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September 27, 2006
It Was Wal-Mart, In Arkansas, With The Corporate Memo
That's that, then. Wal-Mart, the largest employer in America, has decided to cease offering traditional health care plans and move entirely to high-deductible, HSA-style offerings. Wake-Up Wal-Mart got their hands on some internal benefit memos, and here's what they showed:
Among the most striking findings outlined in Wal-Mart’s 2007 benefits booklet is the substantial health care cost a low-paid Wal-Mart worker would be forced to pay under the so-called ‘Value’ plan. A typical individual Wal-Mart worker who enrolls in the Value Plan will face high upfront costs because of a series of high deductibles, including a minimum $1,000 deductible for individual coverage, a $1,000 in-patient deductible per visit, a $500 out-patient surgical deductible per visit, a $300 pharmacy deductible, and a maximum out of pocket expense of $5,000 for an individual per year.
In total, when factoring the maximum out-of-pocket expense and the cost of the yearly premium ($598 a year for an individual under the Value Plan), a typical full-time worker (defined by Wal-Mart as 34 hours) who earns 10.11 an hour or $17,874 a year, would have pay nearly 30 percent of their total income for health care costs alone.
Incredibly, the health care cost burden actually worsens should an uninsured Wal-Mart worker enroll their family under the Value Plan. Again, because of multiple deductibles for each family member, and when factoring in the cost of the medical premium ($780) and maximum out-of-pocket expense ($10,000), a Wal-Mart worker whose family is insured under the “Value Plan” could pay as much as 60 percent of their total income towards health care costs under Wal-Mart’s most “affordable “health care” plan.
Yikes. This, of course, is only further evidence that it's time to stop making Wal-Mart offer decent health care -- which they will clearly not do -- and simply rip the responsibility away from them, ensuring all of their "associates" have generous, serious coverage they can fall back on.
More worryingly, Target has promised the same move. Which'll mean that the two largest retailers will both eschew traditional health care plans for low-cost (to the company), high-risk (to the employee), astonishingly stingy offerings. Now, of course, any retailers who seek to compete with them -- and that includes supermarkets, clothing outlets, and all the rest -- will be at a competitive disadvantage if they fund traditional health care plans for their employees. It also means producers will be under added pressure by Wal-Mart and Target to make the same shift in order to lower their labor costs and, thus, prices. If the producers refuse, Wal-Mart can simply replace them with their in-house brands. This is how a race to the bottom starts. This is how employer-based health security dies.
Crossposted at Tapped
September 27, 2006 | Permalink
Comments
Not that the death of employer-based healthcare is a bad thing, but I wish it could be accomplished without screwing over middle America.
Posted by: Kylroy | Sep 27, 2006 10:57:49 AM
So the answer is National Socialism rather than shopping and working elsewhere?
Still looking for the location where Wal~Mart is the only store in the neighborhood. Target too. Have not found it yet, will report back when I do.
On the bright side, for those who agree with you, perhaps Wal~Mart will carry more petrol products and destroy "big oil." I prefer they carry GM products, but that is just my personal dislike of those products.
Also, for the gun haters, they sell a lot of shotguns, rifles and ammunition. Perhaps that will be the next industry to fold under the crushing pressure of Wal~Mart?
The decline of Ambassador/Mayor Andrew Young can be traced directly to his association with Wal~Mart too.
Posted by: Guy Montag | Sep 27, 2006 11:00:50 AM
Dancing forward and back seems to be what WM does best. The more I look into HSAs the more I think they are great for someone with a dead-middle class income or higher. They do not translate into anything functional for lower income families or individual. And the only way for them to work for the middle incomes is if they are living well within their means. For example, if I was making $55,000 plus I could afford to get an HSA as long as I was willing to forgo home ownership - or at least put it off until I could save a substantial HSA. That, of course being contingent on not getting horribley ill. It does not work for anyone who works for the wages WM pays most of it's hourly workers.
Posted by: DuWayne | Sep 27, 2006 11:01:26 AM
The only way a HSA makes sense is if it does NOT have one of those horrible "use it or lose it" provisions where every 12 months you have to spend down everything in your account or the money goes poof. Those things go completely against the idea of longterm savings for health-related expenses.
