WalMart Salvation?
posted by Frank Pasquale
Can the market solve America’s health care woes? Consider Tyler Cowen’s paean to “super cheap” plans:
If someone needs covering, for whatever reason, give them some stuff. If need be give them some government stuff. Some kind of plan. Give them whatever. But don’t overregulate private insurance companies and take them off the table as a source of future productivity improvements and super cheap coverage, however partial it may be.
How does Cowen define “super cheap” coverage? Is a plan with a $1,000 a year cap on the table? Consider this innovation:
For legions of Americans with no health insurance, a policy known as “limited benefit” sounds like an appealing choice. Premiums are often only about $10 a week. But there’s a big catch: For basic medical care, it often pays only $1,000 a year — so little that some question whether it amounts to health insurance at all.
Employers readily concede the plans offer scant help with a serious illness. The average cost of a hospital stay in 2001 was $13,685, according to Mutual of Omaha Insurance Co. study. Employers and insurance agents say they make sure workers understand what the insurance can and can’t do.
What’s the practical result of this “super cheap” coverage? Those who purchase it and who remain healthy are lucky, and economically quite rational–they avoid being in a risk pool with the chronically sick. Those who get very sick will likely end up bankrupt and/or dependent on publicly funded safety net hospitals. Is Cowen in favor of raising taxes to assure that those hospitals stay open? Or is the prime directive to allow people to take risks, whatever the bad consequences may be?
I also have to wonder–does he consider community rating requirements to be “overregulation?” If so, do we really want to encourage insurance companies to maximize profits on the basis of avoiding the sick? For example, one MediGap plan tried to avoid attracting the sickest elderly by enrolling people at square dances; another had an enrollment office at the top of a fourth-floor walk-up. Is this the innovation Cowen wants to see?
Cowen’s answer to cost control appears to lie, at least in part, in innovations like WalMart minute clinics. I do not think the WalMart clinics a particularly significant development in reining in costs because the vast majority of expenditures are directed to the sickest portion of the population (see John Jacobi, Consumer-Driven Health Care and the Chronically Ill, Michigan J. Law Reform (2005)). Maybe when WalMart starts opening ER’s and chemotherapy centers, we can re-examine the situation. The company is tending in a better direction nowadays, but it can’t work miracles.
Finally, before commenters bring up stories of the “horrors” of the British or Canadian systems, please note that most sophisticated reformers in the U.S. are now looking at models like Germany and France (on the liberal side) and Switzerland (on the conservative side). And consider this quote on the diversity of health care systems worldwide:
Health care financing systems are peculiarly national in their orientation. Indeed, many systems, like our Medicaid program or the Canadian or Swiss health care systems, are even administered primarily at subnational regional levels. National systems can, of course, be classified for analytic purposes—for example as social insurance or as general revenue-funded national health service systems.
But the French, German, and Dutch systems, traditionally classified as social insurance systems, are almost as unlike each other as they are unlike the Swedish, Canadian, Spanish, Irish, and English general revenue-funded national health service systems, which are also each unique. Indeed, the provincial health care system of Ontario differs in significant ways from that of Quebec, as does the national health service of Scotland from that of England. The health care systems of developing countries also differ significantly among themselves.
We will soon reach a point where pointing to “long lines” in Britain is less a mark of a serious argument than a stubborn unwillingness to acknowledge the diversity of paths to reform…or perhaps even outright unawareness of facts on the ground:
[O]nly 40% of U.S. doctors have arrangements for after-hours care, vs. 75% in the rest of the industrialized world. Consequently, some 26% of U.S. adults in one survey went to an emergency room in the past two years because they couldn’t get in to see their regular doctor, a significantly higher rate than in other countries. [And] a 2005 survey by the Commonwealth Fund of sick adults in six nations found that only 47% of U.S. patients could get a same- or next-day appointment for a medical problem, worse than every other country except Canada.
As we learn more about how other countries handle health care, perhaps the excessive allure of marketized care will diminish.
UPDATE: Here is the tension I see in Cowen’s position. He implies some hermetic seal between the government coverage and the private plans’ coverage. He hopes the former (despite its comparatively better record in cost-control in the Medicare context) will not contaminate the latter. But what happens when private plans adopt, as a business model, the avoidance of the very sick and poor and lower-middle-class people? Those groups then swell the ranks of public programs, making them less sustainable. In a mixed system, there is a direct relationship between fair regulation of the private sector and sustainable numbers in the public programs.
February 10, 2008 at 8:52 am
Posted in: Health Law
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