Unions try to figure out a way to provide the concessions, Malloy races forward with layoffs…

(Cross-posted from Pelto’s Point at the New Haven Advocate)

Tuesday Morning, June 28, 2011, Update:

There are a number of must read stories today…

Start with CTNewsJunkie’s Union Leadership Tables Vote On Concession Package

“SEBAC considers how to proceed with 57% of the union membership in favor of the SEBAC/Malloy agreement.  The final vote was 21,415 voted in favor of it and 15,588 opposed.11 of the 15 unions (26 of 34 bargaining groups) voted in favor.  Adoption would have required 14 of the 15 union and 80 percent in favor.”

“We have a set of rules that prevent accepting the agreement right now even though a majority favor it,” Livingston said. “We’re going to do everything we can to reach a different outcome.”

But true to form, the Malloy Administration come out firing – Roy Occhiogrosso, the Governor’s chief advisor said “The Governor is proceeding as if there’s no agreement, because right now there isn’t…His job is to make sure there’s a balanced budget in place on July 1, one that’s balanced with no gimmicks. That’s what he’s focused on.”

IMPORTANT NOTE:  One of the most interesting pieces is that Malloy, his Administration and even the media are saying that Governor Malloy has until Friday to close a $1.6 billion hole in the state budget.

Actually, my understanding is that law requires that the General Assembly approve and the Governor sign a ‘balanced’ budget which they did (or at least approved a signed a budget that they claimed was balanced).

If the budget is out of balance the Governor can certainly come in with a plan, but there is nothing in the law that actually requires him to do so.  The next legal trigger will occur when the State Comptroller issues his “Letter of July 1st “.  At that time he would determine that the budget is out of balance and that would legally require the Governor to develop a plan to meet that deficit.

This is not an unimportant point.  It is understandable why Malloy and his Administration would claim they MUST BALANCE the budget by Friday, but that is actually not true.

But the perception that they are legally required make good cover for coming up with bad policy.

Meanwhile, another “must read” story is CTMirror’s story Malloy challenged to trim his own staff before ordering layoffs

On top of everything else, it turns out that despite promising to cut the Governor’s Office by 15% during the campaign, Gov. Malloy’s office is “up 20 percent in personnel and 41 percent in payroll over June 2010”

As Keith Phaneuf writes Malloy has increased his personal staff to 30 people adding $661,429 to the Governor’s Office budget.

Just The Facts Please: Connecticut’s Budget Crisis as of Monday Morning June 27th

(Cross-posted from Pelto’s Point at the New Haven Advocate)

“You don’t lead by hitting people over the head – that’s  assault, not leadership. ”  – Dwight D. Eisenhower

The Monday Morning Update:

Governor Malloy continues to say he will lay off 7,500 state employees starting this week.

Malloy has ruled out any discussions about modifying the Malloy/SEBAC agreement to get the necessary support to pass it

Asked about solutions such as a re-vote or other attempt to work with the unions,  Malloy’s response was “Not my job…We’re going full steam ahead. … I don’t have the liberty of time.”

What Malloy has proposed is that the Democratically controlled General Assembly give him the authority to cut up to 10% of the state budget (including municipal aid) without legislative approval.  A Governor presently only has the authority to cut up to 5% of any line item and certain expenditures such as municipal aid can not be cut unilaterally.

The General Assembly will meet in special session on Thursday to consider Malloy’s request (demand).

The Governor continues to claim that the budget is $1.6 billion out of balance due to the rejection of the SEBAC Agreement.  Actually a majority of state employees voted for the SEBAC agreement but adoption required a special super majority and that number was not met.

Meanwhile, as to the $1.6 billion figure remember that the legislature’s Office of Fiscal Analysis said it could only confirm 40 percent of the projected savings from the Malloy/SEBAC agreement.

The issue becomes more complicated because Malloy and the Democrats have built a surplus into the bi-annual budget – in fact – Connecticut  could end the coming year with a surplus in the hundreds of millions.

According to Keith Phaneuf of CTMirror.org, in addition to the $150 million projected surpluses that is already built into the budget, tax revenues are running significantly higher than expected and that will mean the surplus for both FY12 and FY13 will be growing.  Finally, certain line items, such as the account to pay health care premiums for retirees are artificially high and when those funds aren’t spent the budget surplus will grow even larger.

However, the problem with using the surplus is that counting the purported $1.6 billion savings from the SEBAC agreement, the budget that was approved by the Democrats and signed into law by Governor Malloy is $1 million below the State Spending Cap in FY12 and $278 million
below in FY13.

So Malloy will argue that he won’t use the surplus to balance the state budget because he pledged not to exceed the spending cap and that even if he wanted to, the legislature would have to vote to exceed the spending cap which would require a 60% super majority.  That would mean the Democrats would have to come up with at least 22 votes in the State Senate and 91 votes in the State House of Representatives.

Although the state of Connecticut regularly exceeded the spending cap under Governors Rowland and Rell, Malloy called that process a gimmick during his campaign for governor.  (Apparently saying the SEBAC agreement would have saved $1.6 billion when it would have really saved about half that amount is not counted as a gimmick).

As the day and week progresses, the main thing to watch is whether Legislative Democrats will grant Malloy the super-authority that he is seeking to cut the state budget or whether they will require him to proposed a $1.6 billion dollar plan to cut the budget which they would then have to adopt, reject or modify.

Governor: This Disaster is Your Doing…

Connecticut Headlines over the past 24 hours:

Prospects Dim For Malloy-Union Deal; Unions Urge Patience, Malloy Readies ‘Plan B’; Prospects unclear for town aid, social services if labor deal fails; Concession Package On Life Support After ‘No’ Vote; Chances dwindle for budget-balancing labor pact; AFSCME unit rejects concessions, making ratification unlikely

If the Malloy/SEBAC State Employee Agreement Fails – the responsibility for that failure rests squarely on the Governor and his little circle of advisors.

