Rising Health Care Costs in Higher Education

            From 2002-2003 to 2003-2004, the average health care premiums paid by colleges rose 11.9% (Glenn, 2005).  And from January of 2009 to January of 2010, the cost of providing health care to employees at institutions of higher education increased by almost 7% (Kirch, 2011).  This is more than 2.5 times the rate of inflation in the United States over the same period (Kirch, 2011).  And this fact remains even though the institutions are paying an increasingly smaller share of employee premiums (Kirch, 2011).  In fact, many of these employees who are now burdened with paying higher premiums may have never even had to pay premiums in the past (Glenn, 2005).  Therefore, there are a couple of different problems inherent here.  First, institutions and employees (and students) are paying more for health care, while not actually receiving additional care.  Second, institutions run the risk of not being able to recruit and retain employees (and students) because of poor perceptions about their fringe benefits (Kirch, 2011). 

            Kirch (2011) offers a few ideas for reducing health care costs for higher education institutions, the first and foremost being educating and involving its employees (and students) about prevention and healthy behaviors for lifetime wellness.  The author mentions that some colleges have begun programs that offer employees incentives, like lower premiums or vacation time, for exercising a prescribed number of times per week.  Kirch (2011) proposes that these efforts will benefit the institution through long term health care cost savings by creating a healthier student body and academic workforce, as well as a more satisfied workforce.  The author also mentions unique opportunities that institutions who act as insurer and provider have (Kirch, 2011).  He cited Penn State Milton S. Hershey Medical Center as an example.  Leaders at their medical center not only instituted a system of health care and wellness education, but they also tiered employee contributions based on income (Kirch, 2011). 

            Given the rising health care costs across the nation, and the ever-decreasing government subsidies to higher education (ironically, in many cases due to Medicare and Medicaid spending on the national and state levels), it is paramount that higher education institutions take a critical look at their insurance plans and the activities of their providers to find ways to reduce spending in this area.

Glenn, D. (2005). The health-care tussle. The Chronicle of Higher Education, 51(20), 21-22. Retrieved from http://vnweb.hwwilsonweb.com.ezproxy.memphis.edu/hww/results/getResults.jhtml?_DARGS=/hww/results/results_common.jhtml.35

Kirch, D.G. (2011). Higher education and health care at a crossroads. Trusteeship, 2(19). Retrieved from http://agb.org/trusteeship/2011/3/higher-education-and-health-care-crossroads

Students Receive Less Bang for Their Buck: Instruction Spending Down, Tuition Up

            From 1989 to 1999, student enrollment in degree-granting postsecondary institutions rose 9%, and from 1999 to 2009 enrollment rose 38%, from 14.8 million to 20.4 million (IES, 2011).  Given these trends, there has been an obvious need for increased student support services and administration across most institutions, both public and private, to accommodate the needs of a growing student population.  However, to what extent should the growth of these services outpace spending on instructional activities, and given the incremental increases in tuition, is the individual student gaining less value for his educational buck?

            Based on a study by the Delta Cost Project (DCP) and the American Institutes for Research (AIR) (Wellman et al., 2009), the percentage of overall institutional spending on student services and administrative support/maintenance has increased at a faster rate than instructional spending from 1995 to 2006, thus decreasing the overall share of instructional spending.  In fact, from 1993 to 2007, the number of full-time administrators per 100 students grew by 39%, but the number of instructional employees grew only 18% (Greene, Kisida, & Mills, 2010).  Again, since enrollment has increased so much, this statistic is justifiable.  However, over this time period the increase in tuition prices outpaced that of education and general spending per student , which suggests that institutions are not only spending less per student on instructional activities as compared to administrative services and student support, but they are also making students pay a larger amount toward the per student spending (Wellman et al., 2009).  Thus, ostensibly for less instruction, they pay a greater amount.  Of course, one could argue that capital spending on technology may have helped to reduce the per student dollars needed to give comparable instruction, but one could also argue that with increased enrollment institutions would achieve economies in both administration and student services.  That is, administrative staff, for instance, should be able to work closer to their potential as they serve more and more students.  For example, one bursar’s office employee may have handled 10 students per hour in 1995, although he could have handled 25.  Perhaps he was just doing crossword puzzles in his unused time.  So, instead of hiring two more staffers to meet the demands of 25 students, the institution can pay the one staffer based on cost of living increases over the years and save money on training and retaining two additional staffers. 

            One of the big problems with this “administrative bloat” (Greene, Kisida, & Mills, 2010, p. 1) is that traditionally students have paid only a small portion of these increasing administrative costs.  Federal and state subsidies, in addition to private donations, have largely insulated students from these costs.  However, as government subsidy decreases, students will bear more of the financial burden.  Therefore, higher education institutions need to focus more on cutting the costs of administration and student services by increasing efficiencies. 

