Wal-Mart Does Health Care

Wal-Mart’s main contribution to the health care debate has been the vilification it has received for providing inadequate health insurance coverage for its employees, a situation which prompted Maryland to pass a law requiring large employers to provide health insurance

But, that isn’t the only role it is playing.  Wal-Mart has been pushing to establish cut rate generic prescription drug pharmacy prices, walk-in nurse practitioner clinics, and small business health insurance plans.  Many competing general retailers have done the same thing.  The results may be more afforable health care, but the benefits may be marginal.

  Cheap Drugs

Most recent has been a bid to sell generic drugs, which usually sell for $10-$30 for a month’s dose, for $4 in the Tampa Bay, Florida area, with an intent to spread the program nationwide.

Whether this is a loss leader, designed to secure customers who also need expensive and profitable non-generic prescriptions, or something made possible by bulk purchasing deals, or both, isn’t clear.  Whatever Wal-Mart’s reasoning was, mass retailer Target, who competes with Wal-Mart, felt compelled to follow suit so as not to lose customers to Wal-Mart.

Urgent Care Lite

Earlier this week, the Denver Post reported that Wal-Mart would be providing space to walk-in “minor acute care clinics” from franchise SmartCare in some of its retail locations in Colorado, Nevada and Arizona.

SmartCare and competitors including MedPoint Express, MinuteClinic and RediClinic have emerged as a faster and often less expensive alternative to emergency room or urgent care visits. . . . SmartCare centers are staffed by nurse practitioners and certified medical assistants who have a physician on call. They primarily test for and treat common ailments such as ear infections, sore throats, bladder infections and seasonal allergies. They also provide cholesterol, bone density and other health screenings along with school or employment physicals.

Retailers Target, Kroger and Walgreens are pursuing similar ventures.

Bare Bones Health Insurance

Wal-Mart affiliate Sam’s Club is also offering small business oriented health insurance policies, allegedly at discounted rates.  The pitch can be found here.  So does CostCo and even Home Depot is getting into the act.

The Sam’s Club plan through contractually affiliated “Extend Benefits” basically skirts requirements imposed on traditional group health insurance plans by creating a health savings account, into which the employer makes some contributions, and then having employees use those funds to purchase non-employer based plans, typically with high deductibles.  Sometimes the individual and family based non-employer plans don’t cover maternity care, prescriptions or mental health coverage, which group health insurance plans either are ordinarily required to provide, or almost always do provide as a matter of commercial custom and practice.

Cut Rate Care For the Working Class

What does this mean for the health care debate?

These companies have looked at the biggest gap in the U.S. healthcare system, which is health care for working class and lower middle class people, who don’t have health insurance now, and frequently work for or own small businesses. 

They are marketing largely to that segment of the population, in places they shop anyway.  They do so by designing products, like walk-in nurse practitioner clinics that serve primarily people who don’t have a regular doctor, and bare bones health insurance policies, which are below the standards set by the existing market which has been oriented towards middle to upper middle class employees of large to medium sized businesses and governments.  Traditional products are often beyond the means of working class patients in an era of rising health care prices, in a health insurance market structured as it is today.

These big retailers are making these health care products available largely by putting their legitimacy, legal resources and political clout behind these programs, which small companies feel involve too much risk of crossing the line into medical practices and insurance products prohibited by state and/or federal law.

Chevys v. Cadillacs v. Sneakers

This isn’t necessarily a bad thing. 

Often, allowing people to obtain “Chevy” health care may be a better option than requiring them to choose between a “Cadillac” plan, and care limited to home remedies and emergency room care, the “Sneakers” option.

The Limited Benefits Of Cheap Generic Drugs

It is hard to complain about low prices for generic prescription drugs, even if it is something of a marketing gimmick and may save a typical patient with one regular prescription $72-$144 a year, as generic drugs aren’t the main source of rising prescription drug prices.  The real drugs v. rent or food crisis situations usually involve new brand name drugs that are still under patent.

