AIP column: Retail health care and reform

posted at 9:30 am on September 3, 2009 by Ed Morrissey

How can the explosion of retail health-care clinics point the direction of real reform for our health-care system?  In my latest column for American Issues Project, I look at the implications of two studies done by the Rand Corporation on the impact of these cash-basis clinics in shopping malls and big-box retailers like Target and Wal-Mart in my state of Minnesota.  Not only do these clinics outperform traditional doctors’ offices and urgent care centers in customer satisfaction, but they also cost less — and compete for customers by using price transparency:

When it came to fees, the results were even more dramatic. For the various kinds of services studied, the average visit to a retail clinic cost $110, versus $156 for urgent care and $166 for a family doc. As for ERs? A cool $570. While even $110 for a clinic visit seems pricey, that is only the average for the three procedures studied. Minute Clinic, the industry leader with 514 outlets, charges just $62 for a minor illness or injury exam and $20 to $66 for a wellness or prevention visit.

Average cost per lab test in the Rand study also differed significantly depending on the provider: $15 at retail clinics, $27 at urgent-care facilities, $33 at doctors’ offices and a whopping $113 at the ER. The study did not bear out the fear that retail clinics would be inclined to overprescribe drugs, and when the clinics did write a prescription, the out-of-pocket cost was lower: $21 compared to a high of $26 for ERs.

What does this mean for reform?  The success of retail clinics should herald an effort to get insurers and other third-party payers out of the way to restore price transparency, and put insurance back in the business of catastrophic coverage:

In 2007, the Minnesota Department of Health estimate for premiums paid per person in the state was $3,627, or about $302 per month. With that money, consumers could have visited clinics for one wellness visit and three illness or injury visits every month and still have had money remaining at the end of the year. For myself, a Type II diabetic with an easily-managed thyroid condition, I would need at a minimum two wellness visits and one blood lab every year, which would cost at most about $300 for the entire year. I would have $3300 left over to spend on other priorities each year rather than paying into an insurance pool.

Verum Serum, which tipped me to the Rand studies, thinks along the same lines:

But what this study shows so clearly is that the marketplace is already in the process of addressing the need for cheaper, better, more equitable primary care. It’s doing this by decentralizing the system, i.e. simple problems can be handled farther away from the hub (and expense) of hospitals and doctor’s offices by nurse practitioners who cost less to train and therefore less to employee.

Inevitably, this leaves doctors and hospitals free to focus on more serious problems instead of wasting their $200K education looking at sore throats and ear infections. Reduced demand on doctor’s offices and hospitals will also force doctors to begin competing for patients. Competition will drive prices down.

In short, you have the beginnings of a better system, one that doesn’t require excessive government regulation of the marketplace or a complete takeover of the insurance industry. One that doesn’t lead to rationing or long wait times to see a care provider. One that relies on decentralization, rather than centralization.

Be sure to read all of John’s post, and of course the rest of my column.

While you’re at AIP, be sure to check out the blog and the other columnists.  Rick Moran covers the Medicare dilemma.  Kim Preistap investigates GM’s Chinese offense.  Dr. Melissa Clouthier marvels at the contrariness of independents.


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