As readers of this blog know, it is apparent that Malloy’s approach to getting a significant state employee concession package was either designed or destined to fail depending on whether you think the Governor’s tactics were an act of omission or commission.

From Day 1, Malloy could not have handled the situation any worse.  Over the past 4 months I’ve devoted a blog post to this very issue every week or so…

The shocking highlights of Malloy’s approach begins back on February 15, 2011

Here are some examples from previous Wait, What? Posts.


2/15/11 Malloy panders to the talk-show crowd:

Today, it is the announcement that Malloy will seek $2 billion in employee concessions.

Putting aside the “let’s beat the shit out of state employees,” the Malloy proposal isn’t shared sacrifice – it is scapegoating of the worst kind.

Malloy has put out a number that is designed to fail.

When state employees end up paying their “fair share,” when they end up paying more than their “fair share,” Malloy’s political maneuver ensures
that they still end up losing in the public opinion game.

There is no question concessions are needed — major concessions at that — but anyone in the know, including the governor, knows that $2 billion is a number designed to fail.

The $2 billion is nothing but a fraud, one designed to humiliate and punish state employees for – well, for being state employees.


2/23/11 No more gimmicks – well okay, one more, but then no more after that!

So instead of providing a true balanced budget, Governor Malloy made it very clear. If the state employees fail to provide $1,000,000,000 this year – and another $1 billion next year – he would be forced to shred the state’s human and social service safety net and lay off thousands of people.


3/2/11  Connecticut is not Wisconsin… Right? Right?

Bullying occurs when a “person intentionally inflicts injury or discomfort upon another person, through physical contact, through words or in other ways”. It is behavior that seeks to intimidate, offend, denigrate or humiliate a person or group of persons.

As we know, now more than ever, bullying is a form of abuse that is often perpetrated on another as a way to intimidate someone to take some particular action.

Governor Malloy’s entire budget is based on state employees agreeing to make $2 billion dollars in wage and benefit concessions.

Anyone familiar with Connecticut’s state budget knows it is a number that literally cannot be achieved and the Governor purposely put out a number that is designed to fail.

Disguised as shared sacrifice, the Governor’s proposal is scapegoating of the worst kind since he has repeatedly connected his demands to the state employees with the warning that if the state employees fail to provide $1 billion in annual savings, he will be forced to shred the safety net and lay-off thousands of employees at a time the unemployment rate makes it clear that many of those laid off will not be able to find jobs.

Malloy has been very clear. If state employees don’t come up with a billion dollars in concessions – this year – the most vulnerable and needy people among us will be hurt and the fault will lie squarely with the state employees and no one else.


3/14/11 The Silence is Deafening – The $1 billion dollar secret.

More than a month ago Governor Dan Malloy released his proposed Connecticut State Budget. His plan included $1.5 billion
in new taxes, $400 million or so in cuts and $1 billion in state employee concessions.

A month later, the Administration has yet to identify any details about how $1 billion in employee concessions in each of
the next two years can be achieved.

They may claim that the final concession package is a product of negotiations between the Governor and the state employee unions – and it is – but as chief executive officer, the burden is on Governor Malloy to lay out a proposed list of employee concessions that would amount to $1 billion.

How else is the public (and for that matter the legislature) supposed to have any ability to judge whether those changes would be better or worse for the state and its citizens than cutting more elsewhere in the budget or raising additional taxes.

But when it comes to the $1 billion in state employee concessions absolutely no information has been put forward.

An analysis from the legislature’s nonpartisan Office of Fiscal Analysis came up with a possible list of concessions that raised more questions than answers and didn’t remotely add up to $1 billion, in fact their list, which was fairly exhaustive could only identify $300 million in possible savings.

Interestingly, despite the hundreds of news articles and stories about Malloy’s budget, not a single reporter has pushed the administration to explain how they propose to take $1 billion out of the state employee salaries and benefits.


3/25/11 Malloy Threatens Public Employees– Happy Friday!

“Nasty and Ugly” is the latest word from Governor Malloy who said today that state employees are running out of time.

The Governor refuses to put forward a detailed plan about his goal of getting $2 billion in employee concessions.

Yet even without releasing his “secret plan”, both sides have been saying (as late as yesterday) that productive discussions are moving forward.

And Malloy decides to use this moment to threaten the state employees.


5/5/11 Malloy Ramps Up His Psychological War on State Employees

The ugly truth facing Connecticut became increasingly apparent Wednesday as Governor Malloy signed into law a new state budget that is $2 billion out of balance.

A budget that from the very beginning was designed to fail while making Connecticut’s public employees the scapegoats for the state’s fiscal problems.

Over the last 48 hours, relying on unachievable concessions from Connecticut’s state employees, Democratic Legislators approved Governor Malloy’s plan that will eventually lead to massive cuts to vital services.

Rather than confront that truth and raise sufficient revenue or identify and approve additional cuts the Democratic majority held fast to the lie that $2 billion in concessions could be achieved.

However, with only 45,000 active state employees, a legal impediment to reducing the benefits provided to retirees and a legacy of underfunding Connecticut’s state employee pension and health care costs it is literally impossible to achieve a $2 billion concessions package that would survive the negotiation and approval process.

Now, with the budget approved, this twisted approach to governing moves forward as the Governor announces that tomorrow he will issue 4,000 lay-off notices and that “everything is on the table” for additional cuts.

The magnitude of the budget lie is becoming apparent.

4,000 Connecticut state employees and their families now wait in fear for the news that their lives will be plunged into chaos as they are thrown into the world of unemployment during the greatest economic downturn of the past 50 years.