Posted by: fiat lux | Sep 27, 2006 11:08:30 AM
This is how a race to the bottom starts. Bad.
This is how employer-based health security dies. Good.
I don't want the process to be as painful as it is shaping up to be, but once Wal-Mart, Target and then the major manufacturers start this race, the closer we'll come to the universal health care the country truly needs.
Posted by: Mr Furious | Sep 27, 2006 11:10:15 AM
You're thinking of Flex Spending, fiat. HSAs all have provisions that you can carry over unspent money to the next year. Of course, you need money to put into your HSA account in order for it to carry over. Also, obviously the tax benefits of all of this will be lost on someone who is poor enough to barely pay any federal income taxes.
I have to wonder what Wal-Mart's contribution is to these plans? I imagine I could go out and buy something similar for myself right now (if not for some pre-existing conditions that might underwrite me out of it), without Wal-Mart's buying clout and without their employer contribution, and wind up paying something similar to what these employees are paying.
Posted by: spike | Sep 27, 2006 11:14:19 AM
The only way a HSA makes sense is if it does NOT have one of those horrible "use it or lose it" provisions where every 12 months you have to spend down everything in your account or the money goes poof. Those things go completely against the idea of longterm savings for health-related expenses.
Like spike said, that isn't part of HSAs. The whole point is to develope a huge savings so that as one gets older and health declines they not only have their deductible - they have enough to cover expenses not covered by their actual policy, such as glasses/contacts, voluntary surgeries, dentures or anything else. The idea is, if you start young, you can have everything you need to cover health related expenses by the time you retire.
At my current income level they just aren't feasible. But as my business grows and my income goes up, I may well end up going that direction. I would prefer to see UHC but short of that I have to protect myself and my family. At thirty, I have certain elevated risk factors for heart disease as well as other concerns. I want to ensure that as I get older I can, in fact see a doctor and get medicines they might prescribe. The enormous problem with HSAs at WM and similar service industry jobs is the lack of income to cover the deductibles. I could afford the policy attached to an HSA right now, the problem is covering the deductible - and I make a little more than your average WM rank and file employee.
Spike - Where I have been looking at them, they don't have nearly the strictures that traditional insurance policies carry. Pre-existing conditions just raise your policy price - but when they start out around $55 a month with the lower end deductible, an increase of 10% isn't that painfull. Shit, I'm sounding like R.G.
Sorry. Beleive me, I am far more interested in UHC than HSAs that do little to nothing towards addressing the actuall healthcare crisis this country has.
Posted by: DuWayne | Sep 27, 2006 11:37:16 AM
This is how employer-based health security dies.Good.
I don't know how comfortable I personally feel about advocating for the liberal version of "starve the beast." (The beast being employer-based healthcare, naturally.) Beyond my conscience telling me there are better ways, there is a political problem too. We want to make sure that Democrats have the ability to sympathize with the segment of the population directly affected by these changes. If liberal supporters go around proclaiming that this is the "tough love" needed to enact our healthcare agenda, that could project onto the politicians themselves. Afterall, I don't think people really have issues with employer-based healthcare as it is, provided they are offered it of course. Ultimately, I think the reasons universal healthcare is better is because it works better than employer-based care, not because people don't have employer-based care.
Posted by: Adrock | Sep 27, 2006 11:39:14 AM
Adrock, I understand your concerns and don't wish to gloat about people who are losing their health coverage. However, until a majority of voters lose their coverage or are convinced they MAY lose their insurance, we will not get the political will to really tackle a universal coverage plan. I know a lot of liberal Dems who believe in the concept of universal coverage, but they won't support any changes to their current coverage. For Americans to embrace this magnitude of change, the fear of the known must outweigh the fear of the unknown. I hope I'm just too pessimistic.
