Authors of a recent analysis of medical costs for auto insurers in Michigan talked with lawmakers about the “tradeoffs” of policy options during a committee hearing on Wednesday, with some lawmakers criticizing the options offered by the report’s authors.
The Citizens Research Council (CRC) released a report last week showing that Michigan car insurers pay more than other types of insurers for identical medical services. The CRC proposed options within the report for policymakers to consider that Nicole Bradshaw, CRC’s research associate, expanded on as she met with senators and representatives at the joint House and Senate hearing.
Bradshaw said the topic is relevant because health care costs surpass the rate of inflation nationwide. Getting the most out of those costs requires analysis because “after a certain level of spending, there are few benefits for additional health care services,” according to Bradshaw.
To address the problem, the report contained 11 options, each with their own benefits and drawbacks, Bradshaw said.
For example, one option discussed in the report is to set a fee schedule for the personal injury protection (PIP) coverage currently required for all drivers in the state. Doing so could “set an industry standard for prices that would be lower than what is paid now,” Bradshaw said.
The problem lies in the government’s ability to set that standard, she said.
Another option the CRC put on the table is to switch back to a liability insurance system that would leave PIP coverage as an add-on instead of a required coverage type.
Reclassifying PIP coverage as a policy add-on has proved around the U.S. to be “a cheaper alternative” but “would likely increase litigation related to auto accidents,” according to Bradshaw.
Completely replacing Michigan’s current no-fault system with a tort system is “obviously the most extreme” option because the latter “meets an entirely different set of policy goals,” Bradshaw said.
“Our paper outlines policy options that could be used,” Bradshaw told committee members, adding that the CRC had no recommendations as to which should be pursued or not. “There are tradeoffs with all of these policy options.”
Lawmaker Says Report ‘Slice and Diced’ Issue of Medical Costs
A few lawmakers in the hearing took issue with the scope of the report, which Bradshaw herself admitted was “very narrow.”
Rep. Theresa Abed (D-Grand Ledge) said she had “significant concerns” about focusing on injury costs and told committee and CRC members that focusing on consumer-related costs boxed in the report’s impact.
“That’s such a small piece of the pie,” she said about the report’s spotlight on medical costs. “I’m very troubled that generalizations are going to be made from that piece of the pie. That’s how we get into bad policy.”
Abed said that she wanted to “look at how other people can start reining in costs” within the state’s auto coverage system, pressing CRC to impose “the same scrutiny when you’re looking at the profit margins of insurance agencies.”
Rep. Ellen Lipton (D-Huntington Woods) said the report “sure was narrow” in its focus.
“Give the fact that it was narrow, some of the policy recommendations you make are fairly broad,” she said.
Lipton offered the report’s 11th option as an example.
“Going back to a tort system?” she asked sarcastically. “Wow, that’s interesting.”
Rep. Peter Lund, chairman of the House Insurance Committee, asked that committee members “be a little more courteous” to Bradshaw and CRC president Jeffrey Guilfoyle, who was also present at the hearing.
“These people are not witnesses for the prosecution you should treat as hostile witnesses,” he said, adding that the report did not contain “recommendations” but were merely options for lawmakers to consider.
Bradshaw told committee members that the CRC would “certainly be doing” addendums to its report “if it warrants.”
CRC Also Pointed Out Flaws in Current Reform Proposals
The CRC report also poked some holes in reform proposals currently in the Legislature.
Lawmakers have proposed instituting a cap on PIP benefits, another option presented in CRC’s report. However, according to Bradshaw, “we chronically underinsure ourselves,” so consumers would likely have to patch together different sources of coverage to treat complex and expensive injuries from auto accidents.
Lawmakers have also talked about shifting medical costs to health insurers. However, cost-shifting would bear consequences for not only auto and health insurers, Bradshaw said, but also employers.
Rep. Marcia Hovey-Wright (D-Muskgeon) asked Bradshaw which service would likely be left significantly uncovered if lawmakers pursued a cost-shift. Bradshaw said attendant care services would “be compromised by this option,” but added that the CRC didn’t endorse or reject cost-shifting.
“[Accident victims] rely very heavily on family and/or agency care,” she said. “Unless they qualified for Medicaid, they would not be reimbursed for this service … coverage by the current system is very broad, very accommodating to the needs of the catastrophically injured.”
Guilfoyle said that the latest report was a follow-up to a May report called“Health Care Costs in Michigan: Drivers and Policy Options.”
Reforms Efforts Already Underway
Some legislative reforms of the state’s auto insurance structure are already in development. This month, two anti-fraud bills were passed in the state House which would limit access to crash reports and victims. They currently sit in Senate Committee on Judiciary.
Another bill would ease the current statewide requirement that all drivers purchase PIP coverage by exempting Medicare recipients who are 65 years old or older. That piece of legislation is currently in a House committee.
The most major reform effort is contained within HB 4612, a bill supported by Gov. Rick Snyder that proposes a $1-million cap on benefits and passed its first committee in May.