Wednesday, November 14, 2007

How Wal-Mart Could Really Improve Health-Care Benefits

The New York Times tells of Wal-Mart’s new willingness to increase its contribution to health benefits for its employees. As others have noted, whatever reforms to our health-care system emerge will not do much if they only happen one demonized employer at a time. But, in what the author obviously considers a throwaway line, a key to Wal-Mart really doing a lot for the health-care system is buried in the middle of the article:

In one sign of its success so far, the company has pushed down the price of 2,400 generic prescription drugs to $4 a month for employees, starting next year, a program that it offers, in more limited form, to its customers.

Now, the chain is even considering weight-loss clinics in its 4,000 stores and is toying with the idea of selling health insurance, hoping to finally bring coverage within reach of most Americans. (Emphasis added)

Like all producers, Wal-Mart is a seller of goods and services first and a buyer of labor services second. Jobs and wages are the tail, consumer demands the dog. But Wal-Mart is an unusually influential and powerful producer, because of its business model of constantly lowering prices. And here it could make a big difference, by revolutionizing the way health insurance is sold. Presumably, its plan would offer lower prices for the same services, but would also have higher deductibles and more resemble a catastrophic health-insurance model (the traditional one, and the expected one for an insurance product) rather than simply a plan to pay almost all the policyholder’s health costs, routine or unexpected. By selling health insurance the Wal-Mart way the company could do a lot for Americans who find health care expensive.

Alas, the insurance industry is one of the most regulated in the nation. It is no coincidence that industries such as insurance, pharmaceuticals and others that are the most regulated by government are those where public dissatisfaction is the highest. And so I suspect that any product that Wal-Mart offers will be nibbled to death by various pressure groups, substantially diluting its effectiveness. But the idea of health-care as an economic problem with an entrepreneurial solution is the way forward.



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