Posted by: Marv Toler | Sep 27, 2006 11:58:06 AM
I can see both side of this - unless someone here has experience in Benefits purchasing or something HR related, it's hard to understand the bind many companies are in (I'm generalizing before going to Wal Mart specifically). Having worked closely with Benefits folks and with a friend in HMO land, I've seen both sides and the reality is that there's almost nothing being done to control costs in the health care systems, leaving insurance providers in a bind in terms of how to price coverage, and leaving companies in a bigger bind about how to subsidize their workers at levels we've all come to take for granted. As to Wal Mart, I'm not entirely sympathetic, but the fact remains they built a model which was never designed to be the bread winning income of a head of household. This was work conceived years ago as part time work for Moms, students and the like, and I doubt they ever fully planned for a huge work force relying solely on them for insurance. So it's a bind. That said, I'm appalled that their solution is to err on the side of providing next to nothing.
Second, while this could signal the death knell of employee coverage, I'm skeptical. In my ex-industry (advertising), there's virtually no discussion of ending the fairly luxurious coverage provided, and high end service workers would seriously balk at the suggestion. Which means that (and I hate to put it this way, but) the social elite are in no immediate need of nationalizing health care. That's likely to put the kibosh on anything happening well before 2010 (my guess), which means a number of years where middle and lower income workers get shafted. If I had to pick a way for the system to fall apart, that wouldn't be my choice. And lacking a good, cogent alternative, I think many people will simply throw up their hands. None of which strikes me as good developments for the single payer movement.
Posted by: weboy | Sep 27, 2006 12:03:39 PM
Help me with the math, here. It seems like the typical Wal-Mart employee (earning $17,874) would only pay 30% of their salary in health care costs if they experienced catastophic illness or injury in a given year - thereby eating up all those deductibles. Am I right?
Posted by: Victoria Ford | Sep 27, 2006 12:05:50 PM
Victoria,
Do you think that someone making $17,874 a year can afford to spend 30% of that on health care?
What about rent? $400/month? $500? That's pretty close to 30% right there. And be sure to take 7% away for FICA right off the bat.
People earning that much typically have a poor debt-to-earnings ratio, so they're going to pay more for car insurance, and probably more for a car as well.
The only "good" part of Walmart's plan is the same as the only "good" part of individual plans: negotiated pricing that is available only to insurance companies.
I agree that while hindsight might see this event as an ultimately good thing, that is 1)only if we manage to institute universal healthcare and 2)something that, is said now, would seem incredibly heartless.
Posted by: Stephen | Sep 27, 2006 12:30:07 PM
Guy Montag:
You haven't been looking in communities with populations under 20,000. I grew up in the rural south and no kidding, Wal-Mart really is the only place to buy most common retail goods within a half hour's driving distance.
When I left my home area for college there was one Wal-Mart and three grocery stores within that driving distance, those groceries representing three different chains. Now there's one Super Wal-Mart and one grocery store; the other two folded soon after the SWM opened.
Posted by: Constance Reader | Sep 27, 2006 12:37:25 PM
DuWayne,
Do you currently have health insurance?
Posted by: Fred Jones | Sep 27, 2006 12:51:04 PM
Stephen -
I didn't mean to comment on the rightness or wrongness of the plan - I just wanted to clarify the numbers.
It seems to me that the numbers are where we run into trouble when thinking about health care costs (and probably most policy issues). Do I think that people should pay for a significant portion of their health care? As a policy analyst, I might say yes - more information (the "real cost" of the care you receive) helps people make better decisions. 30% of a person's income in a given year? Too much. But 30% of one year's income for a once-in-a-lifetime catastrophic illness or injury? It gets murky, and to think clearly about it we have to know what we're talking about.
Posted by: Victoria Ford | Sep 27, 2006 1:31:52 PM
Adrock,
The current system has plenty of problems, even for people who have earned the luxury of employee-sponsored health insurance.
Too many insurers, too many hospitals (and too many cardiac clinics, organ transplant services and MRI machines in particular), too much competition is one of the main things that is driving up the price of healthcare for all of us. Counter-intuitive, I know, but healthcare doesn't operate like most industries. If Universal Healthcare were managed properly, competition could be used positively to keep prices down, but we're not there yet. Getting to UHC will require some suffering, and we shouldn't be rooting for that. But it will require it, and it will be inevitable.