Adding insult to injury, laying off 4,000 employees will not only impact the quality and availability of important state services but it will only “save” the state about $300 million leaving a hole of at least $700 million in the coming year’s budget.

According to the Governor’s rhetoric, this “deficit” will only be eliminated through additional cuts rather than additional revenues – despite the fact that the new budget gave Connecticut’s super wealthy a pass on being required to pay their fair share in taxes.

Cutting $700 million more on top of the record cuts that have already been adopted will have a profound and devastating impact on Connecticut’s most essential services. The quality of life for tens of thousands, including some of Connecticut’s most vulnerable citizens is now at risk because legislators would not face the reality that they were voting on a fraudulent budget plan.

Meanwhile, like so many politicians around the country, Governor Malloy continues to blame this impending disaster on public employees as he ramps up a game of psychological warfare to force concessions and set the stage for cuts in services that can then be blamed on the state’s workers.

And as this horrible strategy plays out there is nothing but silence from Connecticut’s Democratic officeholders.

Imagine if Pratt & Whitney announced 4,000 layoffs.

No, better yet, think back to the times that Pratt has announced layoffs of far fewer employees.  Rallies with Democratic politicians on the picket line calling for investigations, demanding meetings and charging that the company is engaged in union busting.

But now when the shoe is on the other foot and a Democratic CEO who is unfairly targeting employees….Silence.



6/9/11  Malloy: I’m Not A Bully…

Yesterday could have been a day of simple congratulations, with Governor Malloy congratulating himself and Legislative Democrats and the Democratic leadership of the House and Senate returning the favor.

But then, as if he just couldn’t help himself, Malloy returned to his old mantra of claiming that if Connecticut’s state employees don’t approve the concession package and come up with $1.6 billion dollars, he can’t be held responsible for the pain and suffering that will occur.


Yes, really…

At yesterday morning’s gubernatorial press conference, Malloy told the media “I’m not bullying anybody. Talking in real terms and telling people the truth is not bullying…I just want people to understand the reality.”

And Malloy’s “reality” is that if state employees reject that Malloy/SEBAC concession package, he will  be “forced” to lay off up to 7,500 or more state
employees including public servants with as much as 10 to 25 years of service.

According to the Governor, his approach is not “bullying”, it is just a simple statement of fact; If the kid doesn’t turn over his lunch money, he will be forced to beat the crap out of him.

Of course, the Governor’s “reality” doesn’t actually cover the whole truth and nothing but the truth.

That is not to say that rejecting the concession agreement is a good idea.

However, the real truth is that if the agreement is rejected, Malloy and the Democrats could utilize one or more of the following options to fill some or the entire $700 million deficit;

(1) They could fill a portion of the budget deficit by utilizing the growing surplus from “excess revenue”. Connecticut’s 2nd gas tax will generate more than $100 million dollars extra in the coming year. The income tax and corporate tax will also likely produce more than was budgeted.

(2) The budget itself has extra funds in some key line items. The account to pay retiree health benefits, for example, may have as much as $70 million or more in extra funds

(3) The Governor could utilize some of his authority to cut up to 5% of the state budget ($1 Billion) without legislative approval. Although there are some limitations to areas that can or should be cut, the Governor could certainly cut millions if needed.

(4) The law further requires that the Governor develop a plan to deal with any deficit that may arise and propose changes for the General Assembly to approve.

(5) Finally, the Governor could follow the collective bargaining process and return to the table to negotiate a package that would garner majority support among state employees.

So – call it what you want – but the real reality is that Governor Malloy would have lots and lots of options if the agreement fails.

While suggesting that he will lay off 7,500 state employees may or may not be bullying, one thing is certain, it is not his only option.


Now, as the agreement falters, and perhaps fails, the Governor has no one to blame – but himself.

Ode to SustiNet: Yet Another Wait, What? Moment…

(Cross-posted from Pelto’s Point at the New Haven Advocate)

CTNewsjunkie posted another must-read story last night about the Democratic efforts to ease concerns that the Malloy/SEBAC agreement is somehow related to Connecticut’s comprehensive healthcare reform law.  (see Wyman Seeks to Clarify SustiNet Rumors)

Rumors have been circulating that SustiNet (Connecticut healthcare reform) and the union agreement are related.  State employees even received an email from a fake state employee making that statement.

As has been noted on this blog and in many other places, people can come up with reasons to vote against SustiNet or against the SEBAC agreement; but saying they are connected is not one of them.

In any case, the Malloy Administration and the Legislative Democrats joined the effort yesterday to persuade state employees that, in fact, the truth is the truth and SustiNet does not pave the way for the concession agreement and the concession agreement does not pave the way for SustiNet.

Part I of their effort came in the form of an email from Nancy Wyman to all state employees re-stating the fact that the two issues are not connected.

Part II was quite a bit more bizarre.

Think of the child who says to his or her parents “If you don’t buy me that IPod I will hold my breath until I turn blue.”

Or the bank robber who walks into the bank, puts the gun to his or her own head and says “If anybody moves I will pull the trigger.”

As CTNewsjunkie reports, “In what is a rare move the General Assembly recommitted the SustiNet bill in order to send a message to those trying to use it to defeat the $1.6 billion union concession package…”   Recommitting a bill sends it back to committee and prevents that particular bill from being considered again during the legislative session.

According to the story, Democratic leaders “didn’t want anything they were doing to interfere with the decision 45,000 union members will be asked to make about their health care and pension benefits.”

The irony being that SustiNet was and is a very important piece of legislation.  Advocates for healthcare reform have been working for years to ensure Connecticut is at the forefront of the effort to reform our of control health care insurance system.  However, rather than trust state employees to understand that the state employee agreement is not related to SustiNet, they just voted to kill SustiNet, throwing away the opportunity to actually do something about the rising costs of healthcare insurance.  (Go figure.)

