The Way Ahead: Placing Health-Care Options in the Hands of Private Companies
Companies like Wal-Mart and Toyota are loosening the rules for employee health-care enrollment and offering insurance options that workers find attractive.
February 24, 2009 - 12:29 am
Until recently, Wal-Mart was the corporate giant universal health-care advocates loved to hate. As a recent story in the Washington Post recounted, for years the company kept its costs down by limiting the number of workers who would qualify to sign up with the employee health plan and by passing on much of the premium to those who did.
That kind of tight-fisted management worked to a degree and for a time, but eventually Wal-Mart’s executives recognized it was not a viable long-term strategy for a company dependent on employee morale and loyalty. So the company’s executives changed direction. Instead of avoiding the health problems of their workers, they put the company’s business savvy to work to solve them.
That meant loosening the rules for enrollment and offering insurance options that the workers would find attractive. Some in-house research determined that many of Wal-Mart’s younger employees didn’t want expansive and expensive insurance. Rather, they wanted protection against high costs with a low premium. So the company offered a high-deductible option, with a cash credit of $100 to $500 per year to cover some or all of the non-emergency costs the workers or their families might need. Insurance enrollment jumped.
Not surprisingly, Wal-Mart also started taking a hard look at costs and what could be done to keep workers healthy with better care management. Today, Wal-Mart employees can receive any one of 2,500 generic drugs for $4 per prescription. All expensive transplant cases go to the Mayo Clinic to ensure top of the line care and prevent unnecessary procedures. And pregnant women receive nurse counseling to prevent premature births.
Wal-Mart is just one of the many companies that are bringing innovation to health-care arrangements. Toyota is known for its relentless attention to production detail. In recent years company executives have turned some of their analytical prowess toward health-care costs and outcomes. Like management at other large companies, Toyota’s leaders were frustrated. Why, if they were spending so much, were the company’s workers still so unsatisfied with their insurance plan?
What Toyota discovered was not at all unique. Health-care arrangements in the U.S. are often not convenient for the patients. The paperwork is maddening; there are no electronic records that can be accessed later from home; physician office hours are too short; and parents with sick children must often wait until Monday to get an appointment. Communication with practitioners is cumbersome and difficult for no apparent reason.
Toyota’s solution was to take more control over the primary care their workers receive, and invest in prevention, convenience, and efficiency. They set up on-site health clinics at their manufacturing facilities, staffed and run by Toyota employees. There, workers have ready access to low cost care at convenient times, and the company can control expenses with its trademark management oversight. Studies indicate substantial savings as well as high employee satisfaction.
There are other examples as well. Whole Foods, Safeway, and Target now all offer their workers high deductible plans tied to health savings accounts. With these arrangements, the employees have much more choice and control over their health-care dollars. If they don’t spend their full yearly allocation, it stays in their account for them to use later. The employers also give the workers tools, such as wellness programs and access to nurses, which help them manage their health budgets.
In a sense, employers are playing a leading role in innovation because they can. They are the most powerful participants in private sector health care. In 2007, some 165 million Americans were enrolled in job-based health insurance plans. The largest employers have the capacity, if they choose to use it, to leverage change in the ways health care is delivered so that it is more patient-focused, organized, and convenient.
Changing health-care service delivery is difficult work, and not every employer has concluded that the investment is worth it. Even so, the marketplace is starting to respond to consumer demands for better arrangements, even without a push from corporate sponsors. Walk-up clinics in pharmacies and retail shopping areas are growing in popularity because of their convenience and low costs. And software companies, including Microsoft, are moving toward systems which make it easier for patients to retain control over their medical history and records, thus making personalized solutions easier to build.
Unfortunately, even strong private sector incentives can only go so far when public policy pushes in the opposite direction. Medicare and Medicaid are the dominant payers in American health care, and their reimbursement rules are designed to underwrite fee-for-service medicine, which is fragmented, uncoordinated, and costly. Government programs thus limit the speed with which innovation is taking place.
President Obama and his allies in Congress are currently readying reform plans which would enhance the power of public programs and diminish the role of the private sector. If adopted, consumer preferences would inevitably take a back seat to government decision-making, and the progress that is being made around the country to find new models of care, led by employers, will be lost.