Posted by: spike | Sep 27, 2006 1:54:37 PM
Victoria, your math is sound but your reading comprehension needs some work. They said that an individual, with max out of pocket of $5000 + annual premiums of $598 and a salary of $17,874 per year would be paying nearly 30% (not sure where they got that, my math comes out to 31.3%).
When you go to the family plan with an out of pocket max of $10,000 and an annual premium of $780 again divided by salary of $17,874, then the percent is 60.3%.
In speaking to your other point... if only it took a once-in-a-lifetime catastrophic even to max out your $5,000 out of pocket max. With a $1000 inpatient deductible PER VISIT, a pharmaceutical deductible, AND an outpatient surgery deductible, one event like kidney stones (hardly life-threatening) could bankrupt our theoretical worker. All the "information" and "good decision making" in the world can't help you create money out of nothing.
Posted by: spike | Sep 27, 2006 2:01:54 PM
Erza said:
"... Now, of course, any retailers who seek to compete with them -- and that includes supermarkets, clothing outlets, and all the rest -- will be at a competitive disadvantage if they fund traditional health care plans for their employees. ..."
This is nonsense. Such retailors are at a disadvantage only if funding traditional health care plans costs more than the value their workers place on receiving such plans. Obviously an employer should question offering any benefit which costs the employer more than the perceived value to the worker.
Posted by: James B. Shearer | Sep 27, 2006 2:23:59 PM
Interesting that Wal-Mart apparently finds it worthwhile to operate in Hawaii even though they're required by state law to provide comprehensive health insurance to anyone who works 20 hours a week or more. They probably have lots of people working 19-hour weeks, but that can't be everybody.
James Shearer, the first week of introductory microeconomics does not necessarily provide a complete understanding of how labor markets work.
Posted by: DaveL | Sep 27, 2006 2:48:51 PM
Suppose the Wal-Mart employee with the high deductible coverage lands in the hospital and requires, say, a cardiac stent. Insurance pays $19,000 and the employee is responsible for $1,000 but can't afford to pay his or her share. Don't you think the hospital might be much more willing to reach an accomodation or even write off the deductible completely since it got paid $19,000 vs zero if the employee were uninsured. Furthermore, lots of people with these plans can pay their deductible or at least a significant portion of it. Bottom line: this coverage is a heck of a lot better than nothing. The peace of mind that comes from knowing that your family is protected in case of a truly catastrophic medical event such as a premature baby that needs to spend a month in the neonatal ICU is worth a lot as compared to being uninsured.
In most years, most people do not incur significant medical costs. Insurers will tell you that in any given year, 5% of its members account for 50% of claims costs while 70% of members account for 10% of claims costs. Furthermore, the high cost cases are not the same people from year to year.
I personally like high deductible plans for a variety of reasons, though we still need a lot more robust price and quality transparency to help patients make infomred choices as to where to obtain the most cost-effective treatment. However, I think the employer provided healthcare model could be improved by changing the deductible, the out of pocket maximum, and the employee's contribution to the premium from a flat dollar amount to a percentage of income with a reasonable flat dollar cap for high income employees.
Posted by: BC | Sep 27, 2006 2:55:06 PM
Don't you think the hospital might be much more willing to reach an accomodation or even write off the deductible completely since it got paid $19,000 vs zero if the employee were uninsured.
"Write off the deductible" means "submit the outstanding balance to a collection agency." That can still mess with the debtor's credit and possibly force him into backruptcy.
Posted by: Constantine | Sep 27, 2006 3:33:39 PM
Writing off the deductilbe generally means writing off the deductible. The hospital will usually try to make a reasonable accomodation. It may settle for 5 or 10 cents on the dollar or $10 bucks a month for a year or write the bill off completely. If it thinks the patient can pay but refuses to and is uncooperative, it may bring in a collection agency. After adverse publicity regarding heavy handed collection practices on the part of some hospitals in the past, most have cleaned up their act by now.
Posted by: BC | Sep 27, 2006 3:52:52 PM
DuWayne,
Do you currently have health insurance?
