COA: State workers’ mandatory health-care charge unconstitutional

A statute requiring public employees to contribute three percent of their pay to finance state retiree health-care benefits is unconstitutional, the Michigan Court of Appeals has ruled.

In AFSCME Council 25, et al. v. State Employees Retirement System, et al., the court upheld a lower court ruling that struck down MCL 38.35.

The state and unions representing state workers negotiated a three percent pay raise, which the state Civil Service Commission (CSC) approved.

The statute negated the raise by requiring state workers to contribute the amount of the raise to fund health care benefits for state retirees.

Court of Appeals Judge Karen M. Fort Hood, joined by Judges Jane M. Beckering and Cynthia Diane Stephens, ruled that the CSC has plenary authority over state workers’ pay.

Fort Hood explained that Michigan’s Constitution has an express mechanism to override the commission.

[A]n increase in the rate of compensation authorized by the commission may be rejected or reduced by the Legislature “by a two-thirds vote of the members elected to and serving in each house” provided the vote occurs within 60 calendar days of the transmitted increase. Mich Const 1963, art 11, § 5, ¶ 7.

The Legislature tried but failed to override the CSC in this manner, and then enacted the statute.

But, Fort Hood ruled, by enacting the statute:

the Legislature acted to reduce the compensation of classified civil servants by three percent without an accompanying agreement with the unions or the [commission].

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Michigan Blues lawsuit gets national attention

Three months ago, we reported on Pontiac-based TheraMatrix winning a $4.5 million lawsuit against Blue Cross Blue Shield of Michigan for breach of contract and tortious interference with economic and business relationships (“Their (Blue) Cross to bear,” Aug. 23, 2010).

Now, this matter is getting national attention, thanks to a USA Today story that also appears in the Detroit Free Press (both papers are owned by Gannett). The Freep also published a story that talks about a recently filed U.S. Justice Department lawsuit against the Blues.

Here’s an excerpt:

As health care costs soared nationally, a small Michigan firm gave Ford Motor Co. a proposal to cut its physical therapy costs. The automaker signed up for an in-state pilot program, which was so successful Ford expanded it last year to cover about 390,000 employees, retirees and their families nationwide.

Yet the cost-saving program created by Pontiac-based TheraMatrix has come under attack from Blue Cross Blue Shield of Michigan.

Court records allege Blue Cross used its position as the state’s dominant insurer to try to crush TheraMatrix as it worked to also sign up Chrysler and General Motors.

A USA Todayreview of hundreds of pages of e-mails and internal documents that are part of a lawsuit TheraMatrix filed against Blue Cross indicates that TheraMatrix’s efforts to carve out a niche market in managing outpatient physical therapy costs was seen as a threat by officials at Blue Cross and by some Michigan hospitals. …

The dispute provides a window into some of the factors that make overhauling the nation’s health care system so difficult. The aggressive tactics employed against TheraMatrix raise questions about whether relationships between hospitals and insurers are inflating medical prices and stifling competition needed to control costs.

Court records depict Blue Cross — a nonprofit created under Michigan law to provide affordable health care — as working with a major hospital to stop expansion of TheraMatrix’s program. They also reveal that Blue Cross barred TheraMatrix from the insurer’s medical provider network, which covers most Michigan patients.

A Detroit-area jury awarded TheraMatrix $4.5 million in July, finding that Blue Cross breached an agreement with TheraMatrix to process claims for its Ford program, then wrongfully interfered with TheraMatrix’s efforts to launch a Chrysler program. Blue Cross has appealed.

Last month, the U.S. Justice Department sued Michigan’s Blue Cross, accusing the insurer of a different kind of anticompetitive behavior: paying hospitals higher prices for medical care in exchange for a promise they would charge competing insurers as much as 40% more than they charge Blue Cross. Blue Cross says the suit is without merit. …

Effective antitrust regulation is critical to lowering health care costs, Christine Varney, the assistant attorney general who heads the Justice Department’s antitrust division, told lawyers at a health care conference in May. “The goals of health care reform cannot be achieved,” she said, “if dominant insurers use exclusionary practices to blockade entry or expansion by alternative insurers.”

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Meijer will settle pharmacy case for $3M

“Meijer Inc. will pay $3 million after the Midwest retail chain discovered it had employed four pharmacists who were barred from federal health programs, the government said Tuesday,” reports the Detroit Free Press.

“The pharmacists worked at Meijer stores in Michigan and Ohio from 1997 to 2006 and had been barred from Medicare, Medicaid and Tricare, a military health plan. Federal law prohibits stores from using pharmacists on the exclusion list. Meijer gets federal reimbursement for many prescriptions it sells.”

Hungs plead not guilty to 59 charges

“During arraignment in Huron County Circuit Court Monday afternoon, Dr. Yuh-lin Hung and his wife, Jen, pled not guilty to 56 counts of health care fraud and three counts of larceny by conversion,” according to the Huron Daily Tribune.

“A jury trial has been scheduled to begin at 9 a.m. March 16, 2010 and is expected to last several days.

“According to circuit court records, plea bargaining will remain open until Feb. 16.

“According to the Michigan Attorney General’s Office, the charges stem from the alleged misuse of vaccines from the Vaccines for Children (VFC) program.”

Malpractice damage caps touted in health care reform debate

Medical malpractice costs are getting more attention in the health care debate, despite studies that show capping jury awards in malpractice cases would do little to lower health care spending, according to a story by Maureen Groppe of Gannett’s Washington Bureau, published in this morning’s Lansing State Journal.

Thirty-six states – including Michigan – already limit the compensation patients can get for medical errors.

But the issue is popular with doctors and Republicans and has been cited as a way to bring Democrats and Republicans closer on health care reform.

“I have a real difficult time understanding why liability reform is not on the table,” said Dr. Kenneth Elmassian, an anesthesiologist from the East Lansing area who is on the board of the Michigan State Medical Society. “As a practitioner, I know people do practice defensive medicine … just to kind of cover yourself.”

Republican lawmakers have long touted federal tort reform as way to bring down health care costs.

“For too long, trial attorneys have looked at doctors as ATM machines and have filed countless frivolous lawsuits,” said Rep. Candice Miller, R-Harrison Township. …

Studies show that limiting such awards slows growth in the cost of medical malpractice insurance for doctors.

But lower malpractice insurance rates would have a “very modest” impact on doctors’ fees and would reduce total health care spending by less than 0.2 percent, according to the nonpartisan Congressional Budget Office.