Doing the Right Thing: Priceless

I saw an article when I woke up today and it compelled me to dash off this quick post.  Entitled “Wal-Mart Cuts Some Health Care Benefits,” the article details Wal-Mart’s decision to eliminate coverage for new part-time workers who work less than 24 hours/week and to increase costs, including deductibles and premiums, for virtually all other workers.  This is a pretty common story right now—you can read it any day of the week in any local paper where large and small business are the primary advertisers in that publication as the economy is driving employers to the brink.  With unemployment at a record high and consumer spending driving downward, employers don’t need to offer high benefits to attract workers and can’t afford to spend such a large proportion of their income on them anyway.  Yeah, yeah, we’ve heard it all before.  Cue violins and angry union workers.  People spend their time blaming the PPACA health reform law for wrecking the healthcare benefit system but that ire is misdirected:  it’s the economy, stupid, as they say in politics.

Anyway, it wasn’t the overall punch line of the story that caught my attention, it was one particular section, to wit:

Wal-Mart’s new health offerings will require many employees who smoke to pay a significant penalty. They will be required to pay an extra $10 to $90 each pay period — $260 to $2,340 a year — if they want health coverage. Several other large employers have begun charging higher premiums to employees who smoke, according to Mercer, a benefits consulting firm. Among the largest employers, about 28 percent vary their premiums based on tobacco use.

Mr. Rossiter defended the penalty for smokers, saying, “Tobacco users generally consume about 25 percent more health care services than nontobacco users.”

In its health care brochures, Wal-Mart told its employees that diseases caused by tobacco result in $96 billion in extra health care costs nationwide. And it noted that some other prominent companies, including Home Depot, Macy’s and PepsiCo, charge smokers more as part of their health plans.

Tammy Yancey, a $9.50-an-hour gas attendant at a Sam’s Club in Pinellas Park, Fla., complained that she would no longer be able to afford health insurance from the company. Ms. Yancey, a smoker, said her premiums would jump to $127.90 every two weeks — or $3,325 a year — up from $53.80 at present, when she earns $12,000 a year from her job. “I won’t be able to afford the insurance,” she said. “And I really can’t go without insurance because I have a heart problem.”

Now I don’t know Ms. Yancey and her circumstances and I don’t mean to pick on her, but that last sentence captures all that has been wrong about how consumers interact with the healthcare system—lack of personal accountability.  We expect our employers to pay our benefits and then we all blithely go around using them with nary a thought to how our own actions affect the cost of those services.  I don’t care how educated or self-aware you are,  I bet that the last time you went to the doctor for ANY reason you did not ask what the cost of services was going to be and whether there was a less expensive alternative.

Can you imagine undertaking that kind of behavior when you stroll into Best Buy to purchase a television?  I doubt it.  You probably came armed with articles from Consumer Reports and reviews from some geek website, plus feedback from friends and a mood to bargain.  You are going to wander around the store comparing pictures on 30 TVs as if your life depended on seeing the pores on Alex Smith’s face as he throws for a touchdown.  You are going to compare how the color looks on each unit like you are auditioning to be Rachel Zoe’s styling assistant.  And you are going to get the biggest damn screen that your car can transport at the lowest price you can wrangle and damned if you’re not going to get them to throw in the fancy remote control thingy for free.

But in healthcare?  Never. We go in, we say help me, we walk out, we get the bill 6 weeks later and have no idea what it says.  We throw it away and hope that the next one looks better after the coverage is applied.  We pay the remaining co-insurance bill when it comes in the collection agency envelope.  We sheepishly admit we have no idea what just happened.  And worse:  we don’t care that much.

Now add in the fact that we are not only engaging in making bad healthcare purchases, but we are acting counter to our own good health in doing so by smoking or overeating or not exercising or whatever our self-abuse of choice might be.   Smoking is easy to pick on because we all know it is deadly.  The problem is that before it kills you, it causes all sorts of expensive health crises—hypertension, heart disease, asthma, cancer, etc.—that your employer gets the privilege of paying for if they provide you with health insurance.     If cigarettes just killed you quickly, no problem:  an insurance payer’s dream.  The issue is that they kill you slowly and cause high expenses along the way—roughly 25%-40% higher healthcare costs than others, depending on who you ask.