Meanwhile, in a more direct effort to explain the situation to state employees, Lt. Gov. Nancy Wyman sent an email to the employees explaining the facts.

Wyman wrote, “the proposed changes to our healthcare coverage are not in any way related to SustiNet, or to the federal healthcare reform that became law last year…Our benefits will continue to be provided by Anthem or Oxford under the plan we selected during open enrollment.”

So when all is said and done, the truth is the truth…SustiNet and the SEBAC agreement are not related.

In case people missed the point – SustiNet and the SEBAC agreement ARE NOT related!

Oh, and meanwhile, for those who are shocked to see the SustiNet legislation go up in smoke, it is important to note  that (1) as a result of Governor Malloy’s surprising opposition to the very concepts he had previously supported during the campaign, the present SustiNet bill has been so watered-down that it is but a shadow of its once impressive initiative and (2) the Malloy Administration already developed an Executive Order on
SustiNet back in the first week of April. The order, which only covers the minimal items that Malloy will support can then be issued once the Malloy/SEBAC agreement is resolved.  In that way, Malloy is not only able to subvert the SustiNet healthcare legislation, but can come out on top claiming that he and he alone has been able to keep the healthcare reform process going.  It is what is called a “win/win” move.

Finally, the piece de résistance of the last day of maneuvering is how Lt. Governor Wyman ended her email to state employees.  Wyman’s final line to Connecticut’s state employees reads “thank you for the good work you do every day. Governor Malloy and I are grateful for your service.”

This, coming less than 24 hours after Malloy once again threatened Connecticut’s state employees, saying, “We will lay people off on a large scale for which I will not feel responsible,” and noted that the layoffs will include employees with far greater than 10 years of state service.

It reminds me of the school bully who beats up a kid every day for their lunch money and then says “by the way, I’m grateful that you come to school every day.”

The more things change, the more they stay the same.

Governor Malloy, Speaker Donovan and President Williams Solve Connecticut’s Budget Problems

Cross-posted from Pelto’s Point at the New Haven Advocate)

Last night Governor Malloy’s press office released a statement that the Governor and Democratic legislative leaders had come up with a plan to eliminate the $400 million deficit in the state’s upcoming budget.

The Governor capped off the victory by saying “As promised, we’ve maintained our commitment to municipal aid, preserved the safety net and we have not asked for additional taxes.”

Instead the three leaders agreed to additional spending cuts and using higher than anticipated revenue to fill the hole.

And just in case the state employees forget to fulfill their role, Governor Malloy added “The only thing that needs to happen now is for the SEBAC agreement to be ratified in a timely fashion. If it isn’t, we’re back to Plan B – something I don’t think anyone wants.”

Speaker Donovan, now a candidate for Congress, jumped on board saying “Once again, Governor Malloy has kept his promises.”

President Pro Tempore Don Williams backed up the Governor’s threat to state employees saying “We encourage state employees to ratify the SEBAC agreement so we can avoid the draconian budget alternatives that would undermine Connecticut’s economic recovery.”

Their plan to eliminate the $400 million deficit includes “saving” $52 million in what they say are over budgeted allotments to the state retiree healthcare accounts well as cutting $7 million dollars from various workers compensation funds since apparently those won’t be needed as well.

The most interesting piece of all is that the Democratic leaders agreed to cut over $14 million from the State Department of Education’s Interdistrict Cooperation Fund.

Apparently, despite the Connecticut Supreme Court’s rulings that separate and unequal education is unconstitutional, the state’s leaders have determined that we can reduce funding for the programs that are designed to give students the opportunities to attend more desegregated public schools.

Of the $400 million mini-budget plan, my personal favorite it their claim that they have “not asked for additional taxes” to balance the budget.

In fact, since Connecticut’s gas tax #2 is tied to the price of gasoline, the recent spike in gas prices has netted the state $70 million more than was expected and that has come in just the last few months.  Since state government is unwilling to cap this regressive tax, higher gas prices will mean more and more money pours into the state’s general fund and politicians can say with a smile “we have not asked for additional taxes.”

Correct, because the taxes are just growing “without being asked.”

Good one  huh?

You can read more at CTNewsjunkie:  http://www.ctnewsjunkie.com/ctnj.php/archives/entry/400_million_budget_gap_to_be_filled_primarily_with_surplus_funds/

State Employees – You Are Being Had….

Christine Stuart Photo, CT Newsjunkie

Cross-posted from Pelto’s Point at the New Haven Advocate)

And being had by Democrats no less…

Respect for the collective bargaining process?

Democratic Governors all over the country saying that they are being forced to go after state employees in order to balance state budgets but, unlike Republicans, they are respecting the collective bargaining process.  Connecticut’s governor even got a standing ovation at the recent state Democratic dinner for that line.

And getting concession packages that are negotiated across the bargaining table certainly sounds like a fair process…

But what do you call it when the Democratic Administration repeatedly claims that there isn’t any  money… only to reveal afterwards that they
were wrong and, in fact, there are not only tens of millions but hundreds of millions in extra funds that “they weren’t aware of.”

Look, I don’t know how state employees should vote on the budget concession, but I’ll tell you one thing, they are being lied to…in a big way.

Keith Phaneuf, of the CT Mirror has a blockbuster story today about how state officials have suddenly discovered that the account that pays for health insurance premiums for retired workers has an ‘extra” $100 million… $100 million that they only discovered in the last 20 days.

So, after the concession package was finalized, after the Democrat’s adopted the new state budget that included $2 billion in employee concessions, after the word went out that if this package isn’t approved by the membership there will be chaos, the Malloy Administration has announced that state revenues have “surged” over $400 million dollars…leading to a $680 million dollar “surplus” enough that the state can back out of the decision it had made to borrow money to balance this year’s state budget.

