DISCLAIMER:  I work for a health care company (doing Software Product Development – not Sales!).  See my bio for details.  I am not advocating anything to do with my employer.  I just have knowledge of this subject area that I believe is worth sharing.

There has been much discussion of the GIC as an alternative to lower health benefit costs.  I wanted to take the opportunity to expand the discourse in this area.  Since Newton is self-insured, we enjoy the luxury of proposing multiple health care options.  Yes, there are collective bargaining constraints, but we need an accurate view of the health benefit landscape.  The plans offered by the GIC are all traditional HMO or PPO plans.

I wanted to introduce a relatively new option called the High-Deductible, Consumer Directed Health Plan (HDCDHP).  I have recently had my own experience with this type of plan (which saved my family $3200 over a PPO) as our employee health coverage is moving aggressively in this direction.  In fact, this is a trend that is more widespread than most of us realize.  Could Newton get out in front on an issue like this?

The information below (text and charts) is excerpted from a survey of employers conducted by Mercerhealth.

The new plan model’s appeal to employers seems clear: CDHPs delivered substantially lower cost per employee than either PPOs or HMOs in 2008. CDHP cost averaged $6,207 per employee, compared to $7,815 for PPOs and $7,768 for HMOs (Fig. 5). Of the two types of CDHPs, HSA-based plans were less expensive than HRA-based plans ($6,027 compared to $6,420). 

The most obvious explanation for the difference in cost between CDHPs and the other medical plan types is the higher deductible. But even compared to the average cost of PPOs with deductibles of $1,000 or higher ($6,661 per employee), CDHPs still cost less by over $400, even though CDHP enrollees are not significantly younger than enrollees in PPOs with high deductibles and are more likely to elect dependent coverage (which drives up cost per employee). The 2008 cost increase for CDHPs was 4.0 percent, compared to 6.3 percent for PPOs and 9.1 percent for HMOs. 

 “With deductibles in traditional PPOs rising, the CDHP is becoming a more attractive option for employees who have a choice,” said Mr. Bos. “If your employer puts money in the account and you don’t use many services, you can end up ahead.  But it all depends on how you use health care.”

The existing financial structure of the Newton Public Schools is not sustainable over the long term.  This is starkly illustrated by the statistic that over FY 03-07 a 5.9% compound annual increase in cost has been required to maintain level services while only 4.3% compound annual revenue increase has been available.  The CAG projects a compound deficit in school funding of $60M in the next six years.

As if that is not enough, two other factors make the situation even more dire.  In recent years the allocation of overall City revenue to the schools has been increasing as approximately 70% of new revenues go to the schools.  Even with the municipal side sacrificing in this way (which cannot continue indefinitely) we have had to shift costs within the school budget to maintain the most visible aspects of our educational programs at the expense of longer term less visible – but often no less important – cost centers such as facilities maintenance, teacher support and technology.

Taken in total, the overwhelming weight of evidence is that our school’s financial structure is in crisis and we will be unable to sustain the excellence we aspire to without fundamental and structural change.

The table above taken from the CAG report illustrates the key opportunities to moderate cost growth.  Clearly there are two overwhelming problems – benefits and SPED.  The specific report on SPED is quite thorough and unfortunately does not identify any silver bullets.  However, one item that stands out is the overall increase in compensation for aides in the current contract.  This will certainly need to be addressed in the upcoming negotiations.

A potentially controversial thought (not present in the CAG report) is to examine how NPS can turn its reputation for SPED excellence into a profit center by capturing out of district placements from other communities thus leveraging our expertise, infrastructure and fixed cost.  A nod in this direction has been discussed in relation to the proposal to create an alternative high school and generated initial positive response.  Is further exploration warranted?

Benefits are an area that requires a lot more analysis.  I have been dismayed at the “our hands are tied” attitude from the administration and school committee to date on this topic.  Yes – there are real issues within municipal collective bargaining regulations that need to be taken into account.  However, this cannot be an excuse to abdicate the responsibility to thoroughly investigate and propose alternatives.  At least we will know what is being left on the table!