No. Instead I have had to use the ER once in the last year, when I had pneumonia - carried it for three weeks before I realised I wasn't getting better and went in. Thankfully I had access to a non-profit hospital that covered all but $200 of the bill, letting me pay the rest on a monthly basis at $5 or more per month.
An interesting aside, WM new policy of providing $4 scripts for the uninsured is going to allow me to get on medication that will seriously increase my quality of life and get smoking cessation medicine to boot.
Posted by: DuWayne | Sep 27, 2006 4:13:16 PM
I have trouble with the whole "informed choices" and "cost-effective treatment" concepts. They assume rationality and thoughtfullness where they don't exist. When someone has a heart attack they aren't really in a positon to shop for the best priced care. When they find out that they have cancer they want to get rid of it, not "shop" for the lowest cost treatment. I believe that this is true even when deductables are high.
When the stakes are life and death, cost is not really an issue. The end result in these cases is bankruptcy, not price consciousness.
Posted by: Bill | Sep 27, 2006 4:13:32 PM
BC, it's all well and good to advocate this position to us, who are informed policy hobbyists.
Not to sound elitist, but if a person were capable of going to the hospital administrators and negotiating a discount like the one you're talking about, well, they wouldn't be working at WalMart. They would know enough about the way things work to get a better job. The approach you talk about is a good one, and I tell my friends about it all the time... but the average person is intimidated by bills and will not have the courage or knowledge to do what you say. Instead, their bills will be turned over to collections agencies, and then the hospital washes its hands of it.
Posted by: spike | Sep 27, 2006 4:25:32 PM
Spike said -
In speaking to your other point... if only it took a once-in-a-lifetime catastrophic even to max out your $5,000 out of pocket max. With a $1000 inpatient deductible PER VISIT, a pharmaceutical deductible, AND an outpatient surgery deductible, one event like kidney stones (hardly life-threatening) could bankrupt our theoretical worker. All the "information" and "good decision making" in the world can't help you create money out of nothing.
That isn't how HSAs work. That deductible is annual, not per visit. The idea is that you cover the cost of your average doctors visit. But if anything major happens, you have coverage for the rest. For example, if I had a thousand dollar deductible and had already spent two to three hundred of it - or even none for the year - then had a kidney stone that led to bills of a couple grand when it's all done, I cover my remaining deductible and insurance covers the rest. As well, if I have any more need to go to the doctor for an average visit, after that - again the insurance covers it. With some plans there is also a co-pay but those were insignifigant with the plans that included them, they just bring down the cost of the policy a little more.
Just because the guy who was touting them so heavily here he got banned for it is a twit doesn't mean that they are a horrible idea for everyone. It is simply not the ultimate answer to the crisis in this country. And I can see it placating a huge portion of the voting public into not addressing the crisis - because it is ultimately, of the most benifit to the middle class.
Posted by: DuWayne | Sep 27, 2006 4:26:49 PM
Many people make the argument about not being able to shop for care under emergency conditions (like a heart attack). True enough. However, the fact is that all outpatient procedures and some 80% of all surgeries are scheduled in advance, not done on an emergency basis. So, price shopping is at least possible in those cases. Second, it would not be hard for doctors, working in conjunction with insurers, to know which are the most cost-effective imaging centers or outpatient departments and direct their patients there. Right now, they neither know nor care what different places charge for the same procedure at comparable quality. Since doctors drive almost all heatlhcare costs through hospital admissions, referrals, prescriptions, ordering tests, and doing procedures themselves, I'm suggesting that perhaps they should know or at least have a staff member who knows.
Posted by: BC | Sep 27, 2006 4:29:30 PM
Posted by: Bill | Sep 27, 2006 1:13:32 PM I have trouble with the whole "informed choices" and "cost-effective treatment" concepts. They assume rationality and thoughtfullness where they don't exist. ...
Quite so, and even more what they assume is in direct contradiction to what is assumed by long-established institutions like doctor referrals and prescriptions ... that is, that there are some decisions that require more skill and training to make than most people have had the time to acquire.
There is a reason why some drugs are not available on the open market, but require a prescription. That system emerged from experience with the completely unregulated alternative.