Remember back in the day when Governor Malloy talked of shared sacrifice and said that if state employees didn’t come up with $2 billion in concessions he would be forced to lay off thousands and shred the state’s safety net.

The message was clear. If state employees did not provide the largest give-backs in history – five times the size of what was given up by state employees only 18 months ago – Connecticut’s most frail and vulnerable citizens would suffer.

And to ensure that Connecticut’s state employee were compliant, the $2 billion amount was included in the state budget, the concession package was finalized and agreed to by union leadership and it now awaits the approval of the state’s rank-and-file workers.

Ironically, as state employees are learning, that concession package is projected to save $103 million from moving state employees to a “Value Based Health System” in which any employees who do not agree to follow their doctor’s directives and any and all rules associated with any disease management plan, will face an increase of $1,200 in their annual health insurance premiums plus an immediate $350 per person deductible.

Meanwhile, we now learn that what was a $1.8 million surplus in the $500 million dollar retiree health care account 60 days ago, grew to a $16.9 million surplus 30 days ago to now, an astonishing $117 million figure.

The CT Mirror reports that, with a straight face, Benjamin Barnes, Governor Malloy’s budget director, is now saying that not only is there this $117 million surplus in this year’s budget but much of it shows up as a surplus in next year’s budget as well.

But of course, he “declined to speculate on just how much”.

Safe to say, that between this year and the budget just approved, this one line item alone may have as much or more than a quarter of a billion dollars in extra funds.

So Governor Malloy tells state employees to give up benefits or lose their jobs, then takes the extra funds from this year’s retiree health line-item to help cancel some planned borrowing.

And now we learn there is even more there, money that will push up next year’s surplus even higher.

Of course, this isn’t just an issue for state employees. Middle-class families are also being tricked, twice over. First they are paying more because Malloy refuses to ask the wealthy to pay their fair share and now we learn that the state has more money than it was admitting to.

Furthermore, Malloy and the Democrats continue to talk about additional cuts that will be needed to “balance” the recently adopted budget since the state employee concession package did not save the full $2 billion that was required.  Even today the news is includes reports of cities and towns asking their legislators to spare them from potential cuts in aid that may be coming down from the Malloy Administration.

Really?  More cuts when there is a significant and growing surplus built into next year’s budget?

Read Phaneuf’s story at http://ctmirror.org/story/12733/last-minute-windfall-pops-retiree-health-care-account

Value Based Health Care….Rising from the ashes of Managed Care….

(Cross-posted from Pelto’s Point at the New Haven Advocate)

Will Value Based Health Care save American health care and the Connecticut budget?

Is what is being proposed really Value Based Health Care?

Is it a bit ironic that Anthem Blue Cross, the state’s primary health plan carrier, happens to be rolling out what it claims to be a Value Based Health Care Plan in the Northeast at the very same time?

When the news about the Malloy/SEBAC agreement started to trickle out, many people saw the proposed new “Value Based Health Care” as little more than a form of managed care on “steroids.”

But advocates for the coming changes say that, in fact, this new system is really one based on paying for performance (where the medical community is paid for keeping people healthy rather than the present fee-for-service system that pays doctors and hospitals for simply providing services, regardless of the actual outcome).

The new system is projected to be so much better that the Malloy administration and the State Employee Unions believe that, over the next two years, the state will be able to reduce its state employee health care spending by a quarter of a billion dollars.

Considering that the state will save about $140 million a year from the across-the-board wage freeze, the shift to Value Based Health Care will be the 2nd biggest element in the Malloy/State Employee Concession Package.

The proposed SEBAC agreement describes “Value Based Health Care” as a new system, in which employees will sign “a commitment form each year promising to get scheduled yearly physicals, age-appropriate diagnostics (such as a colonoscopy), and two free dental cleanings per year.  In addition, employees with one or more of the 5 listed diseases (Diabetes, COPD or ASTHMA, Hypertension, Hyperlipidemia (high cholesterol), and Heart Failure) which respond particularly well to disease management programs and which are a large part of total healthcare costs––must enroll and comply with the disease management programs.”

As a result of the free office visits and reduced pharmacy co-pays for any of the listed diseases, plus the other elements of the disease management program, healthcare costs for everyone will go down.

The stick to the carrot is that “Employees who after proper notice refuse to sign the commitment or fail to get their physicals (or if they have a listed
disease, refuse to participate in disease management), will have a premium increase of $100 per month, and a deductible of $350 per person per year.”

Finally, “current retirees will also have the option to participate in value based health care, while new retirees will continue to have a choice of free (the POE Plan) or nominally charged (the POS Plan) health care for life, but will be required to participate in value-based health care or pay the $100 per month extra premium.”

So, if the SEBAC Agreement is approved and adopted, state employees and anyone retiring after 9/1/2011 will be required to participate in the new “value based health care system” or pay an additional $1,200 a year and have an additional $350 deductible per person, per year, on top of their existing deductibles and co-pays.

Google “Pay for Performance” or “Value based health care” for some additional background on these issues, but apparently plans based on this type of reform were initially developed in California in early 2000s, and England adopted a more robust system using value based healthcare in 2004.

One of the questions that immediately surfaces is whether the Malloy/SEBAC agreement is a true change to a “value based health care system” or merely an expanded employee wellness program.  Employee wellness programs can be important for employees but do not fundamentally change the way in which health care is funded. Reading through the available literature on this topic, it appears that a true, value based health care system
(one in which doctors are paid for outcomes rather than services) might save money in the long run; but, according to experts, the “return on investment doesn’t start to really pay off for “several years.”

