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Tom Kertscher
By Tom Kertscher January 24, 2011

Acting Milwaukee County Executive Lee Holloway says he saved the county over $100M on health care

A special election for Milwaukee County executive will be held in April 2011, which means that before long, boasts from politicians will be as common as tattoos on basketball players.

The five candidates include Lee Holloway, the County Board chairman who became acting county executive in December after Scott Walker resigned to become governor.

Holloway, in a Jan. 12, 2011 meeting with Journal Sentinel editors and reporters, tried for a three-point basket with a boast about the county’s health care expenditures.

"We’ve saved over $100 million of costs," he declared, then added for emphasis: "I did that."

Has the county really saved more than $100 million on its health care bills? And does Holloway deserve all the credit?

In making his claim, Holloway traced the health care savings to 2006, when the County Board moved to undo changes made by the Walker administration.

Let’s take a look at the sequence of events.

January 2006: Contract implemented.

A four-year contract negotiated by the Walker administration with Madison-based WPS Health Insurance, the county’s third-party administrator for health care, takes effect. It moved the county from being self-insured to fully insured.

Early 2006: Problems surface.

County staff inform the County Board’s Finance and Audit Committee, which requested monthly reports on health care costs, that the county’s 2006 health care costs were projected to exceed the budget by $7.3 million.

Based on a recommendation by the committee, a work group of county employees is formed. Its job is to reduce health care expenses by pursuing changes in, or even termination of, the 4-month-old WPS contract.

October 2006: Staff, contract changes.

The County Board approves a Holloway proposal to create a Division of Employee Benefits to manage health care and pension benefits. The aim is to build expertise in those areas in order to lower costs.

The county also reverts back to the self-insured model for health care through negotiations with WPS. The change is retroactive to January 2006.

November-December 2006: More changes.

The County Board approves a resolution by Holloway and other supervisors to create an advisory committee to help find health care cost savings.

Stuart Piltch -- a consultant hired by the county to help with a pension lawsuit -- is enlisted to help find savings. That recommendation came from county staff attorneys.

Beginning in 2006, the County Board led labor negotiations that resulted in increased co-pays, deductibles and co-insurance for employees.

January 2009: Contract canceled.

The county persuades WPS to release it from the four-year contract one year early. The county then signs a new agreement with UnitedHealthcare, which saved $30 million in one year alone, according to Dave Arena, the first director of the new county employee benefits unit.

(Holloway credited Arena with helping achieve health care cost savings, but fired him without explanation in January 2011 after becoming acting county executive.)

Those were the major health care changes.

So, how much money did the county save? From 2006 through 2010, an estimated $130 million, according to calculations by the county auditor’s office and the employee benefits division.

That doesn’t mean the county health care bill is dropping. The $123.7 million the county spent in 2006 dropped by 1 percent in 2007, county figures show. But since then it has risen each year to the $139.6 million that was budgeted for 2010.

What Holloway meant is that the county spent an estimated $130 million less on health care than it would have if the county remained in the fully insured plan that was put in place by Walker.

Now, how much credit for the savings does Holloway deserve?

The consensus among seven key figures we interviewed was that many people were involved in achieving the savings. But the view also was that Holloway took most of the leadership role, while the Walker administration played more of a supportive role.

A spokesman for Walker declined comment.

Holloway’s major public initiative was the new employee benefits division. That gave the county expertise to negotiate the early release from the WPS contract and to bargain a less expensive deal with UnitedHealthcare. The county estimates the change saved nearly $49 million.

Holloway’s other contributions were behind the scenes.

According to county auditor Jerome Heer, Holloway’s leadership was crucial in boosting employee contributions for health benefits, which saved an estimated $44 million.

Heer also said that if Holloway had not made reducing health care expenses a priority, the county would have stayed with the costlier fully insured plan put in place by Walker. Changing from fully insured to self insured saved an estimated $37 million.

Offering a different view were County Supervisor Paul Cesarz and former supervisor Richard Nyklewicz. They said the savings were achieved through collaborative efforts of Holloway, the County Board, county staff and others.

So, how do we size all of this up?

County figures support Holloway’s claim that the county saved more than $100 million on health care bills -- in terms of what it would have spent had changes not been made. As for credit, no one argues that Holloway dug into the nuts and bolts of the changes the county made. As the County Board chairman, Holloway’s role was leadership, and he played a key -- though far from solo -- role.

To put it another way:

Holloway didn’t dribble the basketball the full length of the court before taking his shot -- he got an assist from his teammates. But his shot did go in. We rate his statement Mostly True.

Our Sources

Meeting, Acting Milwaukee County Executive Lee Holloway at Journal Sentinel Editorial Board, Jan. 12, 2011

Interview, Cambridge Advisory Group managing director Stuart Piltch, Jan. 18, 2011

E-mail interview, Lee Holloway spokesman Harold Mester, Jan. 14, 2011

Interview and e-mail interviews, Milwaukee County Director of Audits Jerome Heer, Jan. 18, 19, 20 and 21, 2011

Interview, Milwaukee County Board budget analyst Steve Cady, Jan. 17, 2011

Interview, Milwaukee County Supervisor Paul Cesarz, Jan. 19, 2011

Interview, former Milwaukee County employee benefits director Dave Arena, Jan. 18, 2011

Interview, former Milwaukee County Supervisor Richard Nyklewicz Jr., Jan. 18 and 19, 2011

E-mail interview, Milwaukee County fiscal benefits manager Matthew Hanchek, Jan. 20, 2010

Memo, Milwaukee County Director of Audits Jerome Heer, March 12, 2008

Milwaukee Journal Sentinel, Holloway fires benefits chief, Jan. 13, 2011

Milwaukee Journal Sentinel, Milwaukee County expects $8.9 million surplus for 2009, April 12, 2010

Milwaukee Journal Sentinel, Changes keep Milwaukee County health costs down, April 30, 2010

Lee Holloway news release, Oct. 30, 2006

Milwaukee County Adopted 2009 Budget, page 1950-2

Milwaukee County Adopted 2011 Budget, page 1950-1

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Acting Milwaukee County Executive Lee Holloway says he saved the county over $100M on health care

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