But, if the choice is between $4 drugs and no drugs, obviously it is a good thing, and for the most strapped consumers, a few bucks saved on generic drugs may make a real difference.

Nurses v. Primary Care Physicians

Certainly, there are risks involved, which are no doubt insured against.  A nurse practitioner, at least in theory, may not flag subtle indications of a serious problem that requires a physician’s expertise, something that a primary care physician could.  But, given that much of the care provided in walk-in “minor acute care clinics” would have been provided by paraprofessionals within a doctor’s office in any case, it is fair to question how much of an impact this will actually have on patient care. 

Indeed, there is a counter-argument that a nurse practitioner, because he or she charges a lower hourly rate, may be able to spend a little more time with the patient and provide better care.  It is already common to have nurse-practitioners serve as certified nurse-midwives, largely displacing obstetricians in routine pregnancies at a lower cost.  If the choice is between a patient with no formal medical training merely guessing about what to do, and a nurse-practitioner who routinely deals with common conditions making a call, the nurse-practitioner will usually provide better guidance.

The costs savings are, however, modest.  Primary care physician care is already the least expensive part of the health care system.  Again, allowing hard pressed customers to save a few dollars on primary care may be good, but the risks associated with using nurse-practitioners clinics, instead of ordinary doctor’s office visits, have to be weighed against the small cost savings involved in these kinds of arrangements.

The Pros and Cons of Limited Health Insurance Coverage

Bare bones health insurance with health savings accounts also, in many respects, are poor choices for this market, which would be better served by highly restrictive HMO plans, like the low end plans offer by Kaiser.  The ideal customer for a HSA-high deductible plan is really a healthy, affluent early retiree, who can afford to pay out of pocket for routine care, and faces especially high premiums for more traditional health insurance products.

But, bare bones health insurance does provide something.  It may mean that out of pocket payments are being made at insured patient prices, rather than the outrageous list prices charged almost exclusively to uninsured people who can’t pay in cash.  It means that there is coverage for catastrophic medical emergencies, putting an upper limit on out of pocket costs.  And, it means that the employer is providing an employee with, at least, some assistance in paying medical bills.

At Best, Only Part Of The Solution

This is certainly a case of the market trying doing what it is supposed to do to provide what people need at a price that they can afford.  But, it isn’t at all clear that these efforts, which are at the core of a Republican vision for the future of healthcare, to the extent that one exists, solves the deep structural problems of our current system.

Medicaid provides reimbursement rates far below market rates and is accepted by fewer and fewer providers, and yet continues to increase its share of state and local budgets.  Would the evolving high deductible, paraprofessional based system aimed at the working class be better for Medicaid beneficiaries than the little or no deductible plan in place now?  Not if the beneficiaries can afford to pay deductibles and co-pays.  If Medicaid beneficiaries are too poor to make those payments, a high deductible plan is for practical purposes, equivalent to no health care at all.

People with high deductible plans, meager health savings accounts, and almost no other savings, may still make the penny wise, pound foolish choice of choosing not to obtain preventative care.

So long as health insurance isn’t universal, the bad debts that providers incur to care for the uninsured will still burden everyone else as providers engage in cost shifting.  And, people will these kinds of health plans are effectively only “semi-insured”.  They have coverage if they end up with the catastrophic health conditions that they expect to experience, but are still effectively uninsured in the event of an unexpected pregnancy, for which a benefit wasn’t elected, or a mental illness that hadn’t been anticipated and wasn’t insured against.

These developments still do nothing to address the high administrative costs associated with a highly fractured health care financing system, or the high cost of the high end treatments which are really driving health insurance rates.  Instead, they nick a few bucks off the least expensive parts of the health care system, making that low end care a bit more affordable. 

In short, while Wal-Mart style health care can make a useful contribution to solving the larger problems with the health care system, it shows little sign of being at the heart of an overall solution.

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Andrew Oh-Willeke

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