Another issue is question whether the large health insurance companies are really ready to oversee such an approach. They are only now gearing up to handle these new approaches to health care.

According to a report in the Crain’s Detroit Business journal last year, Anthem is offering a Value Based Health product in Colorado that “that guarantees up to a 3% reduction in subsequent-year premiums if plan members participate in screenings and health promotion programs that
lead to improvements in their health status.”

Crain’s also reports that an Anthem official, Greg Hughes, the company’s commercial product development director, said that the company was awaiting approval for a new “VBID product” that it planned to introduce in the U.S. Northeast.

To back up their claim that savings will be forthcoming, the Anthem official said, “the findings in the [research and medical journal] literature are very compelling. We’ve also had some pilot groups with outstanding results from both a clinical and financial perspective, generally in the [administrative services-only] space,” Mr. Hughes said also, “but if it works in the ASO population, it’s a natural fit to start doing it in the fully insured market.”

Interestingly, the description of the new Anthem plan is very similar to the language being used in the Malloy/SEBAC Agreement.   The Business Journal, quoting Anthem, said, “the product will attempt to remove the cost barrier to medication compliance by reducing copayments for high-value drugs and medical services while encouraging plan members to participate in the insurer’s condition management education programs…Initially, it will target five conditions: asthma, diabetes, coronary artery disease, chronic obstructive pulmonary disease and congestive heart failure.”

But unlike the win/win situation being projected in Connecticut (no increase in premiums and savings of a quarter of a billion dollars in two years” the report goes on to say that, “because of the additional cost of lowering or waiving copayments for prescription drugs and some services, the Anthem official explained, “The pricing is still being worked out…The promise of a value-based insurance design is to make an investment in your employees. When you do that, you are really looking at increasing the plan’s cost.”

In true health care industry fashion, another Anthem official said that it wasn’t so much about reducing premiums as about increasing employee
productivity.  “One thing fully insured clients will benefit from is the effect on overall productivity…when their employees are compliant and educated, they’ll see decreased absenteeism, disability costs and increased productivity.”

Good news about the increased productivity, since the Malloy/SEBAC plan also relies on more than 1,000 employees leaving state service and not being replaced next year.

Here is the link to the Crain’s story for those interested in reading more: http://www.crainsdetroit.com/article/20100315/HEALTH/100319908/fully-insured-market-has-yet-to-embrace-value-based-design#

THE Malloy/SEBAC Deal: Shocking, incredible… How did this happen?

(Cross-posted from Pelto’s Point at the New Haven Advocate) [apologies for the formatting issues]

Connecticut’s state employees were always going to be part of solving Connecticut’s budget crisis.  A wage freeze and concessions were never not going to be part of some final fiscal package.

What was in question and remains in question is whether rhetoric and political pandering were going to get in the way of common sense solutions.

And now, after months of negotiations and unnecessary bullying on the part of the Governor, rank and file state employees are angry, hurt and upset.  Meanwhile, the union leadership and the Malloy Administration has produced this incredible, some would say, unbelievable package.

Instead of a win/win situation where state government could move forward with a spirit  “all for one and one for all”, Connecticut’s state employees have been put in a lose/lose situation.

I would never suggest how an individual state employee should vote…. But I know this, this debacle never had to happen…

So how did we get here?

On that day in February when Governor Malloy first proposed his budget, it was clear that the $2 billion dollar “state employee concession package” a gimmick and a fraud.   However, the governor and his administration said over and over again that they could and would achieve $1 billion in savings for next year and an additional $1 billion in the following year.

Democratic legislators went along with this farce, even passing a budget that assumed the $2 billion would be achieved.

The Connecticut media, for the most part, took the rhetoric at face value and never dug deep to find what was on Malloy’s “secret plan” that added up to $2 billion.

Last Friday, when Malloy and SEBAC announced their concession agreement they said that they nearly reached the $2 billion goal with a plan that would save $700 million next year and $900 million the following year.

At last night’s JJB Democratic fundraiser, Governor Malloy went out of his way to taunt those who said the $2 billion dollars couldn’t be achieved.

Calling those who doubted his budget “naysayers”, the governor pointed to the concession package and said “Last Friday they proved themselves wrong again…The naysayers never go quietly into the night.”

Governor Malloy could not have been clearer and those of us who raised questions were left to wonder…while $700 million was not the promised $1 billion, how did they achieve $700 million in savings in next year’s budget and another $900 million in FY13.

Today the details of the agreement were released.

They speak for themselves;

On top of the $138 million true savings from a wage freeze there are millions, maybe even tens of millions, maybe even $100 or so million in true savings.

There is $110 million in savings from using more technology and finding other “efficiencies”.

There is $183 million in proposed healthcare changes.  Changes that are, quite frankly stunning in their reach.

Among other things, our state employees will enter a new era of “managed care” in which if employees just do what their doctors and the plans require them to do, the state will miraculously save over $100 million dollars… thanks to healthier patients starting on July 1.

And for those who don’t follow the rules, they will have to pay an additional $1,200 plus a year for insurance.

And there is the $65 million savings that will come from reducing the state work force by 1,000 employees (no reference to where and how that might be done but it is presumed there will be a mass exodus of early retirees). The state budget already increases significant attrition savings.  It is called the “lapse figure” and assumes every agency “saves” money by not filling positions, at least for a part of the year.

And finally there are multiple changes to the state’s pension system going forward.  Most of the changes take place in a few years to allow the most  senior state employees to bail out before the changes take effect. Incredibly, the money “saved” is not being left to better fund Connecticut’s extraordinarily unfunded pension system (we are presently among the 5 worst funded states in the nation). Instead we are apparently saving the money by reducing the pension payments.  The one moment we have to put the system on better footing and we are pulling out the funds to balance the FY13 budget.

