The impact of a comprehensive medical benefit cost management program for the city of Birmingham: results at five years

Abstract

Double digit annual increases in the cost of medical benefits represent one of the major financial challenges for many private and public sector employers. Gaining greater control is a top priority. Since the procurement, administration, and delivery of employee/dependent medical care is a highly complex venture, it is unlikely that any one activity will contain costs effectively. This report examines a comprehensive cost management effort for the municipal government of the city of Birmingham, Alabama, which included health promotion, medical plan redesigning, managed care, and "how to use the medical system" education programs. The $3 million project was funded by the National Institutes of Health and the employer and conducted from 1985 to 1990. In 1985, medical benefits expenses for the 3,586 employees were $2,047 per employee which was about $400 above the state of Alabama per employee average. In 1990, for 4,000 employees, it was $2,075 which was $922 below the state average. While the project design does not permit a precise evaluation of the exact impact of each of the cost containment activities, attempts are made to estimate their impact. Several health promotion activities, which may be unique to this project, including the all-employee medical screen, are presented and evaluated.