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Is Wal-Mart Doing Us A Favor?

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Posted November 6, 2005 in Politics

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>If we just re-allocated all the dollars that employers pay for health care to the employees

Um yeah but the point is Walmart doesn't ALLOCATE any dollars to their employees. This approach doesn't solve the problem of 40 million uninsured americans.

The problem is the 20% or so of the dollars that go to HMOs. Medicare and Medicaid have an order of magnitude lower administration costs. Create a single-payer national healthcare system, re-allocate those dollars to actual care, and you could cover EVERYONE for pretty much the same % of GDP spending we have on healthcare now.

Of course, this isn't too likely to happen because of the insurance and pharma lobbies.

Posted by: Chad | Nov 6, 2005 11:43:22 AM

"History of Health Insurance Benefits"

http://www.ebri.org/publications/facts/dis_0302fact.cfm

Think of health insurance benefits as the stock options benefit of its day.

Posted by: anonymous | Nov 6, 2005 12:25:21 PM

Having worked in consulting for a few health care payors, I have a pretty strong opinion about waste, overhead, and misplaced priorities among insurance companies. I agree with this post that in order for things to change for the better, we may need to change the model, and employer paid insurance as we know it may have to change.

I can't agree with Chad, though. Although my politics tend to be liberal, a single payor system like he describes is too ripe for inefficiency of a different kind. While it's true that Medicare's administrative overhead is about 1.4% vs. an industry figure closer to 8 or 9%, there's something missing. That is, there is no incentive to provide quality or timely service in a single payor system. Forming a monopoly, whether administered by the government or someone else, will have a chilling effect on medical and pharmaceutical innovation, service levels, and adequate care. The rich will pay private doctors, and the poor will be stuck filling out a dozen forms to get Medicare to pay for an emergency room visit.

The reason health insurance sucks in the US isn't because we don't have socialized medicine, or because drug companies overcharge and advertise on TV too much (though as a policy, I think it's poor medicine to have patinents asking for specifics medications). It's because the market is broken: the consumer is not the customer, and we've got a marketplace full of consumers that have a low level of expertise.

I think that the shift toward Consumer-Directed-Health plans (high deductible insurance plans coupled with an HSA or HRA to cover the deductible) are a major step in the right direction. If we start to offer economic incentives to people that reward them for using healthcare intelligently, learning more about treatment options, and exercising preventive care, we'll end up being better off in the long run.

The problem is getting the information to healthcare consumers, and getting them to read it. Healthcare is still one of the areas where the information is not readily available in a compiled, free, consistent, accessible easy-to-understand format.

It's far easier to have an insurance card that you just present at the doctor to pay for whatever services you decided you needed. But if you can make users of healthcare take a stake in their choices, you're on the way to a better market for care.

Posted by: Pete | Nov 6, 2005 2:15:46 PM

We celebrate the competitive dynamism of today's economy... where "creative destruction" is not just a metaphor but a reality for whole industries, businesses, professions, families, and individuals. But yet, a basic and permanent need like health care is linked to jobs.

Fred is right. It is not companies' job to take care of the health care. Today's companies by design are not "built to last" but rather built to quickly transform, merge, or altogether disappear. Jobs are transient by definition.

On the other hand, the idea that people can become educated consumers of health care services seems extremely problematic to me. Health care issues are too complex. Adding them to the long list of self-management stuff that Americans have to do in the precious little time left free of work would be overwhelming.

I don't have clear suggestions... other than taking the time to study the experience of other developed nations... and to see what might work here. This mantra of having "the best health care system in the world" is simply counterproductive.

Posted by: Emil Sotirov | Nov 6, 2005 3:25:30 PM

I don't know much about US healthcare, but I see a flaw in Fred's suggestion ("Just give med money to people and they will pay for themselves").

That will not work. At least not in the pure form.

People, in general, tend to be very short-sighted. When you are healthy, you don't have the itch to pay for medical insurance, because there are so many other things to spend money on.

So giving money to people makes sense only if medical insurance is enforced, much like home and auto insurance.

Posted by: Artem | Nov 6, 2005 4:41:55 PM

A single-payer system is the only solution that even comes close. I've worked for 2 years on this issue in PA and we're introducing the legislation this month: here is a link:

http://www.healthinsurancefreedcom.com

WalMart should lead the charge for single-payer;healthy employees mean higher productivity, less turnover, and lower administration costs. They should also pay their employees a living wage, but that's another economic argument for another place.

The market system has failed us in healthcare. Mission Research has paid over 25% more every year in premiums for the past 3 years, to the point that it's now 14% of our payroll cost; manufacturers pay over 20%.

