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POLICY: Wal-Mart caught with hand in cookie jar — affixs grin, and says “Look over there!”

So just two days ago, Wal-Mart, which as I’ve pointed out in THCB before, has never really been serious about offering health benefits to its workers given that it makes higher profit margins when it doesn’t, apparently had a change of heart. The change of heart involved giving basically minimum wage the chance to pour their huge amount of extra savings into an HSA, and also to get health insurance (without a maximum benefits cap of a massive $25,000) after only one year of employment — ignoring the fact that Walmart deliberately has some of the highest turnover rates of any large corporation. But while Don McCane from the single payer crowd was not impressed, at least one usually non-free market loony blogger was somewhat convinced. (Note the somewhat jaded comment on Joe’s post from yours truly, in which I said that he was an optimist).

Why was he an optimist?  Because any large or small employer that depends on a low income workforce will do better financially by letting that workforce turn-over quickly and keeping their benefits as low as possible. The Costcos and Starbucks are exceptions and their margins suffer in comparison. Of course when you’re talking about health benefits, you’d also do well to try to get your employee population to be younger and healthier than average, or else America’s former largest employer may be your future model. (as Uwe says, GM is an insurance company that builds cars to defray its health care  expenses). So what did you really expect from the Beast of Bentonville.

Well of course it doesn’t take long to realize that Wal-Mart can’t help but trip over its feet in the PR department, event though it’s barely out of the glow of the minuscule positive spin it was getting. The NY Times gets its hands on the memo that tells the reality: Wal-Mart Memo Suggests Ways to Cut Employee Benefit Costs. What’s the rationale?  Get the unhealthy employees out of there, and also eighty-six the ones that stick around and might collect those benefits. And of course hire McKinsey to tell you about that strategy, because you really need $700 an hour consultants to tell you how to reduce your health care costs using those techniques!

In some ways I have a smidgen of sympathy for Wal-Mart. After all they weren’t even around when the ridiculous employer-based system was created. But it’s only a smidgen. Given that employment based insurance is  what we’ve got, and given that Wal-Mart is one of the planet’s most profitable companies, it could easily take the high road. Alternatively, it  could easily use its political muscle to push for genuine universal health insurance in which everyone (including big corporations) pays a fair share. Instead it just wants to get out of any notion of responsibility, and dump everything on some one else–usually its employees and the taxpayer.

And apparently it’s a family trait.

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  1. Jim-
    1. The concept of algorithm based care exists in many ways today– except that every physician tends to use his or her own algorithm. While I agree that some better way of getting “best practice” data out to patients and providers, it is complex when there are over 10,000 diagnoses listed in the current CMS diagnosis book (and over 40,000 in the updated version, not yet utilized!). Those who want more of this must include protections to providers who follow the algorithm from nearly all liability.
    This piece tends to be missing from the plans of those who want rigid managed competition or “evidence-based medicine”.
    Promoting individual responsibility for “straightforward” medical issues will save money however. There is data for price sensitivity for healthcare delivery– but this is more so among the healthy (the second group way up from my previous post).
    Among “group 1”, it is both harder and easier to save money– harder, because complex medical problems and expensive emergencies do not lend themselves as well to consumer based decision making; easier, because for the chronically ill, very small changes in need for care can make a huge impact on overall health costs.
    Generally speaking, a 10% reduction in utilization (cost) for group 2 would decrease spending overall 2%, or nearly $40 billion, other factors remaining equal. But for group 1, a 3% reduction would decrease overall spending the same amount.
    Thanks for your input!