And the problems become even more serious when you are talking about a for-profit medical system that has a strong profit motive to discover and provide expensive treatments for life-threatening conditions.
Posted by: BruceMcF | Sep 27, 2006 4:31:37 PM
Spike -
Apologies, I miss-read the original post to say it is an HSA, not like one. I don't see this policy as making a lick of sense. For less than WM would charge they could get a "traditional?" HSA with much more reasonable deductibles. I don't see why WM would even consider this over regular HSAs. I would have to think that their PHP (I'm assuming that is an option at WM as it seems to be what most employers offer) terms would be a lot better than this deal. Paint me skeptical as to the accuracy of the figures quoted by Wake Up Wal Mart. It really makes no sense.
Posted by: DuWayne | Sep 27, 2006 4:48:52 PM
I can elaborate on the kidney stone thing a bit.
I had a kidney stone in June. I was out of town for the weekend, and had to go to the ER in the middle of the night for drugs. They gave me a CT scan and a prescription and said the stone had passed. Two days later when I got home, I had a fever, so I went to a doctor, who sent me across the street to a hospital for another CT scan. They tried to get a copy of my x-rays from the out of town hospital, but they were not cooperative. Turned out I had a kidney infection at this point, so I needed to do a blood test and a couple of urine tests, in addition to 2 more prescriptions, one of which I'm still taking.
Total bills: $4000. This is hardly a once-in-a-lifetime experience, and kidney stones tend to recur, but because the pain is possibly indicative of other more serious problems, doctors are reluctant to just send you away with a pain killer without doing an expensive CT scan first. I suppose, in theory, somebody could manage without pain killers for the kidney stone itself, but a kidney infection can be life-threatening if not treated.
Posted by: Stacy | Sep 27, 2006 4:53:25 PM
There will be no meaningful effort in this country to address this issue. Even the great liberal hope Barack Obama has nothing of substance to say on health care except to prattle on about making health care affordable and accessable to all. Horse feathers.
Because the political system is so profoundly corrupt no genuine solution is possible.
Posted by: The Dancing Kid | Sep 27, 2006 4:58:02 PM
So, price shopping is at least possible in those cases. Second, it would not be hard for doctors, working in conjunction with insurers, to know which are the most cost-effective imaging centers or outpatient departments and direct their patients there. Right now, they neither know nor care what different places charge for the same procedure at comparable quality.
A great many doctors may know, but they almost certainly don't care. Doctors, and their clinics, often have contracts with these places. Send us your business exclusively and we'll do the same for you. They won't even talk to you about the options. There is a bigger question here, really. What kind of health care system puts working person who is a cancer patient or a heart disease patient in the position of having to "shop around"? It's not a luxury car you're looking for. A stressed out family and sick person needs timely treatment intervention, they should have to flip through sales brochures and payment option charts too?
Posted by: sprocket | Sep 27, 2006 4:58:12 PM
The other part of the "shop around" problem is that you don't know up-front what is life-threatening and what isn't. And when you see your nearest and dearest in distress, you'll damn well do whatever it takes to get him healthy again.
Case in point: One summer day I came home to find my husband lying semi-clothed and semi-conscious on the floor. I called our doctor and then 911 for an ambulance. Due to a history of cardiac problems in his family and an initial EKG that showed some anomelies, he spent three days in the hospital getting a raft of tests for what turned out to be a bad case of heat exhaustion and dehydration. The total bill came to about $10,000. Our insurance, thank god, picked up 95% of the costs.
Now, in hindsight, if I had known it wasn't a "real" emergency, I wouldn't have called 911 and we wouldn't have run up such a high bill for a non-emergency. But I am not omniscient, and neither are doctors. The whole point of running tests is to figure out what is wrong with someone, and you don't know until after the tests have been run whether they were necessary or not.
Posted by: fiat lux | Sep 27, 2006 5:22:47 PM
BC, your points are well taken, but I still think you're applying rationality to an area that's extremely irrational. Even in the case of planned surgery or an outpatient procedure the patient's primary concern is getting the *best* care, not the most cost effective. I honestly don't think that this would change even if the out of pocket costs were much higher. And rightly or wrongly, many people see doctors as authority figures. They would never think to second guess a the necessity of a procedure or test if their doctor recommended it.
