New Offerings

Wal-Mart’s announcement that it plans to offer Health Savings Accounts and other high-deductible health plans to its employees next year is a win-win-win opportunity:

  • Cost: The world’s largest private employer and savviest purchaser concluded that high-deductible, low-premium health insurance offers the best deal for its workers. In some areas, Wal-Mart employees will be able to purchase health insurance for as low as $11 a month. Wal-Mart has taken heat because just 60% of its eligible employees participate in the company’s health plan and another 5% are on Medicaid. But now the workers can buy affordable private insurance – real insurance – to protect against major medical expenses.

  • Access: As we reported in an earlier issue of Health Policy Matters, Steve Case’s Revolution Health is providing capital to a company that will introduce Redi-Clinics into Wal-Mart stores and elsewhere. The clinics will offer quick and affordable access to nurses who can diagnose and provide treatment for the most common ailments, from ear and bladder infections to strep throat and bronchitis.

    Wal-Mart employees tend to overutilize emergency rooms and underutilize doctor’s visits. The new clinics will provide employees – and shoppers – with easy access to simple acute care services and provide a ready source of referral for more complicated or serious ailments.

  • Bargaining power: And talk about a company that knows how to bargain for prices! No one does this better than Wal-Mart. Having this 800-pound gorilla in the game of trying to get good prices for its employees who are themselves motivated to shop for value will provide an added boost to HSAs. Prices and price visibility are the biggest stumbling blocks right now with HSAs. Wal-Mart surely will shake up the market.

Details still are sketchy about Wal-Mart’s new health plan offerings, but one plan reportedly would provide three doctor’s visits a year as part of the insurance contract. After that, workers would have to pay out of pocket to reach the deductible ($1,250 – $3,000 for singles; $2,500 – $6,000 for families) before insurance triggers in. Wal-Mart will match employee HSA contributions up to the deductible they select.

Prof. Uwe Reinhardt of Princeton University, often a critic of HSAs, was quoted in The New York Times as saying that the office visit offering “removed a big financial barrier between doctors and patients,” adding that critics “would have trouble attacking this plan.”

But they are attacking it, of course. They say it’s ridiculous to offer a high deductible plan to employees who are barely earning minimum wage. The $2,500 may seem an almost impossible amount of money to many workers who live from paycheck to paycheck. But the company is mustering a campaign to encourage contributions to the HSA account to save for the deductible. And ask a husband whose wife contracts cancer if he would rather have the high-deductible policy or none, and I think you will find that most workers will conclude that insurance for major medical costs is what matters most.

(Even a giant like Wal-Mart can shoot itself in the foot: The New York Times reported on Wednesday on an internal memo suggesting ways that the company could cut its health costs, including hiring younger, healthier workers and encouraging physical activity in every job. It’s always wise to remember that anything you write may someday show up in the NY Times.)

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And on the other side of the scale, workers with some of the most generous health coverage in the country also will be able to choose HSAs next year. General Motors announced this month that it will offer high deductible, HSA-qualifying insurance for its salaried employees and for retirees who are not yet eligible for Medicare.

Employees will be able to select a “low” high-deductible plan with insurance that starts at $1,000 for individuals, $2,100 for families. Or they can choose the “higher” high-deductible plan of $2,780 individual/$5,500 family to maximize the tax benefit.

There will be no monthly premium contributions for employees who enroll in either of the HSA options. By contrast, those who enroll in the traditional PPO plan will pay $125/mo. for a family, and they also will face higher deductibles ($450/individual, $900/family). The company is encouraging employees who choose the HSA option to put their premium savings into their HSA, which can be done through a payroll deduction.

General Motors is coupling its offerings with new tools to help employees decide which is best for them. UnitedHealth won the contract for GM’s HSAs, and Wells Fargo will service the debit card which allows employees to access their HSAs. United’s chronic care management program along with its organized delivery systems were particularly attractive to GM.

The company is mustering a major employee education campaign to explain the new options. The HSA offering is a pure business decision based upon trying to find the best value for its employees. Kudos to GM.

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And finally, we congratulate Florida for winning approval of its waiver to introduce new incentives and competition into the state’s Medicaid program. Also, Gov. Jeb Bush has been appointed to serve with us on the Medicaid Commission, and he will bring first-hand experience to our work about how to introduce choice and new incentives into this extraordinarily complex program which is so desperately in need of reform.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

  • U.S. industry is in the crosshairs of bad tax policy
  • Sizing up criticism of new Medicare drug benefit
  • May Reagan GOP R.I.P.
  • Values-driven healthcare: Freedom of conscience for the consumer
  • Empowering consumers: Better knowledge drives better and more affordable healthcare
  • At clinic, hurdles to clear before Medicaid care

U.S. INDUSTRY IS IN THE CROSSHAIRS OF BAD TAX POLICY
Author: Grace-Marie Turner
Source: Galen Institute, 10/26/05

Major American companies, from General Motors to Wal-Mart, are struggling with health costs, and many are offering HSAs as a new tool to engage employees in helping to manage costs. “HSAs will help, but it’s time for even bolder solutions that get to the root cause?of high health costs,” Grace-Marie Turner writes in a new paper. Employees, especially those in high-paying jobs, have a huge incentive to demand more and more of their compensation in the form of tax-free health benefits. The president’s tax reform panel is expected next week to recommend a change in tax policy that caps the tax break for job-based health insurance, giving employers a new tool in negotiating with employees to keep health costs under control.
Full text: www.galen.org