We've gone from 2 admins per doc to over 12 per doc in the past 25 years; UPenn Hospital system sports 660 employees just working on payment processing. With over 150 different forms, it's not wonder it's such a terrible system, not to mention the sales and marketing costs we subsidize through our premiums.

We've proposed a system financed by business(all businesses within PA, though it should be national) of 10% of payroll, a reduction for the vast majority of businesses. One form, one payer, and private providers.

On the cost side, we automatically reduce the high costs associated with inappropriate ER visits through early detection, primary care, and coverage for all. We also address the high cost of defensive medicine through tort reforms in a no-fault system, eliminating malpractice insurance altogether. Still with me?

Unhealthy workers mean lower productivity; healthy workers mean higher productivity. Ever-escalating healthcare costs have driven the automakers to Canada, where healthcare costs are stable and predictable. In PA, we expect a huge boost to the economy through the combination of cost savings and new plants by companies that understand the benefit of a managed system that values healthcare over profit, and business over the inefficient drag on business the current system gives us today.

This is not about liberal or conservative, it's about what makes sense as part of the dialtone of public services. Roads, electricity, fire, police, schools, health insurance. As a business person, I'm tired of subsidizing WalMart through my higher premiums that absorb the cost of poorly insured WalMart workers, through higher taxes that go to Medicare and Medicaid that WalMart employees must take advantage of, and through the other state and local programs designed to clean up WalMart's mess.

Everybody in, nobody out, businesses pay less, and the economy grows.

here's a great link to single payer explained: http://www.grahamazon.com

Posted by: charlie crystle | Nov 6, 2005 4:42:43 PM

I agree that companies don't have to be the ones to provide health care, but it is in all of our interests that everyone is covered. This spreads the costs among the largest population. As others have said, people won't necessarily choose to spend their money on health care. However, if they don't, everyone else ends up picking up the bill when they do need care (or, we can leave them dying on the streets, which doesn't sound good, either).

Health care needs to be enforced. Everyone must participate. Massachusetts is considering laws in this vein where everyone must buy basic health insurance, either through your company or individually. Although companies are not necessarily the best buyers of health care, they do have an incentive to 1) compete for talent by offering better health benefits and 2) keep their employees healthy and happy.

I like the idea of government enforced health care insurance minimums, but I don't like the government being the buyer or provider of health care. They are bound to be less efficient and people or companies should have a choice of the type of plan they participate in and the level of coverage, as long as it is above some minimum.

Posted by: Mike Feinstein | Nov 6, 2005 5:16:48 PM

Except that the cost in the non-government plans is what's killing us--uncontrolled increases in premiums (tied very closely to underperforming investments by the insurance companies).

Our plan provides a single plan with all catostrophics covered, primary care, and everything in between. If you want to opt to purchase additional insurance that covers extraordinary items or vanity care, you can. You choose your own doctor, and the doctors decide whether you get tests, what kind of tests, what additional care you need, not the insurance companies.

Health education for people of any age is important as well, and is included in the legislation.

As far as the efficiency of markets, I'd love to add an eBay for medical services, where doctors are rated, facilities are rated, and prices are published in an effort to keep quality up and prices down. As it is, insurance companies, managed care companies and hoispitals force physicians to manage to the dollar, not the the patient's health.

That said, we should at some point have a serious discussion about long-term care and extraordinary measures to extend lives beyond the subjective "meaningful" existence. We do not know how to die gracefully in this country; there is a difference between saving lives and stretching out long and painful deaths. It's a tough moral issue that I'm not personally clear on, but it is important to add to the discussion--after the passage of the bill.

Posted by: charlie crystle | Nov 6, 2005 7:30:21 PM

The thing Fred's post and the comments seem to ignore is that most people past their thirties simply cannot buy individual health insurance on the open market, at any cost. Ever tried it? I have. My wife was refused flat-out by Blue Cross for issues that are well within the realm of normal for a woman in her 40s. No cancer, nothing chronic, just routine stuff. For me they wanted excruciating detail on the *bursitis on my elbow*, which I never bothered with because they had already refused my wife but it is preposterous that they would even look at such a trivial thing. They were clearly looking for any possible reason to deny coverage.

Granted this is Montana where there are few options but I doubt it's much different elsewhere, and certainly not if you have any serious medical history. If as Fred suggests the *first step* is getting employers out of it, rather than that being the last step, there will be millions of people facing immediate loss of benefits.