Ms. Yancey, of the NY Times article described, notes that she is being forced to pay $3300/year extra for health benefits because she is a smoker.  If she is an average smoker she is probably spending at least that much on the cigarettes themselves.  At nearly $5/pack now, that is almost precisely the cost of a 2-pack a day habit.  Worse yet, she reports that she has a heart condition, which I’m guessing can’t be improved by the smoking.  So are we supposed to feel angry at Wal-Mart for enforcing this clearly discriminatory rule against smokers?  I don’t think so.

I am quite confident that Wal-Mart offers coverage for smoking cessation programs if they are like most large employers.  I am not suggesting that quitting smoking is easy—in fact I am quite confident it is not.  However, there is no way in hell that we can get our nation’s healthcare costs under control if there is no personal accountability here.

In health insurance programs that have provided people with clear transparency about what things cost (e.g., the cost of one type of pharmaceutical vs. another), it has been widely demonstrated that people tend to select the cheaper choice if it is clinically equivalent or less invasive (e.g., less invasive surgical procedures for cardiac conditions vs. more expensive open your chest like a bagel procedures).  In fact, Wal-Mart has been the poster child for this, launching a very successful program to sell most generic drugs for $4 for a month’s prescription, thus driving serious traffic into their stores by consumers who know a bargain when they see one.  We know that engaging people like real consumers, such as when they are buying that HDTV, can make a meaningful difference in healthcare costs.  And I am quite sure that people already know that cigarettes make healthcare more expensive.  We can’t force people to stop smoking, but we can make them pay for making the more expensive choice as we would in any similar situation.  I mean seriously, no way Best Buy is throwing in the 3D TV option for free—they are going to charge you for it AND get you on the installation.  When you choose a more expensive product, you pay.  And that is what the smoking issue is to healthcare.

Let’s do some simple math:  the cost to employers of offering healthcare benefits went up about 9% on average this last year.  Wal-Mart’s U.S. sales have been essentially flat for 9 consecutive quarters.  That means that overall profits are down due in part to rising healthcare costs.  If this continues into next year, it’s only going to get worse for Wal-Mart.  It starts with health benefit reductions and ends with worker lay-offs.  So by taking action to essentially penalize those that disproportionately increase healthcare costs (smokers), Wal-Mart is acting quite rationally from a financial standpoint.    No one likes to hear this, particularly when the implication is “ok, smoking I get…what comes next?”  Wal-Mart has not said they will increase the cost of benefits for people who are overweight or who don’t exercise or who eat some of the very food that is sold at Wal-Mart (Velveeta, anyone?), but it is the logical extension of the idea.

To avoid going down this rabbit hole, people just have to become more serious about how they purchase their own healthcare and manage their own health if any of this is going to change.  We need to give a damn about what that visit to the doctor costs and whether the generic drug is equal but cheaper and whether a particular MRI is really necessary.  We need to start asking what things cost and bargaining with our healthcare providers.  Guess what?  That’s how insurance carriers make money.  They buy deep discounts from hospitals and health plans and pharmaceutical companies and pass it through with a mark-up.  Wake up, consumer—you can play at this game and you better if you want to stay insured.

I saw a study this week by the Annals of Emergency Medicine that said that 11% of patients prefer to go to the Emergency Room of the hospital over going to their Primary Care Physician’s office not because they have an emergency, but because the ER offers more services.  Holy crap.  I prefer to go to the Four Seasons rather than the Holiday Inn because it offers more services, but I am generally expecting to pay extra for the cabana boy, not the same fee.  Unfortunately, because of the way insurance works, those 11% (who know full well it costs more to go to the ER) are probably paying about the same out of pocket for their incredibly lame choice.     Bleeding from the eyes?  Yes, go to the ER.  You find it handy that the ER can do all your tests in one place?  Suck it up, people.

Cost of average ER visit:  $1000 or so.

Cost of average physician office visit:  $200 or so.

Doing the right thing:  Priceless.

Oh, and one final thought.  Wal-Mart, if you are listening, you are not helping yourself by selling cigarettes in your store.