  2. Ideas:
    1. Begin to embrace technology more for disease management. Every time my daughter (I am a new parent) has an illness (fever, cough…) I can look up on the internet any number of possible diagnosis’ as well as what to do and when to seek care from the Physician or ER. For so many other costly disease processes (musculoskeletal dysfunction, neurological disease and cardiac related disease) it seems much more difficult to find sound information. How about algorithm based care provided for many diseases/conditions over the internet. Citizens can use technology to decide when and why they should be seen by the medical system. Users of the system will know what tests are appropriate and which are not necessary given the situation. This would work great combined with the HSA concept as the individual now has personal and financial accountability. I believe that if the patient is not part of the solution, it will not work.
    2. As a society, embrace more realistic end of life scenarios. While I understand your oath as a physician, I think many people at the end of their life receive care that they do not need and more importantly do not want. We should look at when and why we keep certain people alive. Someday, Kevorkian will be seen as a man well ahead of his time. Not only is keeping these people alive wasteful in terms of precious dollars, it seems so inhumane.
    3. Create Federal and State tax credit situations that will strongly encourage providers to see uninsured individuals in return for a hearty tax credit. Most medical providers I know want to provide for the less fortunate, but have been hammered so hard with declining reimbursements (and fear of litigation) they do not do much pro bono work.
    4. I do not have this concept figured out completely, but if there were a way to encourage our society to be more healthy and to better monitor their health we could save billions and possibly trillions. Somehow, we need to figure out how to track general health of people and provide rewards for those that make lifestyle choices to be healthier. I am sure there are other ideas on how to accomplish this….
    Anyway, just some thoughts that were not mentioned. I think the tax credit for providers would be a huge step in getting the medical world at least interested in progress.

  3. Ideas:
    1. Begin to embrace technology more for disease management. Every time my daughter (I am a new parent) has an illness (fever, cough…) I can look up on the internet any number of possible diagnosis’ as well as what to do and when to seek care from the Physician or ER. For so many other costly disease processes (musculoskeletal dysfunction, neurological disease and cardiac related disease) it seems much more difficult to find sound information. How about algorithm based care provided for many diseases/conditions over the internet. Citizens can use technology to decide when and why they should be seen by the medical system. Users of the system will know what tests are appropriate and which are not necessary given the situation. This would work great combined with the HSA concept as the individual now has personal and financial accountability. I believe that if the patient is not part of the solution, it will not work.
    2. As a society, embrace more realistic end of life scenarios. While I understand your oath as a physician, I think many people at the end of their life receive care that they do not need and more importantly do not want. We should look at when and why we keep certain people alive. Someday, Kevorkian will be seen as a man well ahead of his time. Not only is keeping these people alive wasteful in terms of precious dollars, it seems so inhumane.
    3. Create Federal and State tax credit situations that will strongly encourage providers to see uninsured individuals in return for a hearty tax credit. Most medical providers I know want to provide for the less fortunate, but have been hammered so hard with declining reimbursements (and fear of litigation) they do not do much pro bono work.
    4. I do not have this concept figured out completely, but if there were a way to encourage our society to be more healthy and to better monitor their health we could save billions and possibly trillions. Somehow, we need to figure out how to track general health of people and provide rewards for those that make lifestyle choices to be healthier. I am sure there are other ideas on how to accomplish this….
    Anyway, just some thoughts that were not mentioned. I think the tax credit for providers would be a huge step in getting the medical world at least interested in progress.

  4. Hope- I imagine I cannot afford your rates!!
    I really want to thank you for pleasantly responding to my requests for additional information, and being willing to engage in a true ‘dialogue’.

  5. //You miss the point of my original post completely. I pose the question that Hope has courageously working through: HOW do you propose to improve the system?//
    I didn’t miss the point: I’m not remotely qualified to make proposals about how to fix the health care system. What I represent here is the relatively intelligent voter who understands maybe 1/4 of what the experts on this blog have to say about the economics of health care. The only reason my response might be interesting for you is it might shed light on why a proposal you favor does or doesn’t fly with a particular segment of the electorate. From where I stand, it sounds like you’re arguing for rationing in favor of the rich, which means the universal healthcare side shouldn’t get tagged for rationing.

