THCB

Wal-Mart Care

Can Wal-Mart provide us with health care as efficiently as it furnishes us with paper towels?

According to a Kaiser Health News report:

Wal-Mart — the nation’s largest retailer and biggest private employer — now wants to dominate a growing part of the health care market, offering a range of medical services from basic prevention to management of chronic conditions like diabetes and heart disease, according to a document obtained by NPR and Kaiser Health News.

But then the next day, according to Kaiser, the company started backtracking:

The only thing the company would say for certain is: “we are not building a national, integrated, low-cost primary care health care platform,” according to the statement from to John Agwunobi, senior vice president and president of Wal-Mart U.S. Health & Wellness.

I’ll get to what Wal-Mart might be thinking in a minute. First questions first: Can Wal-Mart provide care that is of higher quality and lower cost than conventional provision? If so, how?

My answer: Wal-Mart can indeed improve on the current system. But here’s the catch. It can do so only if it continues doing what it and other retail medical outlets are already doing: ignore the third-party payers. Almost everything that’s wrong with our health care system is the direct result of third-party payment; and some of the most striking examples of efficient care are emerging in those parts of the market where third-party payment is either nonexistent or of marginal importance.

So as not to be misunderstood, I am not saying that our problems are being created by health insurance. There is nothing in principle wrong with insurance. The source of our problems is using insurance companies to pay medical bills. It’s insurance companies acting pro emptore — in place of the buyer.

Life insurance, for example, plays a useful social function. But we don’t use life insurance to pay for coffins, caskets and funeral services. There is a lot wrong with the funeral industry. But none of it is caused by life insurance. As I previously wrote in response to a comment by Uwe Reinhardt:

I have life insurance. But when I die, the insurer is not going to pay for my autopsy, my cremation, the urn that will hold my ashes, or the cost of the plane needed to sprinkle my ashes over the Princeton University football field (or some other suitable place). Instead, my wife will get a check.

When insurers become buyers of care instead of insurers of care a number of things begin to change, all of them bad:

  • The provider becomes the agent of the third-party payer, rather than the agent of the patient — even shaping the practice of medicine to the third-party’s view of how it should be practiced.
  • The provider no longer competes for patients based on price.
  • Absent price competition, the provider no longer competes for patients based on quality.
  • Overall, the provider’s incentive is to maximize against reimbursement formulas rather than provide low-cost, high-quality care.

Most people (even most health policy experts) have no idea the extent to which third-party payment makes efficient provision of medical care impossible. Here is an excerpt from one of my previous posts:

Misa and his team thought they had the solution: a “concept clinic” that uses doctors for only the most complex cases, and steers most patients to nurse practitioners and physician assistants… Then they did the calculations: What if Park Nicollet had used this model in 2009, when it had about a million total patient visits to primary care; and if everyone had paid Medicare rates?

They discovered that the concept clinic would have run at a 40 percent loss; about the same as the current model… The problem, in part, is that Medicare payments also drop under this kind of model; it pays less for visits with nurse practitioners than doctors. That ate up any savings.

The perverse incentives work both ways. They not only discourage conventional sources of care from becoming efficient, they discourage efficient care givers from accepting patients who rely on third parties to pay their medical bills. As Tom Saving and I wrote in The Wall Street Journal earlier this year, most walk-in clinics won’t accept Medicare enrollees and almost none accept Medicaid enrollees because of their low payment rates. (Yet if Medicare and Medicaid would pay the market price — or allow the patient to pay a “balanced bill” to reach the market price — care would be more accessible for the elderly, the poor and the disabled and the government would save a lot of money in the process!)

Fortunately (at least for efficiency’s sake) a lot of people are paying for a lot of care out of their own pockets or out of medical savings accounts of one sort or another. As a result, there are about 1,300 walk-in clinics nationwide (see the graph below via Sarah Kliff at Ezra Klein’s blog). These include about 140 Wal-Mart clinics, CVS Caremark’s nearly 550 Minute Clinics and Walgreen’s 355 Take Care clinics. All of these clinics post prices; they keep records electronically; most can prescribe electronically; and, according to one study, they provide more reliable care than conventional primary care physician’s offices. [See our previous reports here, here and here.]

    So what is Wal-Mart up to? I previously reported that a lot has been going on at Sam’s Club — generally below the health media radar screen. For example, in June they offered the following screenings to male customers at no charge:

    • BMI Index measurements,
    • Blood pressure tests,
    • Cholesterol readings,
    • PSA (prostate cancer) tests, and
    • TSH (thyroid stimulating hormone) tests.

    And, here’s the schedule they have been following since then:

    • July: Kids Health Screenings
    • August: Vision Health Screenings
    • September: Diabetes Screenings
    • October: Women’s Health Screenings
    • November: Digestive Health Screenings

    Wal-Mart is clearly testing the waters.

    John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.

