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Citizens Budget Commission Clashes with de Blasio Over Healthcare Savings

 Mayor Bill de Blasio's labor agreement with the city's workforce includes $3.4 billion healthcare savings over the next four years.
Mayor Bill de Blasio's labor agreement with the city's workforce includes $3.4 billion healthcare savings over the next four years.
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DNAinfo/Colby Hamilton

CIVIC CENTER — CIVIC CENTER — Independent fiscal watchdog group Citizens Budget Commission dismissed many of Mayor Bill de Blasio's proposed union healthcare savings, saying they won’t significantly shrink the $13.4 billion price tag of new four-year contracts as promised by the mayor.

In a June 6 letter sent to Bob Linn, the mayor’s chief labor negotiator, CBC president Carol Kellermann addressed the mayor's outline for how he plans to save $3.4 billion in healthcare costs to offset his multimillion-dollar teachers union deal.

The tentative deal hammered out between the city and the city’s union umbrella group, the Municipal Labor Committee, will provide a “menu” of options each union can use to help the city realize $3.4 billion in health care savings over the next four years.

Kellerman said the city's options need to “either reduce provider payment levels for, or reduce utilization of, a particular service” to be considered valid savings.

Based on subsequent responses from the mayor's team, CBC fears the city’s plans “are a collection of one-time or temporary savings.”

The savings options the city is including as part of its projected $3.4 billion budget fail to meet the CBC's basic criteria for sustainable savings, according to Kellerman.

For example, the city is counting the emptying of a $1 billion health insurance “stabilization fund” as savings in its plan, which Kellerman says shouldn’t be because “[i]t does nothing to make the delivery of health care more efficient and is not recurring.”

Likewise, any sort of temporary “freeze” on insurance premiums shouldn’t count, Kellerman said, because they too often result in future premium hikes to make up the shortfall for insurers.

Additionally, Kellerman criticized plans that would count headcount reductions as healthcare savings.

“Savings should be based on an agreed upon baseline number of people covered,” she said.

Kellerman did give the city a partial pass on its plans to drop thousands of members who don't qualify from the city’s health insurance rolls.

Since the unions have to help the city implement the purge, a savings on the first round was understandable, but Kellerman pointedly argued that auditing the rolls should be ongoing and not count towards future savings.

Given the difficulty in finding these sorts of savings, Kellermann said the best plan was to begin having workers contribute to their health care.

“These savings are easily identified, predictable, and create incentives for employees to seek additional cost containment measures,” she said.

The CBC encouraged the mayor's team to seek changes that are “recurring and…truly ‘bends the curve’ in health care costs by making the system operate more efficiently.”

In his response, Linn made clear that having workers pay more for their healthcare isn't currently part of the city’s plan.

“It’s important to note that the City has not assumed the cost savings will necessarily be realized through premium cost sharing with employees,” he said. “The City will first work to find real, permanent savings and fundamentally bend the curve when it comes to rapidly-increasing health care costs.”

Linn acknowledged that the health care deal didn’t define savings the way CBC had. Instead the city and unions agreed to meet “annual or four-year cumulative saving through a variety of initiatives.” The list of initiatives included some Kellermann had specifically argued shouldn’t could towards savings.

Linn went on to say that the city’s “objective is to save money relative to the projected costs” of healthcare costs to the city in the long run, indicating that if the overall costs go down, the health care savings goals would shrink accordingly — not, as Kellermann suggested, be hard targets the city should aim for.

“We beg to differ with them on some things, based on how savings should be determined and calculated,” Kellermann said in a phone interview Wednesday.

She said CBC would continue to press for recurring savings.

The Mayor’s office didn’t return a request for comment on CBC’s latest statement.