BUDGET STUDY COMMITTEE REPORT QUESTIONS BENEFITS CLAIMS

Chapter Executive Committee

The Budget Study Committee of Senate Assembly provided a report to the Senate Advisory Committee on University Affairs (SACUA) on 24 March 2003 that challenges many of the claims made by the university administration in its haste to take over the administration of pharmacy drug benefits to university faculty and staff.  University officials continue to report that no contract exists with its pharmacy benefits manager, AdvancePCS, although millions of dollars are changing hands regularly.

BSC members reported that they had been unable to obtain any information from the U-M administration about the previous costs for prescription drugs, and that the U-M administration has not been willing to share information about key cost issues.  Despite declarations from Faculty Chair C. F. Koopmann that SACUA and the BSC need to see the terms of whatever agreement the U-M is working under with AdvancePCS, the BSC has been unable to obtain a copy of any agreement of any sort.

The BSC reported that AdvancePCS provides detailed information to the U-M administration on a bi-weekly basis about the prescription drug use of U-M employees.   This detailed drug-specific information linked to individuals may be a violation of the Health Insurance Portability and Accountability Act of 1996, and seems to violate privacy rights.  BSC chair C. B. Smith noted that, according to information supplied by the staff benefits office, psychotropic drugs represent the largest prescription drug use on campus. 

The BSC reported that the U-M had been expecting hefty rebates from AdvancePCS, but those expectations were on hold owing to federal probes into the practice as a kickback scheme. 

The BSC analysis shows there has been a significant shift in expense from institution to individuals.  Moreover, the claims of 16% to 20% inflation per year in prescription drug expense cited by U-M officials and agents are not borne out by published data uncovered by the committee. 

For example, from December 2000 to December 2002 in the Detroit, Ann Arbor, Flint area, the overall consumer price index (CPI) rose 4.7%, and the CPI for medical care rose 7.7%.  In the same two-year period, the U.S. City average CPI for prescription drugs and medical supplies rose 10.8%.  Meanwhile, the U-M implemented a “cost-saving” program in which the total drug costs (ingredients and pharmacy dispensing fees) rose an average of 13% per year, which includes the effects of a 2% rise in the number of participants, inflation, plus the increases in costs due to the new PBM plan.

The BSC pointed out that there has been a corresponding dramatic rise in out-of-pocket co-payments to employees that were not part of the “cost-saving” picture.

Other key points from the Budget Study Committee report:

On other budget matters, the Budget Study Committee reported it had learned that the administrative cost of instruction has been increasing by 12% per year versus a 6% per annum increase for the cost of instruction itself.  This continues a longtime trend.  The growing cost is charged to tuition.

The BSC also challenged on budget grounds the efforts by U-M administration to weaken and eliminate the Periodic Health Appraisal Unit (PHAU).  BSC learned that visits to the PHAU cost $30 per person each year.  This compares with $250 for one visit at the UM Medical Center.  The PHAU is strictly a diagnostic unit, but it also provides travel analysis and health supplies for travel as well as running a wellness program that is widely hailed as excellent.

In response to the BSC report, SACUA members adopted a resolution supporting the retention and strengthening of the PHAU and expressing opinion that it is shortsighted of the administration to let it succumb to attrition. 

The Budget Study Committee will continue its work over the summer, with its next report to SACUA due in the fall.  Committee members can be contacted directly at budget.study@umich.edu or through the chair, cbsmith@umich.edu.  

 


 

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