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    BarbieCrainjuddymorganAnonymousC. WellsC Wells Recent comment authors
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    BarbieCrain
    Member
    BarbieCrain

    Wal-Mart Stores, Inc., doing business as Walmart, is an American multinational retailing corporation that operates also by team members of Dissertation bliss review as a chain of hypermarkets, discount department stores, and grocery stores.

    juddymorgan
    Member
    juddymorgan

    Walmart provide international standard facility so many people apply for Walmart positions does not mean that endorses Walmart, its means there are more people apply jobs and many of those applications are probably from previous industry employees that Walmart due to out of country buying and so many from local retailers walmart mission statement it’s very clear there is no problem everyone all of big manufacturing company interest to contract Walmart.

    Peter1
    Guest
    Peter1

    Nate, looks like my post is “awaiting moderation” To save you the anticipation read below: “The Effects of Wal-Mart on Local Labor Markets – – by David Neumark (University of California-Irvine), Junfu Zhang (Clark University), and Stephen Ciccarella (Cornell University), IZA Discussion Paper No. 2545, Jan. 2007 This study presents the most sophisticated analysis to date of Wal-Mart’s impact on retail employment and wages. Analyzing national data, the study found that the opening of a Wal-Mart store reduces county-level retail employment by 150 jobs. Because Wal-Mart stores employ an average of 360 workers, this suggests that for every new retail… Read more »

    Peter1
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    Peter1

    “most of Wal Marts sales come from domestic goods, largest of which is groceries” I guess you think AG jobs pay the same as manufacturing jobs. You speak as if there was no distribution for food products before Walmart. I wonder if Walmart supports using illegal immigrates in the AG business, their biggest employer? “After that Wal Mart sells the same clothes and electronics everyone else does.” That’s the competitive race to the bottom that Walmart creates, forcing everyone else to buy overseas. It’s odd you support offshore sourcing now because in the past you’ve argued how many jobs are… Read more »

    Anonymous
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    Anonymous

    @Peter1, In some cases reasoning with someone is like peeing in the ocean. Afterward you feel relieved but the ocean is not really affected.

    Nate Ogden
    Guest
    Nate Ogden

    “manufacturing employees that Walmart put out of business due to overseas buying” Its time to update your dogma, most of Wal Marts sales come from domestic goods, largest of which is groceries. After that Wal Mart sells the same clothes and electronics everyone else does. “many from local retailers who realize they’ll be out of work soon.” Again retailers around Wal Mart see an increase in sales so Wal Mart not only creates direct jobs but increases employement around them. If you read the study, I know you have problems stomaching any non liberal propoganda but tough it out, to… Read more »

    Peter1
    Guest
    Peter1

    As with anything there is a trade off. It’s not as if Walmart (or any other big box) creates something from nothing. A lot of what it “creates” actually robs from other retailers and sectors in the community and does not really add net benefits. http://www.newrules.org/retail/key-studies-walmart-and-bigbox-retail Just because 25,000 people apply for 325 Walmart positions does not mean that endorses Walmart, it just means there are more people than jobs. Many of those applications are probably from former manufacturing employees that Walmart put out of business due to overseas buying and many from local retailers who realize they’ll be out… Read more »

    C Wells
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    C Wells

    I, for one, find it humorous that while Walmart is considering entering the field of consumer clinics, this appears to be causing some a bit of, shall I say, heartburn? I don’t care for Walmart myself, I don’t think they treat their own employees well and I think a companies worth really lies in how well they treat their own; but really, the conservatives should be doing cartwheels here. Their agenda’s are being met. A private entity is taking over health care. Or at least some part of it. Whoopee! One thing I will say on Walmart’s behalf though, and… Read more »

    Nate Ogden
    Guest
    Nate Ogden

    ” I don’t care for Walmart myself, I don’t think they treat their own employees well and I think a companies worth really lies in how well they treat their own” Is that based on what you read in the liberal media or actually talking to Wal Mart employees? If they were so terrible why do so many peopel want to work there so badly? “The new Wal-Mart Stores Inc. location opening Friday in suburban Evergreen Park received a record 25,000 applications for 325 positions” http://www.outsidethebeltway.com/wal-mart_gets_25000_applications_for_350_jobs/ Wal Mart is improving the lives of people that were unemployed or had jobs… Read more »

    C. Wells
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    C. Wells

    As provocative and argumentative as always Mr. Ogden, however, I would suspect that the reason so many people sought jobs at Walmart was the necessity of putting food on the table. It was not so long ago, Mr. Ogden, that Walmart employees were paid so poorly they qualified for Medicaid. It was that the liberal Hillary Clinton among their board of directors, and finally influenced them to offer health insurance. And still, that health insurance was negligable. They were the subject of a facinating documentary shown on a cable station regarding their hiring practices, and are facing round two of… Read more »

    C. Wells
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    C. Wells

    Pardon my typos, phone upload. Thanks

    Aimee
    Guest

    When my daughter got a bad ear infection at the beach this summer, the best option was a retail clinic at one of the chain stores. It was a $100 flat fee, which wasn’t more than a doctor’s visit to someone we didn’t know. We couldn’t find a doctor who could take her right away and there was only one ER nearby and it was packed. The nurse practitioner spent time with us and was very thorough. She even called back to check on my daughter the next day. I was impressed. If you get caught in another market like… Read more »