  6. Ron – thanks for looking up my blog but I decline the invitation to argue with you. I’ve read enough of your comments on THCB to believe that you are willing to argue but not to discuss. Which is fine, you have a strong opinion – I just don’t have the energy.
    Erik – I would make it a private non-profit, yes. Prior auth requirements, yes, although don’t ask me to give you an exhaustive list. I would permit specialists to be the PCP for people who have chronic and complex conditions if they and the provider agree it is necessary and the specialist agrees to function as a PCP. Long-term care services would generally get auths for a year (or until the person’s needs change). An independent review board would be available for appeals. People can sue if they feel it is warranted, although a liability limits is a totally different discussion. If people want to purchase care privately, more power to them. But I would not envision people needing to purchase their own care because medically necessary stuff would be covered. Of course, things like cosmetic surgery wouldn’t be covered (except in cases like kids born with defects, etc) so there would still be a totally private market for that.
    I think I’ve given you a pretty good picture of the direction I would go with system reform. Thanks for your interest in my opinions. If you want more, I would be happy to quote you my rate. 🙂

  7. Hope- first, thank you for your continued dialogue!
    Your regional MCOs- funds obtained through taxation (presumably progressive- ie. income based) then redistributed to the region MCO for the total delivery of care for that population.
    Since the MCO is non-profit, I assume you will not have the employees governmental- ie. a private non-profit?
    Would you leave control over reasonable care to the executives/ board of the non-profit? Could patients or physicians go outside of the nonprofit for care paid out-of-pocket?
    If the MCO ‘denies’ a service like a test or surgery or exam and a bad outcome occurs, will the patient be allowed to sue the doctor? clinic? MCO? If so, will there be limits to liability?
    Theora- still waiting…
    Ron- how does HSAs for all, in the short to intermediate term (eg. next 10-15 years), have an impact on reducing the cost of care for the 20% of the population that accounts for most of the total costs?
    Gadfly- It is an immutable fact that 20-30% of the population incurs 70-80% of the total costs in healthcare. Resources (financial, manpower, medical) have limits. To slow or even reverse the trends in healthcare spending requires examing the groups that utilize the most dollars. You miss the point of my original post completely. I pose the question that Hope has courageously working through: HOW do you propose to improve the system?
    P.S. be specific!

  8. hope, you wrote, “By the way, when you switch to a Health Savings Account and a high-deductible product, you’ve removed yourself to some or other degree from both sharing your resources and from being able to count on the resource pool in times of great need.”
    Are you sure this really means something? Are you suggesting that my HSA clients who have heart attacks have been removed from your so-called resourse pool?
    I think the $25,000 max on Walmart’s HSA plan is much more troubling than the $1,000 deductible. Also it’s still employer-based so employees will be terminated after a short COBRA if they are too sick to work.

  9. I would only have one non-profit MCO per region, so not exactly competition. I would just make sure that a variety of entities ran MCOs throughout the country so that if one turned out to be crappy another could come in and take over.
    Eliminate Medicaid and Medicare (or think of them as consolidated and expanded).
    Fund it through taxes on personal and business income. Instead of paying a premium to an insurer, you pay it to the feds who turn it back to the MCOs. Could be payroll, could be annual. Require states to roll back their own personal/business taxes to whatever degree they currently tax to pay for health and related services. I’m sure there are many smart people who have given this kind of detail some thought.
    Assets that are unneeded – what happens to those types of assets today when they are unneeded? They go bankrupt or merge or change their business model. I don’t see a need to change that or compensate anyone. The whole point is to control costs, which means somebody isn’t going to make as much money.

  10. John- very funny… but a little silly.
    Hope- you appear to be recommending “managed competition”. How would you fund it? Would you eliminate the employee deduction (which would, if same dollars spent,-big, big if- bring in $200 billion approx)? Would you have a dedicated payroll tax (ie medicare)? VAT? national sales tax? What would you do with assets (hospitals, surgery centers, imaging centers) that the MCOs deem ‘duplicate’ or not needed? Should anyone be compensated? Would you eliminate medicaid? Medicare?
    Should the MCOs be for-profit? Not for profit?
    Please expand.

  11. Also meant to include health and long-term care related outcomes up there (in the part about paying MCOs), upon a re-read I see I forgot.

