Nice to see McDonald's defending mini-med plans

The Senate Committee on Commerce, Science, and Transportation put McDonald’s on the hot seat today, challenging the company to justify the “limited benefits” aka “mini-med” plans it offers its hourly employees. Benefits in these policies generally top out at $2000 to $10,000 per year of coverage. From the perspective of some of the Senators, McDonald’s should offer plans with higher limits and pick up more of the tab.

As reported in the Wall Street Journal (Senators Attack McDonald’s Health Plan), committee chairman, Sen. Jay Rockefeller (D, WV) asked McDonald’s about what happens to the 10 percent of employees who actually reach their caps.

“Why can you let them go, let them suffer?”

Sen. Barbara Boxer (D, CA) didn’t like hearing that McDonald’s paid less toward low wage employees’ benefits than for managers and corporate staff.

“That just makes my heart beat fast, and not in a good way,” she said.

These Senators are looking at the situation the wrong way. The actual problems are as follows:

  • Only wealthy people can afford to cover the full cost of comprehensive health insurance
  • People without insurance are charged far more for medical services than those with insurance
  • Even low wage earners are taxed to pay for Medicare, a non-means tested program for the elderly

Let’s examine the case of McDonald’s workers to put things in perspective. An employee making the federal minimum wage of $7.25 per hour and working  40 hours per week for 50 weeks would make $14,500, pre-tax.  Meanwhile, the average cost for comprehensive health insurance for family coverage is just about identical, at $13,770. It’s unrealistic for McDonald’s to double its labor costs to offer such insurance. And even if it paid the average amount that employers pay toward premiums (about $10,000), that would still leave employees paying $4000 per year, or almost one-third of pre-tax wages. In addition, employees would face co-pays and deductibles when they actually used the insurance. As a result, very few would actually enroll in the insurance option and they’d be uninsured anyway.

When those uninsured workers sought medical care, they would be charged the crazy prices that most hospitals, doctors and pharmacies charge to so-called self-pay patients. They wouldn’t get the benefit of negotiated rates for health care services and drugs. They’d also face the stress and shame of not being able to produce an insurance card when making an appointment or checking in. When a worker got sick, sought treatment and missed work, he or she would be in serious trouble and headed to bankruptcy in a hurry.

Furthermore, the workers, whether insured or not, and McDonald’s would each be paying 1.45% of wages (2.9%) overall to Medicare under any scenario. That’s $420.50 per year to subsidize health insurance for seniors of all income and wealth levels.

The appeal of mini-med plans is actually fairly strong to low wage earners who live paycheck to paycheck. It provides access to the health care system and discounts for routine services, and can prevent a minor illness or a single trip to the emergency room from placing a family in financial jeopardy. Even when the cap is reached, the negotiated rates are still in force.

Of course if an illness or injury is serious and costs add up into the tens or hundreds of thousands of dollars, the employee will still be in serious trouble. That’s until 2014 of course, when health reform fully kicks in and everyone can get affordable coverage.

December 1, 2010

3 thoughts on “Nice to see McDonald's defending mini-med plans”

  1. Thank you David for pointing out the advantage of having even a mini-med plan. Many times I’ve received an EOB from our insurance where the local hospital billed $10K (or more) and because our insurance has contracted rates, the hospital “adjusted” off 80% or more and the insurance paid only a fraction of the original invoice. What happens to those individuals without any insurance with negotiated low rates? The hospital expects full payment leaving many to have to “spend down” all their assets and go on assistance and the hospital still only gets that fraction of the original billing.

  2. Insurance companies COULD offer disease-based plans that pay only specific CPT codes that correspond to medically necessary diagnostic and therapeutic services related to the ICD-9/10 code. Not only would this go a long way towards decreasing fraud, waste and abuse in healthcare, but it would also give third party payers the ability to predict expenses. For example, when a Mc’Donald’s employee visits an ambulatory (or acute care provider) for flu-like symptoms, they are entitled to a limited set of diagnostic services based on their symptoms and physical exam. Likewise, if the diagnostic services don’t reveal specific positive results, then the corresponding therapeutic services are not covered. If the patient isn’t running a fever and complaining of flu-like symptoms, then a throat culture is NOT indicated and neither would prescribing an antibiotic.

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