Why the Walmartization of Healthcare Insurance Cannot Work
Truth for right and left of the political spectrum
Some believe Walmart is a great example of capitalism at work. The retail chain makes a profit while lowering prices for consumers. Wouldn’t it make sense that insurance would do the same thing for healthcare? To understand why that doesn’t work we must first look at the Walmart model.
Walmart buys products at steep discounts in return for volume. Suppliers don’t have to worry about sales. They just produce and get paid by Walmart. A good deal for all.
I’m about to tell you why that model doesn’t work for healthcare insurance. You should know a little about insurance and costs of healthcare. Dylan Scott wrote a pretty good article on the history of our system in Vox. John Cassidy wrote a good article for The New Yorker and gave his experience. Cassidy mentioned a hospital ER charging over $11,000 to put a couple of stitches in his daughter’s finger.
I don’t want to rehash the history of insurance. I simply want to give my experience and thoughts after 40 years in the U. S. system as a Doctor of Chiropractic. My story began in 1985. I started my own business and patients paid cash and billed insurance themselves. Insurance routinely paid about 80% of usual and customary charges. By definition, usual and customary was based on the previous year’s experience. In order for insurance reimbursements to go up next year, fees had to go up this year. No surprise - doctors raised fees.
Patients did not want to bill their insurance. I began doing the billing. I accepted payment from Medicare and some other insurance. One patient said, “Bill them as much as you can doc. You’re worth it.” He wasn’t paying. There was a disconnect between the consumer and the supplier. Think about it. If someone else is footing the bill, why shouldn’t a person have the most expensive?
The disconnect between doctor charging the patient and patient paying the doctor is why capitalism can’t work in healthcare.
Similar to Walmart, insurance companies now ask doctors to sign up for their plans. Similar to Walmart, in return for the discount the doctors will have access to all the patients who sign up for the insurance plans. This is not limited to for-profit insurance. Medicare would list my name in a book to be sent to all beneficiaries, if I would become a preferred provider and accept money directly from Medicare. However, that is where the similarity ends.
A customer enters Walmart, pays cash, and gets a great deal. Walmart makes more money if more customers come and buy more products. A patient enters a doctor’s office, doesn’t pay, and gets a service. The insurance company is billed. The insurance company doesn’t make more money if more people see the doctor. The insurance company makes less. So, insurance companies renege on their promises to both their subscribers and the doctors. They refuse to pay.
That, in a nutshell, is why the Walmartization of healthcare cannot work.