  12. Erik-
    Here’s how I would reduce costs for all those groups.
    I would stick everyone into regional risk pools. Every person in a given region would be in a single risk pool, regardless of age or health/disability status.
    I would contract with a risk-bearing managed care organization to administer all health, behavioral health (BH) and long-term care services for the region, so that multiple funding streams were merged into a single pot of money within the MCO in each region.
    The MCO would have interdisciplinary care coordination teams consisting of a nurse, a social worker, a BH clinician and a support staff. Individuals with chronic or catastrophic conditions, BH needs, and/or long-term care needs would be assigned to a team. The team would partner with the individual and the individual’s primary care provider to develop, implement and monitor a comprehensive plan of care. The MCO would have the ability to provide home and community-based long-term care services or other innovative services (but not typically considered health services) as needed to prevent, delay or reduce the need for hospital, emergency room and nursing home care. The team would link the individual to other community resources (such as housing, trasnportation, etc) as needed.
    The MCO might have specialized teams in some areas; for instance, teams that deal specifically with high-risk pregnant women. The MCO would do all the other things we would expect: contract with a limited provider network, do utilization and quality management, etc.
    The MCO would receive a monthly payment for each individual, but would also be eligible for incentive payments based on achieving designated outcomes regarding cost and utilization. The MCO would be paid less than what we project we would spend for care in the absence of this approach, guaranteeing some level of savings.
    I haven’t suggested anything here that hasn’t been discussed or implemented or studied already. My point? There are well-known ways to reduce health costs. The main problem is politics.

  13. Okay Eric:
    I’ll take you up on that.
    “How would I reduce spending in all three areas at once?”
    I’d write a cool little computer program that would look for wasteful spending, fraud and abuse in those trillions of dollars.
    Then, with the political climate being the way it is, I’d create a quasi-private corporation to oversee my cool little program and make sure it’s allowed to do its thing.
    If somebody tried to block my clever little scheme by saying I didn’t I’d nationalize Mark Lanier and have him file a really big class action lawsuit again them.
    Alternatively, I’d declare myself President and call the whole thing a vital matter of national security.
    Eh?

  14. //20-30% of the population accounts for 80% of total costs//
    I’m confused about why this is part of your (Eric’s) argument. One of the reasons that people reject universal health care is fear of rationing, which is a fear that they will be abandoned by society when the chips are down (those three months of end-of-life care). If Eric isn’t against treating people during those last three months, then he’s arguing only the rich should be able to get treatment during those last three months: that’s just rationing in favor of the rich.

  15. Theora- I would suggest that you have not offered anything in your response. But, and I think Matthew would back me up, I am open to real ideas.
    Let me lay out the scenario (which all sides would basically agree with):
    1. 20-30% of the population accounts for 80% of total costs
    2. the rest 70-80% account for 20%
    3. approximately 15% of all medicare dollars are spent on the last 3 months of life
    4. total healthcare spending is approx $1.9 trillion in 2005
    Now, tell me HOW you would reduce expenditures in all 3 groups- don’t just say “government purchase drugs”– I want to know WHAT you would do.
    Of course, this request goes out to all THCB visitors.

  16. Erick–it’s not based on ideology, it’s based on fact. If a non-universl system worked better, I’d be for it. But it doesn’t.
    Look at the cross-national comparisons that have been discussed ad nauseam on this blog, and in many, many other places. At this point, saying universal care costs less and takes care of more people and gives you the same or better outcomes relative to a privatized system is about as controversial as saying that “computers help you work more productively.”
    Case in point–the recent Medicare drug bill. If we had the universal coverage in which the government purchased all necessary medications for seniors, it would cost far, far less than this crazy cockeyed plan they have now with donut holes and individual registration with stand-alone drug insurers. More people would get more medicine, and the total bill would be lower.
    Now, you can argue that more medicine for less money isn’t cheaper and better, but I don’t think people would find it terribly persuasive.

  17. //businesses deny this connection//
    I don’t think they’re denying it – I think they’re trying to reform human behavior/attitudes by prefering to hire people who pretend to be able to handle horrible environments, and similar “encouraged” qualities. In actuality, they are adding to the problem by making people feel they have to lie just to earn a livelihood – and they probably end up hiring a lot of sociopaths (in the sense of people who have no guilt reflex about lying) in the process.