Greene, J.P., Kisida, B., & Mills, J. (2010). Administrative bloat at American universities: The real reason for high costs in higher education (Report No. 239). Phoenix, AZ: Goldwater Institute. Retrieved from http://www.goldwaterinstitute.org/article/4941

Institute of Education Statistics (IES) website. (2011). “Fast facts: Information on postsecondary enrollment rates. Retrieved from http://nces.ed.gov/fastfacts/display.asp?id=98

Wellman, J.V., Desrochers, D.M., Lenihan, C.M., Kirshstein, R.J., Hurlburt, S., & Honegger, S. (2009). Trends in college spending: Where does the money come from? Where does it go? Washington, D.C.: Delta Cost Project. Retrieved from  http://www.deltacostproject.org/resources/pdf/trends_in_spending-report.pdf

Net Price Calculator

Baum, S., McPherson, M. (2011). Net-price calculators: A good first step. Retrieved from http://chronicle.com/blogs/innovations/net-price-calculators-a-good-first-step/28968.
On October 29, 2011, all colleges and universities, who participate in Title IV federal student aid, are mandated by the federal government to have a Net Price Calculator on their college website. The calculators use institutional data such as budgets (tuition, room/board, books, personal expenses) and award amounts to provide an estimated "net" cost to current and prospective students (Baum & McPherson, 2011).
The purpose of the net price calculators is to help parents and students make better informed decisions about where to go to school. The calculators allow for prediction in costs before enrolling in a college (Baum & McPherson, 2011). The success of the calculators have yet to be seen but will likely depend on the design utilized by each institution. The federal government template allows only for grant programs (i.e. Pell grant). Other templates allow for customization in which schools can ask specific questions related to a specific question. While the calculators will provide initial information, it will be important for the student and parent to go above and beyond to talk to the institution of choice before making any final decisions. Better decisions and guidance can lead to a better college experience (Baum & McPherson, 2011).

Financial Aid Fraud

In 2009, Trenda Halton was arrested for financial aid fraud that involved as many as 136 individuals posing as online students. Halton stole taxpayer funds by creating false documents and helped people take out Pell grants and Staffard loans. The so called “students” were scammers that pretending to be “online students” at Rio Salado Community College in Tempe, Arizona. Halton falsified documents such as social security numbers, drivers license numbers, tax returns and high school diplomas. Halton made between $500-$1500 for each “student” in the scheme. The grand jury indicted 64 people, 55 of them sentenced to time in prison and ordered to pay restitution. In 2010, Halton was sentenced to prison and ordered to pay $581,060. Trenda Lynn Halton recruited close to 136 individuals as part of a financial aid scam. She lead a financial aid fraud conspiracy in 2009.

Federal aid funds are limited so financial aid fraud limits availability of money for students that really need the funds. Money intended for real students was stolen from taxpayer funds. The sentencing and indictment of these individuals should serve as a deterrent to other people that may try to scam the financial aid system. In addition to the legal prosecution in the aftermath of an event such as this, college or universities should prepare beforehand. In order to avoid schemes like this the United States Department of Education and colleges and schools should require that financial aid administrators receive in-depth training on identifying fraud scams. Any individual participating in unlawful actions as it relates to financial aid should be prosecuted.

United States Department of Education (2010). Ringleader of $500,000 Financial Aid Fraud Scheme Sentenced to Prison 55 of 64 Defendants have been Sentenced to Date. Retrieved October 28, 2011 from http://ed.gov/about/offices/list/oig/invtreports/az052010.html

Unknown (2009). Grand Jury Indicts 65 in Arizona Student Aid Fraud Scheme. Fox News Online. Retrieved October 28,2011 from http://www.foxnews.com/story/0,2933,529000,00.html

Winner Take All

Selective higher education institutions strive to be the best in every area of the institution. These institutions fundraise aggressively and use the money to improve the institutions. Funds are generally used to enhance technology, construct or renovate buildings, increase research, and to recruit top students. This gives the institutions an advantage over other institutions that may not be able to allocate a lot of resources. Since these institutions have so many upgrades and enhancements they become more attractive to parents and students. Therefore, selective private institutions can drive up the price tag on higher education in order to set themselves apart from the competition.

Colleges or universities that have limited resources should consider ways in which they can control costs without raising tuition through the roof. The system of shared governance should come into play when evaluating the spending at the institution. Academic deans should be responsible for helping to control costs campus wide, not just at the department level. Also, trustees and alumni should be key players in backing the efforts of top administrators in controlling costs. Lastly, institutions should work with their competitors to share academic and administrative resources in order to decrease spending.

Ehrenberg, R. (n.d.). Tuition Rising: Why College Costs so Much. Retrieved October 29, 2011 from http://net.educause.edu/ir/library/pdf/ffp0005s.pdf

Change our expense habits.