SIZING UP CRITICISM OF NEW MEDICARE DRUG BENEFIT
Author: Grace-Marie Turner
Source: The Orlando Sentinel, 10/13/05

The new Medicare drug benefit for seniors marks an important departure from traditional Medicare by introducing free-market incentives to bring about more choices and lower prices, writes Grace-Marie Turner, president of the Galen Institute. While there were critics on both sides of the new Medicare law, the new Medicare drug benefit is indeed bringing private sector competition into play – and it is paying off with more choices and lower-than-expected premiums for seniors. Premiums in the new drug program will average just $32 a month – lower than Congress’ estimate of $35 a month – “and every state but Alaska will offer at least one plan that costs only $20 a month.”
Full text: www.galen.org

MAY REAGAN GOP R.I.P.
Author: Robert Goldberg
Source: The Washington Times, 10/26/05

U.S. Rep. Joe Barton and Sen. Charles Grassley, charged with producing legislation to reduce spending on Medicare and Medicaid, will “actually increase it,” writes Bob Goldberg of the Manhattan Institute. The lawmakers plan to ask taxpayers to pick up the full cost of Medicaid for Katrina victims, raise physician fees, and add more middle-class Americans to Medicaid. “Both chairmen propose to pay for this spending spree by imposing price controls on all drugs?and for good measure, both lawmakers plan to eliminate generic-drug competition from brand drug makers in order to enrich other generic drug makers,” he writes. “Quite simply, if a brand drug company wants to take any of its products generic, Messrs. Barton and Grassley would have Medicaid – which gets the best price companies give to private health plans – use the generic price as the government-set price for remaining brand name business,” writes Goldberg. This will ultimately “discourage brand-company launches of generic drugs altogether ? [which] means the small group of generic firms that get 180 days to exclusively market a medicine whose patent they successfully challenge can charge anything they want, which is usually just a shade below the brand price.”
Full text: www.washingtontimes.com

VALUES-DRIVEN HEALTHCARE: FREEDOM OF CONSCIENCE FOR THE CONSUMER
Authors: Robert E. Moffit, Ph.D., Grace V. Smith, and Jennifer A. Marshall
Source: The Heritage Foundation, 10/25/05

A primary goal of healthcare reform should be the creation of a values-driven system “in which Americans are free to choose health coverage that is consistent with their ethical, moral, and religious convictions,” write Robert E. Moffit, Ph.D., Grace V. Smith, and Jennifer A. Marshall of The Heritage Foundation. “The current system of third-party payment, which governs government- and employment-based insurance arrangements, undermines personal decision-making in health care,” write the authors. “The primary goal of reform should be the achievement of compatibility between individuals’ personal values and their health care choices?Tomorrow’s doctors will have far greater means at their disposal to improve and extend the quality of human life?[I]ndividuals and families should be free to make their own decisions and exercise their own conscience in these sensitive matters.”
Full text: www.heritage.org

EMPOWERING CONSUMERS: BETTER KNOWLEDGE DRIVES BETTER AND MORE AFFORDABLE HEALTHCARE
Source: Blue Cross and Blue Shield Association, 09/28/05

A new survey by the Blue Cross and Blue Shield Association provides solid data on the health of populations selecting HSAs. The company found a general bell curve for health status, with those selecting HSAs virtually mirroring those with traditional coverage: 89% of those selecting HSAs considered themselves in excellent, very good, or good health, compared to 87% in traditional plans. The remaining enrollees considered themselves in fair or poor health. The survey, which surveyed 3,000 policyholders to gauge perceptions of consumer-driven health plans, also found similarities in age with one notable exception: 37% of people purchasing HSAs were ages 45-55, compared to 25% in traditional plans, making it clear that middle-aged families see a value equation in HSAs.
Full text: bcbshealthissues.com

AT CLINIC, HURDLES TO CLEAR BEFORE MEDICAID CARE
Author: Richard P?rez-Pe?a
Source: The New York Times, 10/17/05
“Too many people who need Medicaid are bewildered by it,” writes Richard P?rez-Pe?a in a New York Times series about the state’s Medicaid program. “A daily parade of people passes through [New York City’s Morris Heights Health Center], struggling with the one essential demand Medicaid makes to get insurance and keep it: paperwork. Many fail to do it, or do it incorrectly or too late. Some think they have insurance but do not, some have it but do not know it, some lose it and some never get it,” writes P?rez-Pe?a. New York has one of the most stringent documentation requirements in the country, but others point to additional issues that make access to care difficult. Susan Billinghurst, a physician’s assistant who treats Medicaid patients said, “How can you provide care when you can’t find people? They move, their phones get cut off, they don’t get their mail, and they all have a lot of other problems going on.”
Full text of series: nytimes.com

UPCOMING EVENT:

Authorized Generics: Part of the Solution or Part of the Problem?
American Enterprise Institute Event
Monday, October 31, 2005, 10:00 a.m. – 12:00 p.m.
Washington, DC

For additional details and registration information, go to: www.aei.org.

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at http://www.galen.org/.

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