One alternative that has been frequently raised is to join the GIC.  I will tee up another one here and go into detail in a future post.  We could shift from the traditional plans we offer now to a high-deductible consumer driven health plan (HDCDHP).

Other specific items of note:

o  The existing contract makes it very costly to have teachers take on extra administrative or management duties (for which they would be compensated).  This dramatically limits the flexibility of school principals, especially at the elementary level, from leveraging the skills of experienced teachers to provide a better support structure for the rest of their staff.  This restriction should be eliminated from future contracts.


o  The bulk of our professional development funding appears to be going to creating central roles of curriculum coordinators, math coaches, and others who provide indirect support to the teachers rather than directly to the teachers to fund continuing education and skill building.  Has this model been proved to be more effective?  Do the teachers agree?  Have we asked them?

In reaction to coverage of the Superintendent's FY2010 budget proposal...  

As working with the superintendent to arrive at an approved budget is one of the most important functions of the School Committee, I wanted to share my thoughts on the budget recently proposed by Dr. Young.

First of all, we must recognize the challenge and hard work that goes into creating a budget for an organization as complex as the Newton Public Schools.  It is a significant effort and one which, unfortunately, is seldom rewarding or fulfilling.  That being said, I do have some concerns and suggestions.

My immediate reaction to the budget proposal was that it is more of the same.  What do I mean by that?  This budget is presented in comparison to prior years’ budgets.  Each section describes the change from prior year and justifies why the change (up or down).  This approach, while easy to follow, does not in any fundamental way solve the structural financial problems facing our schools.  This budget misses an opportunity to do one or more things differently.

The first opportunity is to throw out last year’s budget and start from scratch using a top-down, priority based budgeting approach.  In this method you establish the amount of money that is available (in this case dictated by the mayor), then establish the priorities of what you want to achieve (in this case outlined by the school committee).  From there you examine how much money you are willing to allocate to each priority and continue until you run out of money to allocate.  This is obviously an iterative process as once the list of what falls off the table is known priorities may be revised.  Even if this approach does not drive the budget to completion on its own, it can lead to surprising conclusions that might not otherwise be discovered.

The second item that I was surprised to see omitted from the budget proposal was explicit discussion of the upcoming contract negotiations.  I had read through nearly the entire budget document before I saw in the press that the budget proposal called for wage freezes on the contract.  I quickly went back to the document and searched for “contract”, “freeze”, and “COLA” and found nothing relevant.  Why were the assumptions used in the budget not explicitly stated in the document?  Why were the potential budgetary impacts of varying contract scenarios not explicitly described?  I remember the passionate and vivid comparisons made in both text and tables of the “Override Budget” compared to the “Allocation Budget” last year.  Why the reticence to be equally explicit now?

The final point I will discuss is the opportunity to demonstrate data driven decision making.  This is something that the School Committee has been requesting for some time and as such should be a priority within the budget.  The example I will use is the proposal to expand the math coaches program on page 41 of the document.  This comes enticingly close to using data.  2008 MCAS test results are cited as is industry research.  However, the description of the pilot program that placed coaches at the six elementary schools with the lowest MCAS scores doesn't describe the change in MCAS scores at those schools compared to the changes at the schools without math coaches (*1) -- it is clear that the point has been missed.  This seems like an obvious way to measure the success of the program.  Instead the proposal says:

“Experience to date indicates that the presence of a coach – a strong, competent, and caring colleague whose focus is on mathematics teaching and learning - has a powerful effect on teachers’ willingness to make improving their mathematics instruction a priority. Conversely, schools without math coaches have had a much more difficult time improving mathematics teaching and learning, though they have benefited from system wide professional development delivered by coaches.”

In general, the budget document is missing the same section for every item.  After "What is the Need?" and "What is the expected outcome of this proposal?", should be "How will effectiveness be measured?", only then does "What is the cost?" make sense.