Colleges and students allow money to walk out the door by making uneducated decisions on managing the campus’ facilities. There are a number of ways to improve efficiency and save both parties money, but these items are normally the last items of concern for either party during a hectic semester. However, that lack of focus needs to change.

Articles by The Best Colleges Online and Time Magazine highlight a number of improvements that numerous colleges have made in order to save money. From saving money on electricity, water, storage, waste, and many other ideas, these colleges have been able to save thousands of dollars annually. You will find some of these ideas below:

“Cutting Phone Lines: At the University of Washington, they’re cutting their land lines. The school discovered that landlines just weren’t necessary for the communications department (an appropriate department for the cut, we think). Although they kept common area land lines as well as lines for staff, department faculty no longer have their own phones, saving about $1,100 each month, and eliminating the department’s biggest line item.” (Best Colleges Online, 2011).

“Going Trayless: Cafeteria trays lend a festive, institutional flair to school eateries, but many campuses are ditching them altogether and seeing a huge savings. Williams College has cut trays, and estimates a water savings of 14,000 gallons. And although food costs are rising, Rochester Institute of Technology has a 10% lower food bill, attributed to reduced food waste since eliminating trays. An added bonus of going trayless? Students are less likely to pack on the "freshman 15" once they have to choose food carefully instead of loading up” (Best Colleges Online, 2011).

“Retrofitting lighting: At Arizona State University, the school took on a major project to retrofit interior and exterior lighting, improving lighting quality and reducing the energy demand of the lighting fixtures. There were 10,214 fixtures retrofitted over six months and 300 acres. Although an involved undertaking, it proved to be useful. The effort saved more than 1 million kilowatt hours, with a savings of $100,000 each year for the school” (Best Colleges Online, 2011).

“Rhodes hires students for professional staff positions: College jobs are great for students, and can provide excellent experience that will serve them when it’s time to graduate and move out into the career field. Colleges can also benefit from student work, and Rhodes College has created a program that serves both student and college by hiring students to work in professional staff positions. In addition to improving the resumes of the 25 students in staff positions, the college has saved $725,000 per year by hiring them” (Best Colleges Online, 2011).

“Dirty windows, dingy sidewalks: Power washing eats up a huge amount of money at Pitzer College. The college used to power wash its sidewalks and windows two times a year, but now does it just once, saving the college $80,000 annually. We’re betting that no one even picked up on the difference of a little bit more dirt on the sidewalks, but $80,000 is certainly worth noticing” (Best Colleges Online, 2011).

“Bryn Mawr College: Saved $900 when its women's swim team held a virtual meet against nearby Dickinson; each team's swimmers raced in their home pool, and then they compared times to declare winners” (Yan, 2009).

“Rochester Institute of Technology: Netted $10,000 by going digital, moving some athletics publications online” (Yan, 2009).

Considering that these steps are small in many ways, yet they add up in the long run. So much so, that tuition costs and other expenses, which are budgeted to these areas, could be used in more constructive means. Sometimes it takes a collective action to make a dent in the cost disease.


References:

Best Colleges Online. (2011). 20 innovative ways colleges are saving money. Retrieved from, http://www.bestcollegesonline.com/blog/2011/08/09/20-innovative-ways-colleges-are-saving-money/

Yan, S. (2009). Colleges find creative ways to cut back. Time Magazine. Retrieved from, http://www.time.com/time/magazine/article/0,9171,1921613,00.html

Improving data to tackle the higher education "cost disease"

Wellman, J. (2010). Improving data to tackle the higher education "cost disease." Retrieved from http://periodicals.faqs.org/201004/1980865751.html.

In order to tackle the cost disease issue, one must understand what has contributed to defining cost disease. Over the past few years, there has been a renewed focus on degree attainment and access. President Obama made it clear during the presidential elections, that he wanted to have so many degrees by the year 2020. The United States is straggling behind other countries in relation to degree attainment (Wellman, 2010). Rising tuition is the clearest of the diseases. Students, parents and institutions feel the pressure of rising tuition costs. Cost of tuition has been on a continuous upswing since 1988. Another issue relates to spending. While college costs are on the rise, institutions are not spending on the student (Wellman, 2010). State funding is decreasing each year knowing the gap can be filled by students through increased tuition. Public opinion strongly supports public education but is highly critical of spending and cost management (Wellman, 2010).
Wellman argues that data can impact the cost disease dilemma (2010). Partnered with the Lumina Foundation, the Delta Cost Project is providing important information related to cost spending and educational access and performance (Wellman, 2010). Such data include:
• Revenues by major source, per FTE and adjusted for inflation
• Spending by major function
• Relationship between spending and tuition increases
• Patterns of cost, price and subsidy over time
• Costs of degree and certificate completion
• Measures of average education and related spending per student (Wellman, 2010).