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Originally published Monday, October 29, 2012 at 9:46 PM

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Inslee scales back expected savings from a centerpiece of his platform

After spending much of the governor's race touting prevention-based health care as a way to save the state hundreds of millions of dollars, Jay Inslee has cut his estimate for how much the plan would actually save.

Seattle Times staff reporter

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From Pullman to Puyallup, gubernatorial candidate Jay Inslee has trumpeted prevention-based health care for state employees as a way to save hundreds of millions of dollars a year.

But now the Democrat has cut his cost-savings estimate by as much as two-thirds, raising new questions about the feasibility of his vow to boost education spending without raising taxes.

Campaign staffers insist the proposal would still generate significant savings. But some government officials, health-care experts and union leaders say that isn't clear without further study.

Inslee and his Republican opponent, Rob McKenna, agree that controlling health-care costs is crucial to adequately funding education without new taxes, as both have pledged.

McKenna wants to cap health-care spending and raise the share of premiums paid by employees unless they switch to a consumer-directed plan, which pairs higher deductibles with health-savings accounts. Persuading unions to accept those changes could be a challenge.

Inslee's plan would shift state employees to a health-care system similar to the one adopted in 2005 by King County, which lowered costs through wellness programs, greater use of generic drugs and other strategies. Inslee has said it could save between $300 million and $455 million a year if implemented statewide.

However, his campaign recently discovered that King County actually saved only a third of what Inslee has been saying on the campaign trail. Because the state savings estimates are based on the county's experience, the campaign has scaled back its numbers.

"If you want to argue that $200 million or $100 million in savings to the state is insignificant, I think everybody in the world would argue with you," said Sterling Clifford, a campaign spokesman. "Frankly, if it's $50 million, it'll be helpful."

State health officials also note they've already adopted parts of King County's system, would have trouble doing some other aspects of it and, of course, would have to negotiate changes with many labor unions.

"There are 100 moving parts in this type of discussion," said Lou McDermott, the director of the public-employees benefits division of the state Health Care Authority. "None of it is simple."

Still, officials and experts praised Inslee for proposing something comprehensive to address one of the largest parts of the state budget and potentially improve employee health.

Traditional model

David Rolf, president of Service Employees International Union 775NW, says the state's health-care system is too focused on a traditional model in which patients often wait to go to the doctor or think about health until they get sick.

"It's not the way of the future," said Rolf, whose long-term-care workers union has endorsed Inslee. "Fifty years from now, we'll look back on it as we now look back on leeches."

Doctors say it's cheaper and better for patients to get checkups, know their health status and work to address potential issues, such as with exercise or diet.

The state, which covers some 337,000 employees, family members and retirees on several plans, generally does not encourage that kind of preventive care.

Systems geared toward prevention have saved private companies money, especially long term. But their record in government agencies has been spotty.

In fact, health-care policy experts say King County was the country's first governmental entity to demonstrate cost savings and improved employee health.

The county's system got significant cost reductions — $46 million over its first five years — by providing financial incentives to employees to get healthy, use generic drugs and avoid unnecessary visits to the doctor, budget director Dwight Dively said. It also lowered obesity and smoking rates.

Many mistakenly believe King County saved much more — $61 million over just two years — because the county announced in 2011 that its overall health-care costs for 2011 and 2012 were $61 million below projections. That was partially due to the new health-care system, but also the result of layoffs and problems with the original projections.

Inslee has long used the $61 million figure, including in debates and on his website, extrapolating the savings from the 30,000-member King County plan to get his state savings estimate.

The error was due to bad information, said Clifford, the spokesman. He said the county's experience has always only offered "the scope of the potential savings."

Obstacles seen

Health-care experts agree parts of King County's model could produce savings if implemented statewide.

But a closer look reveals the state would have trouble saving money on at least three of the four major pieces of King County's plan.

For one, Inslee says he does not "prefer" one of the pieces — an across-the-board increase in deductibles and co-payments paid by all employees on its preferred-provider plan. That move shifted some costs to employees and reduced unnecessary doctor visits.

Meanwhile, state officials say they have focused on two other pieces: raising employees' contribution for brand-named drugs while lowering it for generics, and encouraging employees to switch to a less costly health-maintenance plan, Group Health.

In fact, the state is ahead of King County on both measures. The county has increased its generic-drugs utilization rate to 68 percent and Group Health usage to 27.5 percent. But the state's generic utilization rate already is 84 percent, and 35 percent of its members are with Group Health.

Officials also said it could be hard for the state to greatly expand its use of Group Health because that provider does not have partners in every corner of the state.

That leaves the centerpiece of King County's plan: the wellness program.

Called Healthy Incentives, the program raises deductibles and co-pays unless employees take an annual online health assessment and participate in a 10-week program to address their health. Most employees do, and their improved health lowered costs by $15 million over its first five years.

State officials said putting in place a wellness program could save money, and some agencies have already pursued a version of it — including McKenna's attorney general's office.

Inslee does have other health-care ideas.

Among them, he said he would consider encouraging employees to go to a primary-care physician by reducing reimbursements for emergency-room trips.

He also wants to push Medicaid recipients toward prevention-based care and would accept the Medicaid expansion in President Obama's health-care law, which could save the state $120 million in its first seven years, according to the left-leaning Washington State Budget and Policy Center.

But those savings are far short of the more than $1 billion lawmakers say is needed next biennium to meet a state Supreme Court ruling ordering them to fully fund basic education.

Gov. Chris Gregoire, a Democrat who has endorsed Inslee, said last week that neither candidate's education-funding plan is realistic.

Another challenge facing both Inslee's and McKenna's health-care proposals is that several labor unions would have to sign on.

State health officials approached labor last summer with a wellness proposal but could not reach an agreement. And attempts to get state workers to pay a larger share of health-care premiums came up short this fall.

Tim Welch, a spokesman for the Washington Federation of State Employees, said the union would likely support a proposal from Inslee, though members would have to see the details.

Inslee said he's confident about getting support. "This is not just a financial exercise," he said. "The primary goal of this is improving our fellow worker's lives. I think we can all agree on that."

Brian M. Rosenthal: 206-464-3195 or brosenthal@seattletimes.com. On Twitter @brianmrosenthal.

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