Posted by: Bill | Sep 27, 2006 5:36:25 PM
fiat lux -- The example you cited was a case of needing care under emergency conditions. Everyone, including me, recognizes that price shopping does not work under those circumstances. Second, where price shopping is appropriate, we are not talking about spending a lot of time looking at brochures but rather accessing a user friendly database, typing in your zip code, the test or procedure that's required and getting back a list of several places where it can be done, how much it cost at contract rates if you have insurance and a meaningful quality rating. As for doctors and imaging centers or labs having reciprocal referring arrangements, there is nothing that says that ways of doing business that existed in the past cannot change in response to new or different incentives and pressures.
Bill -- Determining what care is "best" is not easy unless you are well connected to or within the medical community. Provider quality and cost-effectiveness ratings could be helpful here to go along with pricing transparency.
Posted by: BC | Sep 27, 2006 6:09:44 PM
I recall growing up in the 60's reading about how we were becoming so efficient at manufacturing/robotics that soon worker's would have a 30 hour workweek. That may have been fantasy but it does show the mindset back then--to make employees lives better and to make "us" better. Race to the bottom indeed.
Posted by: Steve Mudge | Sep 28, 2006 8:13:56 AM
DuWayne, read the post again. It said the inpatient deductible was $1000 per visit. Outrageous, I know.
BC: Insurers do know which providers are most cost-effective because they are the ones who contract with the providers and so they know the allowable. As much as they have control, they try to steer people to the low-cost providers, but how much control do they have in a PPO environment? Choice, freedom, blah blah blah is why we're paying so much on healthcare. The people who have ability to control costs (insurers) aren't allowed to because controlling costs in that way leads to a PR battle they always, always lose.
Posted by: spike | Sep 28, 2006 11:27:44 AM
Spike -- Insurers are showing increasing interest in embracing pricing transparency. Witness Wellpoint's recent announcement of its effort along these lines that it is launching in Dayton, Ohio. Humana also has a pilot program underway in Milwaukee. Insurers tell me that one obstacle in the way of this effort is confidentiality agrements imposed by hospitals that forbid insurers from disclosing what they actually pay for services. Device manufacturers impose similar agreements on hospitals. We need to get rid of these by legislation if necessary to allow the transparency movement to achieve its potential.
Regarding Wal-Mart's high deductible plan specifically, it is instructive to compare it to standard Medicare, which many universal coverage advocates would like to expand to the entire population.
For 2007, Medicare's deductible for EACH inpatient hospital admission is projected at $992 vs $1,000 for Wal-Mart. For Medicare Part B (physician services, etc.), the deducitble next year will be $131, and the co-pay is 20% of allowable charges beyond that with no out-of-pocket maximum. Outpatient co-pays are also 20% of allowable charges. Wal-Mart has a $500 deductible for outpatient visits and $1,000 for doctors charges, etc. For prescription drugs, Medicare's deductible is $250 plus co-pays of 25% of the next $2,000, 100% of the next $2,050 (doughnut hole), and 5% thereafter. Wal-Mart's deductible is $300. Wal-Mart has an out-of-pocket maximum of $5,000 overall per person while Medicare's is unlimited. The beneficiary's annual premium next year is estimated at $1,080 ($90 per month) for Medicare vs $132 ($11 per month for Wal-Mart. Many seniors also buy Medigap policies at considerable cost to cover charges that Medicare doesn't. Given these comparisons, I'm having a lot of trouble understanding why people think Medicare is fabulous while Wal-Mart's plan is horrible or, at least, woefully inadequate. If anything, Wal-Mart's plan looks like a better deal overall.
Having said all that, I'm not a big Wal-Mart fan. I'm not an employee or a shareholder (though my employer's pension fund is), and my wife and I prefer to shop at Target even though their prices are slightly higher. We have a Wal-Mart 7 miles away vs 5 miles for Target), and have been in the Wal-Mart store exactly once to see what it looked like when it first opened.
Posted by: BC | Sep 28, 2006 1:37:32 PM
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