  18. //can’t be an advocate of taxpayer subsidies for Wal-Mart.//
    If they are offloading the disabled, older workers, and whatever they deem “less healthy” onto public assistance, then Wal-mart is just decreasing the cost of their plan and maximizing their own profits, not reducing the taxpayer subsidy. In otherwords, they just shifted the subsidy so it can’t be directly associated with Wal-mart.

  19. Thanks for the info WITY! Feel free to email me with reading recs. I just don’t get why people think the destroy-productivity-for-short-term-profit model is working. If there are benefits, they certainly aren’t being spread across society.

  20. Matthew – I’m an optimist because optimists look kat the glass as half full. In this case, the glass is now being filled – albeit very slowly, but progress is progress and should be recognized as such.
    I work in and with the insurance/managed care industry, and am delighted to see a rather intelligent benefit plan design considered by an entity that is subsidizing its profits on the backs of taxpayers. That is corporate welfare at its worst. Whether you are a single payer system advocate or hang your coat at Cato, you can’t be an advocate of taxpayer subsidies for Wal-Mart.
    Could it be a better plan? Yes. Could it cover more? yes. Is it better than what they are doing today? Absolutely.
    Reward positive behavior by recognizing same.

  21. Gadfly,
    Plenty of studies point to a connection between what is called disaffected employment and poor health. I can refer you to the Jounal of Occupational and Environmental Medicine (JOEM) generally and Dr. Nortin Hadler (from UNC Chapel Hill) specifically. However, other sources (New England Journal of Medicine) and other researchers are uncovering startling connections between how we feel about our jobs and our health. In fact, according to one such study, “…issues that relate to job context, such as control, sense of being valued, fear of redundancy and the like…” contribute more often than the content of the job to health care utilization and workers comp claims.
    As long as businesses deny this connection no amount of health care system reform will do much more than nudge the cost needle (let alone improve health for millions of us suffering the effects of crappy jobs). But if somehow businesses begin to acknowledge and behave in accordance with this connection then we might see a day when as Hadler elequently states, “…the crown jewel of capitalism [becomes] not the accumulation of wealth; it is the creation of sustaining jobs.”

  22. Ps. The Wal-mart article also points out the public is partially subsidizing their employees through Medicaid and other public assistance.

  23. Unsuprised and still disgusted.
    Even with universal health insurance, being put through the cheese grater of the high turnover workforce is unhealthy. I wish somebody would do a study on that. I also wish that there were some enormous disincentive to the high-turnover model: and some fine or tax that would hit the shareholders themselves so they would be less eager to support the high-turnover model.
    On top of that, the irony is that when the Bush administration wants everyone to buy into the stock market for their retirement savings, they are ultimately giving workers a vested interest in keeping their own wages low and job conditions poor.

  24. Theora- please expand on exactly how “universal healthcare” would be “cheaper and better”. Speaking of ideology…

  25. Theora. I have no doubt that Costco may be a better all around business than Wal-Mart. I was referring only to Wall Street valuations when I said it “suffered” in comparison.

  26. In addition to being evidence for everything you’ve suggested above, it’s been pointed out that this memo is grounds for an ADA (Americans with Disabilities Act) discrimination lawsuit.
    I’d also like to take issue with your comment that Costco suffers for not screwing over its workforce. Take this recent BusinessWeek article, and it appears that Costco’s “a full day’s pay for a full day’s work” model makes for a better business (though I’ll admit I’ve no expertise here, so no way of judging whether this is a valid point).
    http://www.businessweek.com/magazine/content/04_15/b3878084_mz021.htm
    Ironically, this appears to cause its stock price to suffer, because Wall Street does not believe Costco’s profits are tied to its higher employee reimbursement, and simply thinks that Costco doesn’t prioritize shareholder return. (Hmmm, why do I believe Wall Street would find the argument that profits were tied to higher EXECUTIVE reimbursement a terribly persuasive one?)
    Of course, it’d all be moot if employers would just stop trying to duck the bill and would support a cheaper and better system of universal healthcare. But why go with what’s proven when there’s ideology…

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