
Co-insurance is not only of questionable utility in the 21st century—at a time when diagnostic testing is much more effective at influencing outcomes than it was in the 1970s—it also unethically transfers risk and expense to the most vulnerable in our community.
We often hear that Harvard is the apex of academic research and teaching institutions, and that part of its success is due to its sense of community. The University ignored that community when it embarked on a secret and non-consultative planning process and disregarded the strong concerns that faculty have about their own health and that of less well-paid members of our community.
The result is a plan that imposes a serious financial burden on those with chronic illness or who face medical emergencies for themselves or their families. This plan is based on a flawed process, on a misguided charge to the University Benefits Committee, on misinformation about our peers, and on outdated research that is not relevant to the current situation. It is unfair to the most vulnerable members of our community, and not worthy of our great university.
Jerry R. Green, John Leverett Professor in the University and David A. Wells Professor of Political Economy
Alison F. Johnson, Professor of History
Marc W. Kirschner, John Franklin Enders University Professor of Systems Biology
Mark Kisin, Professor of Mathematics
Charles H. Langmuir ’72, Professor of Geochemistry
Mary D. Lewis, Professor of History
James J. McCarthy, Alexander Agassiz Professor of Biological Oceanography
Lisa M. McGirr, Professor of History
Richard F. Thomas, George Martin Lane Professor of the Classics
Mary C. Waters, M.E. Zuckerman Professor of Sociology
Christopher Winship, Diker-Tishman Professor of Sociology
Harvard Ideas on Health Care Hit Home, Hard
By Robert Pear
The New York Times, January 5, 2015
For years, Harvard’s experts on health economics and policy have advised presidents and Congress on how to provide health benefits to the nation at a reasonable cost. But those remedies will now be applied to the Harvard faculty, and the professors are in an uproar.
Members of the Faculty of Arts and Sciences, the heart of the 378-year-old university, voted overwhelmingly in November to oppose changes that would require them and thousands of other Harvard employees to pay more for health care. The university says the increases are in part a result of the Obama administration’s Affordable Care Act, which many Harvard professors championed.
“Harvard is a microcosm of what’s happening in health care in the country,” said David M. Cutler, a health economist at the university who was an adviser to President Obama’s 2008 campaign. But only up to a point: Professors at Harvard have until now generally avoided the higher expenses that other employers have been passing on to employees. That makes the outrage among the faculty remarkable, Mr. Cutler said, because “Harvard was and remains a very generous employer.”
Richard F. Thomas, a Harvard professor of classics and one of the world’s leading authorities on Virgil, called the changes “deplorable, deeply regressive, a sign of the corporatization of the university.”
Mary D. Lewis, a professor who specializes in the history of modern France and has led opposition to the benefit changes, said they were tantamount to a pay cut. “Moreover,” she said, “this pay cut will be timed to come at precisely the moment when you are sick, stressed or facing the challenges of being a new parent.”
The university is adopting standard features of most employer-sponsored health plans: Employees will now pay deductibles and a share of the costs, known as coinsurance, for hospitalization, surgery and certain advanced diagnostic tests. The plan has an annual deductible of $250 per individual and $750 for a family. For a doctor’s office visit, the charge is $20. For most other services, patients will pay 10 percent of the cost until they reach the out-of-pocket limit of $1,500 for an individual and $4,500 for a family.
Harvard’s new plan is far more generous than plans sold on public insurance exchanges under the Affordable Care Act. Harvard says its plan pays 91 percent of the cost of services for the covered population, while the most popular plans on the exchanges, known as silver plans, pay 70 percent, on average, reflecting their "actuarial value.”
Michael E. Chernew, a health economist and the chairman of the university benefits committee, which recommended the new approach, acknowledged that “with these changes, employees will often pay more for care at the point of service.” In part, he said, “that is intended because patient cost-sharing is proven to reduce overall spending.”
“It seems that Harvard is trying to save money by shifting costs to sick people,” said Mary C. Waters, a professor of sociology. “I don’t understand why a university with Harvard’s incredible resources would do this. What is the crisis?”
Peering into Harvard’s academic cocoon, there are two lessons we can take home. One has to do with the insularity of the Harvard academic staff as they consider their own health benefit program, but the more important lesson has to do with the insularity of the health policy academics at Harvard and other institutions regarding the design of optimal systems of health care financing.
When we have a new national standard for health insurance that has an actuarial value of 70 percent (patients pay an average of 30 percent of their health care costs) based on the benchmark silver plans offered in the insurance exchanges established by the Affordable Care Act, it is astonishing to hear the outrage expressed by the Harvard academic community over the reduction of the actuarial value of their plans to the almost unheard of level of 91 percent! They would pay on average only 9 percent of their health care costs.
That said, they are right. They should be able to receive all essential health care services without paying anything out-of-pocket at the time they receive care. Other nations have proven that you can provide first dollar coverage at a per capita cost that averages half of what we spend in the United States. Placing financial barriers in the way of health care access is not only unnecessary, it is frequently harmful.
The first lesson here is that the insularity of these academics did not allow them to think beyond the needs of themselves and the needs of the “less well-paid members of our community” - the Harvard community, that is. It is difficult to watch the expression of their outrage over their comparatively modest reduction in benefits, leaving them with platinum-level plans, when they remain silent on the deficient plans that most of the nation has to deal with. From their academic towers, they have the luxury of being able to sound off about the health care injustices that so many in the nation face. But they didn’t do it. They merely whined about the injustices of their own solid-platinum insurance.
But then there is the academic health policy community. They are still fixated on the misinterpretations and extrapolations of the RAND Health Insurance Experiment (see the Harvard Crimson excerpts above). They continue to insist that when patients have health care needs, they must buy a ticket to enter the health care arena, partially invalidating their prepayment arrangements (i.e., health insurance). That there are better ways to improve value without erecting financial barriers to care seems to be lost not only behind the blinders that these health policy academics are wearing, but also behind the earplugs that they must be wearing as well. They see and hear no evil, but they sure do speak evil!
When are those of us outside of the moat protecting Harvard’s insular compound finally going to take over the policy reins? Soon, I hope.