The “Wal-Mart” legislation on the docket in over 20 states is pushing some pro-business advocates into a Hobbesian choice – support Wal-Mart and other opponents of mandatory benefits legislation, thereby adding thousands to Medicaid rolls, or support the legislation and place a heavier financial burden on the world’s largest retailer.
Wal-Mart and several other large employers have thousands of employees covered under state Medicaid programs. The modestly paid employees qualify for the taxpayer-funded coverage due to their relatively low income. And, Wal-Mart’s health insurance plans are too expensive for these employees; different souces indicate different participation levels for employees, but none report participation above 46%. (The Wall Street Journal claims 46% of employees are enrolled in the company’s plans, other sources indicate 43% of the company’s 1.3 million workers are covered under their plans in 2005, a drop of five points from last year’s 47%.)
The average income for a Wal-Mart employee is less than $20,000 per year, making it difficult for them to afford even the least-expensive plans offered by the company. The company has developed a low-cost alternative plan (the “Value Plan”) that provides minimal coverage for an employee contributing $11 per month; while there are tight limits on benefits in the first year, these restrictions make sense; they will help mitigate adverse selection risks.
Improvements to the health benefits annonced by CEO Lee Scott include a reduction in the eligibility waiting period from two years to six months for full time workers; allowing children of part-time workers access to the plans; and reducing the waiting period for part time workers.
There are more than enough Wal-Mart bashers and advocates throwing stones over these and other issues. And the company is (somewhat unfairly) being made into a whipping-boy for a national problem. Remember, the number of employers offering health insurance has dropped by 15% over the past five years…
Simply put, labor expenses are a very significant part of Wal-Mart’s overall cost structure, and health benefit costs are hitting the company both directly (via employees on insurance) and indirectly (via the tax burden from uncompensated care, Medicare and Medicaid). This increases the company’s cost of doing business, and thereby their prices to consumers.
This is not a value statement, but reality.
What does this mean for you?
The US health care system is a burdeon on employers and our industrial competitiveness.

When the (registration required) FDA approves new medical devices for specific conditions, insurers are almost always required to cover them. Even if the approval makes no sense, the device fails in clinical trials, and there is no conclusive evidence of its efficacy.
The cost per case for the device and surgery is about $25,000; over 500 implants have been performed to date (the majority during the so-called clinical study).
Dr. Daniel G. Schultz, director of the Center for Devices and Radiological Health, approved an electrical stimulator for the treatment of depression, despite the unanimous opinion of the Center’s clinical staff that the device had no discernable impact. A Senate committee investigating the FDA could find
“no previous instance in which the director of the center had approved a device in the face of unanimous opposition from staff scientists and administrators beneath him. “(NYTimes)
In fact, in a study conducted by the device’s manufacturer, the device utterly failed to produce any measurable impact on depression in the study group.
Now that the device is approved for treatment of depression, expect manufacturer Cyberonics to put on a full-court press to get doctors to prescribe it. This over the concerns expressed on the floor of the Senate:
“I am greatly concerned the FDA standard for approval may not have been met here, and if that’s the case it raises further difficult questions about whether Medicare or Medicaid dollars should be used to pay for this device now,” Grassley, an Iowa Republican, said during a speech on the Senate floor.” (Reuters)
What does this mean for you?
More of your dollars spent on highly questionable and really expensive technology.