Many of us couldn’t imagine how the two sides could reach a concession package that ‘saved” $300 million let alone $500 million or a $1 billion.

Now we know what they did…

One word… “unimaginable.”

Wage Freeze                                                                                      ($138,852,400)

Pension Savings due to 2 year wage freeze                            ($69,316,000)

Change the minimum COLA                                                         ($32,525,000)

For individuals who retire after 9/2/11 from 2.5% to 2.0%.

Change the Early retirement reduction factor from 3% to 6%   ($35,000,000)

for each year before eligible to take Normal Retirement with
associated health care savings


Technology Initiatives:                                                                      ($40,000,000)

Utilize new technologies and reduced licensing procurement and consulting costs

SEBAC Budget Savings Initiative                                                   ($70,000,000)

Implement savings ideas proposed by employees to reduce
costs in agencies through reduced procurement costs, more efficient agency operations and other

Longevity – No longevity payment October, 2011                         ($7,000,000)

to those units with capped longevity and an equivalent savings
amount would be negotiated from those with uncapped longevity.

No one during the biennium will have those years count for that period.

Individuals first hired on or after 7/1/11  (military service counts) would never receive
a longevity payment.

Health Plan Change                                                                          ($1,200,000)

$35 Emergency Room co-pay; Certain cost savings changes where individuals  would have to get preauthorization before a second MRI etc.

Value based health and dental                                                         ($102,000,000)

Provide  a Value based health and dental care plan under which individuals
and their families could chose to participate and agree to follow
a plan and physician recommended physicals, disease management protocols
and diagnostic testing. Failure to comply would result in the individual
and their families being placed in the Non value added plan with the
concomitant cost increase. The cost for this plan would be the same as the
current plan plus any scheduled experience determined increases.

Value Added for Retirees–voluntary for current Retirees; Mandatory
for individuals who retire on and after 9/2/11. If new retirees elect non value added, cost is $100 per month.

Non value based health and dental                                                  ($18,000,000)

If the employee chose not to participate their cost for healthcare would be
the same as calculated in the first year for Value based, plus $100.00
per month additional. Institute a $350 Medical Deductible per year per individual.

Reduce Costs with Generics                                                             ($1,500,000)

Drugs coming off patent

Tobacco and Obesity                                                                        ($1,000,000)

Reduce costs through voluntary referral program

Other Health Cost Containment Initiatives                          ($40,000,000)

The Healthcare Cost Containment Committee will identify additional
cost savings through renegotiation of contracts and improved service delivery

Pharmacy Co-pays/Mandatory Mail Order                                   ($19,876,000)

Increase to $5, $20 and $35 for non maintenance drugs.

Additional drugs coming off patent which will now be available as generics. Mandatory Mail Order- maintenance drugs for active employees, future
retirees and current retirees under 65 must be ordered through the mail.

Voluntary for current retirees over 65 (mandatory once enrolled).

Minimum  Service for Retiree Medical                                            ($3,822,000)

Increase to 15 years of actual state service for Normal, early retirement and HD retirement
with continuation of Rule of 75 for Deferred Vested.

Cap salary that can be considered                                                   ($2,400,000)

As part of an individual’s pension  benefit as provided under the  Internal Revenue Code

Increase number of retirees due to absence of ERIP;                   ($65,0000,000)

Reducing the number of state employees by 1,000 plus due to attrition – read retirement incentive – (Worse, in
many ways this is a double count since the “lapse” figure already assumes natural attrition)

New Retirement Program (Applies to people in Higher Education)     ($10,750,000)

Provide the availability of individuals in the Alternate Retirement Plan to switch
to a Hybrid-Defined benefit/Defined contribution type plan.

(This is a big “positive” for faculty in higher education, stay tuned)


Increase Age of Retirement:                                                                        ($22,000,000)

For current employees who retire after 7/1/2022, Normal Retirement eligibility
increase from Age 60 and 25 YOS or Age 62 and 10 YOS to  age 63 and 25 YOS or
Age 65 and10 YOS. By 7/1/13, present employees may elect to pay the actuarial
pension costs of maintaining the normal retirement eligibility that exists in
the present plan which is scheduled to change effective July 1, 2022.

New Tier III                                                                                      

For individuals hired after 7/1/11, Normal Retirement eligibility Age 63 and 25 YOS
or Age 65 and 10 YOS and salary based on Final five year average; HD 20 Years
of HD service and age 50 or 25 Years of HD Service regardless of age and salary
based on final five year average pay; Early Retirement Age 60 and 15 YOS; Ten
year cliff vesting.

Increase the Employee Contribution to 3% for Retiree health care trust fund

for all employees, (not just new employees) phased in beginning 7/1/13.  This is a 3% cut in pay starting in FY14.  (It is the 7 furlough days for life, but you have to show up to work in order not to get paid).

So , as my introduction observed, after months of negotiations and unnecessary bullying on the part of the Governor, rank and file state employees
are angry, hurt and upset.  Meanwhile, the union leadership and the Malloy Administration has produced this incredible, some would say, unbelievable package.

Instead of a win/win situation where state government could move forward with a spirit of all for one and one for all, Connecticut’s state employees have been put in a lose/lose situation.

As I said earlier, I would never suggest how an individual state employee should vote….

But I know this….this debacle never had to happen.

State Employee Concession Package: The devil is in the details

Taking the Governor and state unions at their word, Connecticut’s media outlets reported Friday that the new state employee concession package will save Connecticut $1.6 billion over the next two years.

Although Governor Malloy repeatedly said that nothing less than $2 billion would do, the $1.6 figure was touted as a major victory by all involved.

Actually, it turns out that the Malloy Administration projects savings of only $700 million in the first year and $900 million in the second year leaving the existing approved budget about $300 million dollars in deficit for the fiscal year beginning July 1, 2011.