    Margalit Gur-Arie
    Guest

    No doubt total health care costs would be contained rather quickly if we did away with Medicare/Medicaid, or “allow the patient to pay a “balanced bill” to reach the market price” (allow?) and did away with private insurance too. As John Goodman points out correctly, the issue of access to care will also be largely resolved: “care would be more accessible for the elderly, the poor and the disabled and the government would save a lot of money in the process!” If we also stop using doctors, and go back to apprentices and I presume allegiance to Apollo, health care… Read more »

    Change Needed
    Guest
    Change Needed

    Maybe it is time for major changes to the medical education system? Is there some mental and/or bureaucratic construct that keeps us stuck? Like the Johari Window, is there a blind spot in our thinking that keeps us stuck? What if we went back to an apprentice system (albeit modified). Open the doors of medical school up to many more students. With vast improvements to simulation technology there should be no reason we could not train a lot of students intensely over a shorter period of time all as primary care providers for much less money. These providers graduate to… Read more »

    steve
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    steve

    Health care costs have increased consistently faster than GDP since about 1930. Insurance may be a factor, but it is likely only one causing our costs to rise so quickly.

    Steve

    John Ballard
    Guest

    For most people with coverage a health insurance policy is like the entrance charge to an all-you-can-eat buffet. And when the employer picks up half the tab it’s better than “…and kids eat free.”

    steve
    Guest
    steve

    Devise a health care system without insurance. The expenses are so large, I dont see how you can do it. Also, people do not respond predictably to incentives when it comes to health care. For example, the recent Health Affairs paper that showed dropping co-pays does not increase consumption of primary care services.

    To be clear, I think insurance is a problem, but it is largely unavoidable. Please note that John Goodman, the author of this piece, has health insurance.

    Steve

    John Ballard
    Guest

    Steve, I have no illusions about the need for private insurance. We already have social insurance in the form of Medicare, Medicaid and Social Security and those programs, though under a strain (like old bridges and other infrastructure) continue to work. The VA is another illustration of social insurance but thanks to the military nature of the program they make no apology for means service-connected testing for eligibility. Despite the misinformation machines spewing panic in America about “socialism” and “government-controlled health care” private insurance in various forms is universal in most of the developed world as an adjunct to their… Read more »

    Nate Ogden
    Guest
    Nate Ogden

    “But US private insurance needs so much for marketing, wages, sales commissions and corporate profits”

    over 50% of group insured Americans are covered by self funded plans which have no marketing and corporate profits.

    If government would stop discourging self funding the problem would be solved.

    Nate Ogden
    Guest
    Nate Ogden

    Large expenses are easy to insure, they are very predicatable in large populations. Its not insurance that is the problem its the type of insurance. A scheduled benefit plan would not have the same problems as a reimbursement policy when it comes to inflation. Dental is a good example, a scheduled dental plan has no inflation unless the plan sponsor increases the per procedure reimbursement. This puts pressure on dentist to not increase their fees. If health insurance returned to scheduled benefits inflation would be killed. Your academic hospitals could never justify their charges. With reimbursement directly from the carrier… Read more »

    Peter1
    Guest
    Peter1

    October 2007: “It is thus tempting to believe that the moment for reform has finally arrived and that we stand on the verge of historic change. Yet before reform advocates get too exuberant, they would do well to remember what happened the last time health care reform topped the national agenda. In the early 1990s, reformers also believed that the conditions were ripe for change1; then, as now, soaring health care costs and growth of the uninsured population fueled public dissatisfaction (see tableComparison of Key Factors Affecting the Demand for Health Care Reform, Early 1990s and Today.). When President Bill… Read more »

    John Ballard
    Guest

    I knew it wouldn’t last. This is where Dr. Goodman and I part ways. Your question, Jonathan, is the right one to ask. My point in agreeing with that part of his post was that health care and insurance have different missions. Health care is about medicine and healing. Insurance is about risk management. Although they are related (or in the case of the US, bound together in a dysfunctional relationship) neither of these two groups has any real need to reduce costs because whatever costs are incurred are the responsibility of someone else. In the case of insurance, “costs”… Read more »

    Jonathan H
    Guest
    Jonathan H

    So, John and John, if third party payers are necessarily so bad for efficiency/cost in health care, why do the third party payers in the rest of the world keep expenditures half as high as those in the US, with universal coverage and access issues in general that are about the same? Why did health care expenditures outpace inflation and GDP growth by an even higher rate before managed care than after it took hold in the early 90s? You seem to forget that health care cost growth was out of control in the indemnity days. That was the main… Read more »

    John Ballard
    Guest

    …ignore the third-party payers. Almost everything that’s wrong with our health care system is the direct result of third-party payment; and some of the most striking examples of efficient care are emerging in those parts of the market where third-party payment is either nonexistent or of marginal importance. [and] When insurers become buyers of care instead of insurers of care a number of things begin to change, all of them bad: Dr. Goodman, I have often disagreed with arguments you have advanced, but this is truly insightful and should be put up in lights. Thanks for this. It’s a step… Read more »