Posted by: Jonathan Weber | Nov 6, 2005 10:36:22 PM

I would like to discuss the whole idea of "selling" and "buying" health care... Can you really "pay" a doctor who saves your life. There is something uneasy about any attempt to quantify or even qualify the situation. The absurd paperwork in today's system is a reflection of the impossibility to rationally analyze and describe the processes. Patients probably shouldn't be "paying" for health care. There must be a better way of thinking about and structuring the whole relationship. A different mode... The "market" and "service" metaphors do not work well when we deal with absolute values like life and death. And then, to be sure, I am not advocating a soviet style government run system (my father was a doctor in an ex-communist country). But we don't have to accept the current framework as natural either. The debate should be about the underlying structures... and not about the proverbial "aligning of interests" within the current framework. Can you align the interests of hospitals making the bulk of their money from heart surgery with the interest of people in not getting to the point of having a heart surgery? May be, health care shouldn't be called an "industry." Let's start from there...

Fortunately, people like Charlie work on these problems. We should participate actively. It is a political problem, not a business problem. Ah... and please, after trying unsuccessfully the "market" and "business" metaphors, let's not instinctively reach for the "declaring a war" metaphor... please. There are ways of dealing with problems where you don't have to "win" or "loose"... or "beat the other guy."

Posted by: Emil Sotirov | Nov 6, 2005 10:41:13 PM

Rather than reward failure, why not pay doctors when you are well? Every day you are not sick, you pay. When you're ill, you don't.

Posted by: Pete | Nov 7, 2005 12:23:34 AM

I'm far from an expert in this, so correct me if I'm wrong, but I thought the idea of employer-provided health care was that employers were in a position to ask health care providers to bid on insurance for a good chunk of their employees. Competitive bidding by the providers drives down the prices. If you work for a company where people tend to be healthy (i.e., mostly educated without the health risks of poor nutrition, smoking, wide-spread obseity, etc.) your risk is less, and thus insurance companies find your employer a better risk, and they're more likely to offer lower rates. Would we save more if we each individually sought health insurance? Also, having formerly been in the clutches of an HMO, the idea of single-payer insurance makes my skin crawl, since it seems pretty likely that it would be worse than the worst HMO you can imagine.

Posted by: christy | Nov 7, 2005 7:31:50 AM

As much as I love the free market (it's where I made my money, and I'm a business coach) there are things it doesn't do well.

The agrument is that if we make the customer the same as the consumer and give them their money to spend on their own they will do a good job at buying the right services at the lowest price. This idea is wrong. For a couple reasons.

#1 - buying healthcare is not like buying a car where you have time and ability to weigh your options and make your decision.

When someone is sick with an emergency or chronic illness (the most expensive kind) you don't have the time or the emotional stability to make a rational expenditure decision. Even if you did, the cost/benefits are not always knowable to experts never mind consumers. And the field is too broad for even experts to be aware of all the alternatives. So it's just not possible to apply the competition/market logic to something like health care.

#2 - Not everyone is able to save the money they need even if it were given back to them, nor will they all make the proper trade-offs of long term vs short term benefits (this is one area the market is exceedingly poor at).

#3 - Luck plays a big part in who gets sick, and who has money.

One might think the last two are the price of living in a capitalist society and those who are bad at these decisions or unlucky just have to deal with it. I could agree that their choices in many areas are none of my business. But with health care, a person's personal decisions affect others (read ME).

People who don't spend their money on preventitive medicine end up in emergency rooms which cost taxpayers (you and me) more than they should.

People who don't spend their money well in health care are at risk of spreading disease and propogating pandemics to the rest of us.

For these reasons, I submit that a completely market based approach is not the right one for health care.

We need something that allows people with money to spend it anyway they want, and provides a minimum of care as a baseline for those who don't have it or won't spend it wisely. As a society we already do this when it comes to funding public schools and as bad as they may be, our coverage there is better than our healthcare coverage.

Posted by: John Seiffer | Nov 7, 2005 9:07:52 AM

If you all remember, the reason companies started to offer health care, is because the insurance companies saw a large customer base with a large shared risk. The insurance companies offered larger discounts to larger companies. The more employees the lower prices of the policy. They figured if you are working then you are healtier, also. A single person cannot get the same benefits as a group nor can they get benefits at any type of reasonable rate. ( As a small busness we were paying $2500 a month for one family membership with deductibles and plenty of co payments .) It was a indeminty plan. We switched to a ppo and we pay $1300 a month. A single person with that same ppo plan pays $820 a month. A managed major plan for a single person is $729 a month with plenty of co pays and plenty of non-covered services that 10 yrs ago were covered.
Blue Cross in the year 2000 had a a huge profit, but instead of escrowing or keeping our premiums down they again raised our premiums and cut out more covered services.