To address this new deficit the Governor said he would make up the gap with additional budget cuts and by using some of the unanticipated revenue that has been coming in recently. (Thank you Connecticut gas tax #2).

Both sides agreed to keep the details of the deal secret in order to provide the SEBAC union coalition time to educate their members about the agreement.

Without knowing the details it is impossible to determine the accuracy of the projected $700 million figure.  The few details about the package that are public include:

(1)  A wage freeze for two years for all unionized employees

(2)  After the two year wage freeze, unionized state employees would receive 3 percent pay increases 2013, 2014 and 2015

(3)  Newly hired state employees would no longer be eligible for longevity pay (but of course new employees would not have qualified for longevity payments for 10 years anyway but it sounds good)

(4)  The age of retirement would be increased from 60 to 63 for Tier II employees and 62 to 65 for Tier IIA employees but apparently that change would not take place until 2017

(5)  Although the 4 year no-layoff clause would cover all unionized employees, it would not protect non-union managers who could be laid off the next two years

(6)  Finally, by all accounts the agreement includes “big changes to the health insurance plan.”

In addition, among the rumored changes will be a new requirement that all employees will have to contribute 3% of their salary to help fund the cost of state retiree health benefits.  Connecticut has huge unfunded liabilities for future state employee pensions and retiree health benefits and this change would begin the process of addressing the retiree health fund crisis.

One side note, the Governor was especially keen on pointing out that there were no furlough days in the agreement.  At his Friday press conference announcing the agreement he said “One more point: there are no furlough days in this agreement, nor is there a reduction in the 40-hour work week. This means we’ve achieved these savings without reducing government’s ability to serve its constituents, and without reducing employees’ productivity.”

It is an impressive agreement by any standards, but the real question is:  If it actually saves $700 million next year, then what has not been revealed and why?

A real wage freeze saves about $160 million and having employees pay 3% of their salary to fund retiree health benefits “saves” about $100 million.

Together these two items save about $260 million, so if they are being truthful about the $700 million, there is only $440 million to go.

Those must be pretty damn impressive changes to healthcare and benefits.

In addition to the changes in retirement age (which would save some money down the road), certainly look for reductions in the annual Cost of Living Adjustments for retirees, and perhaps a  change in how a retiree’s pension is calculated.  (Maybe using their average salary over a five-year period rather than the present three-year system).

However, that still doesn’t come close to explaining where an additional half a billion in concessions is coming from.

Last, but not least, back to the interesting point that the Governor felt he need to highlight the fact that no furlough days are part of this agreement.

Many states and even some private employers have been using furlough days.  Employees are told to stay home a certain number of days and that way the employer doesn’t have to pay them for that day of work.  It serves as a temporary (one year) reduction in pay without actually cutting the
employees pay over the long-term.  In Connecticut, each furlough day saves about $14 million dollars.

By requiring state employees to pay a new 3% of their wages to retiree health benefits, the employee is getting a true 3% reduction in salary.  This is equivalent to instituting 7 days furlough a year for the duration of a state employees’ career. The only difference is employees will actually have to go to work in order not to be paid.

It will be interesting to see what happens next.

And don’t forget that 14 out of the 15 SEBAC unions must vote yes to implement the pension and health care changes.

Individual unions could still accept the wage freeze but without the pension and health care changes the total amount saved won’t even be 20% of the amount that has been publicized.

Flash Back – Wisconsin is not Connecticut, Right?

The date was March 2, 2011:  Day 1 of the Malloy/State Employee negotiations.


“But before we think that Connecticut and Wisconsin have nothing in common when it comes to the rights of workers, let us remember that efforts to undercut unions and the rights of employees to join together for their common good come in a variety of forms.

Like bullying, anti-union efforts can be overt, covert or both.

Bullying occurs when a “person intentionally inflicts injury or discomfort upon another person, through physical contact, through words or in other ways”.  It is behavior that seeks to intimidate, offend, denigrate or humiliate a person or group of persons.

As we know, now more than ever, bullying is a form of abuse that is often perpetrated on another as a way to intimidate someone to take some particular action.

Governor Malloy’s entire budget is based on state employees agreeing to make $2 billion dollars in wage and benefit concessions.

Anyone familiar with Connecticut’s state budget knows it is a number that literally cannot be achieved and the Governor purposely put out a number that is designed to fail.

Disguised as shared sacrifice, the Governor’s proposal is scapegoating of the worst kind since he has repeatedly connected his demands to the state employees with the warning that if the state employees fail to provide $1 billion in annual savings, he will be forced to shred the safety net and lay-off thousands of employees at a time the unemployment rate makes it clear that many of those laid off will not be able to find jobs.

Malloy has been very clear. If state employees don’t come up with a billion dollars in concessions – this year – the most vulnerable and needy people among us will be hurt and the fault will lie squarely with the state employees and no one else.

Even today, as the Malloy Administration and the state employee unions prepare to officially sit down for the first time, Malloy’s chief political advisor said that the “governor hopes and expects the talks to be productive and will produce the money that’s necessary to help balance the budget,”

The facts could not be clearer.

Saying that his budget is balanced when he knows it is not and then setting up Connecticut’s state employees to take the fall is more than a gimmick, it is nothing short of a mean-spirited form of bullying.

The definition of bullying is clear.  A person or group is being bullied when “exposed, repeatedly and over time, to actions that seek to intimidate, offend, denigrate or humiliate.

Let’s face it, today the Connecticut’s Public Employee Unions will be sitting down with representatives of an Administration that would be expelled from school or fired from the workplace for the intentional bullying that they have perpetrated.


Flash Forward:  May 10, 2011…. Now let’s ask the question again, is Connecticut really that different from Wisconsin?