It is absurd to think that it is the patient's fault for using their health care plan. I have paid in 100,000's of thousands of dollars to be able to get coverage if I am ill.

Part of the problem also is that the hospital sometimes has inept help. If you are very sick who follows your case? Not a physician with years of experience but an intern with none. You get charged for his lack of knowledge.

Remeber the DRG's. If one person stays in a hospital for 10 days, the hospital receives less money than if the hospital kicks the patient out after 5 days and gets a second patient in for the next 5 days. Your insurance is actually giving the hospital a bonus for throwing you out. Remember you are paying the premiums.

Hospital-borne infections and hospital mistakes greatly add to our medical expensives not the insured.

Hospitals also do certain tests only because the insurance company won't balk. Important tests need too much paperwork so we pay for things we don't need, while the things we do never get done.

Paying larger deductibles isn't going to make this present system better. The unfortunate thing is when you are very sick, you can't choose the best lowest priced hospital. As a consumer you don't have the upper hsnd.

If we paid our doctors and hospitals for results and quality of work, we would have plenty of extra health care dollars.

Walmart could never pay their employees enough money for them to buy individual plans. Have you ever looked at the cost of plans in your state?

Posted by: ellen | Nov 7, 2005 10:03:26 AM

QUOTE: "I can't agree with Chad, though. Although my politics tend to be liberal, a single payor system like he describes is too ripe for inefficiency of a different kind. While it's true that Medicare's administrative overhead is about 1.4% vs. an industry figure closer to 8 or 9%, there's something missing. That is, there is no incentive to provide quality or timely service in a single payor system."

First, doctors and nurses (good ones) are incentivized to provide quality service because they are in the industry to help people. HMOs are incentivized to provide a little care as possible (the situation we have now). Basically until people get over the whole "gubmint bad" mentality and accept that this is one industry where the government can play a positive role, we're screwed.

Nobody is saying this is a socialist takeover. Its not radical; all the other industrialized economies have some form of national healthcare. Its just accepting reality: the government is a massively large customers of healthcare products and services. As long as we have a system designed by pharma and HMO lobbyists, its going to obviously benefit those actors.

The good news is that this probably will be driven by business. At some point the Auto industry etc. will wake up, realize that they're competing with industrialized nations where healthcare isn't a total clusterfuck and accept changes. Hell, New GINGRICH has already recommended to the HMO/pharma industries that they stop their profit-taking lest they risk outright government intervention. Its just a matter of time, and no a single-payer isn't going to put everyone out of business, its just going to cut out those fat administration profits and probably lower drug costs.

Posted by: Chad | Nov 7, 2005 1:31:56 PM

This is NOT a solution - I have none to give, but last night I was talking with my friend Mike, who has dual Canadian/American citizenship. He works and lives in America, but retains his health care from Canada. He uses a two fold health plan. Part one - the broken leg scenario. He breaks a leg, he goes to the Hospital and breaks out his Amex. He figures the cost of emegency care once in a very blue moon is less than monthly payments. If he get's ill, he uses his GTC plan - go to Canada.

Posted by: jackson | Nov 8, 2005 11:55:30 AM

Jonath Weber,

Yeah, individual insurance is a mess. But the market varies from state to state. In Massachusetts, they have to take you. And they can only consider your age and zip code when calculating your premium.

Posted by: Abby | Nov 8, 2005 7:46:39 PM

It is unfortunate to see wal-mart treating there employees so poorly. Health insurance is a great product and everyone deserves to be covered.

Posted by: California Health Insurance | Nov 9, 2005 3:59:36 AM

Krugman discusses (picked up by Brad Delong)

Wal-Mart, kind of like Microsoft, gets tarred for certain things because they're the biggest. Both are highly respected and admired businesses that offer highly unloved products.

Unfortunately for Wal-Mart, their empire is built on being low-cost provider, not on an IP monopoly. Political fallout can hurt them a lot more, and consumers can just go to Target.

Posted by: druce | Nov 9, 2005 12:03:12 PM

The problem with waiting for Walmart to lead us into the end of employer-insurance abyss is that there'll be a whole lot of suffering as we go over the edge in a process that will take years.

I doubt too many VCs will be the ones doing the suffering, though. Find me an uninsured mom of two trying to get her family health care who shares your view and I'll be more impressed. For her single payer now is the best option.

Posted by: Matthew Holt | Nov 9, 2005 7:05:17 PM

Great article on wether or not walmart is doing us a favor with there health coverage policies.

Posted by: Blue Cross of California | Nov 23, 2005 1:26:10 AM

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