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January 14, 2007
Return Of Employer Clinics

The fight over health-care costs keeps centering on employers, and now the largest of them may decide to operate health clinics directly in order to reduce their financial exposure. Toyota, Pepsi, and a host of other large corporations have opened their own primary care centers, allowing their employees free access in the hope that the companies can hold costs to a minimum and focus their insurance on more specialized treatment and hospitalizations:

Frustrated by runaway health costs, the nation’s largest employers are moving rapidly to open more primary care medical centers in their offices and factories as a way to offer convenient service and free or low-cost health care.

Within the last two years, companies including Toyota, Sprint Nextel, Florida Power and Light, Credit Suisse and Pepsi Bottling Group have opened or expanded on-site clinics. And many employers are adding or planning to add even more clinics, which were experimented with about 30 years ago but fell out of favor amid questions about their cost-effectiveness.

Today a new wave of clinics is opening, driven largely by a motive that was less of a factor in the past: employers’ desires to reduce their health insurance premiums by taking care of workers before they need to see outside doctors. More than 100 of the nation’s 1,000 largest employers now offer on-site primary care or preventive health services — a number forecast to exceed 250 by the end of the year, according to David Beech, a health benefits consultant.

Corporate America’s new in-house medical offices go well beyond traditional occupational health clinics that hundreds of factories have long maintained for job-related injuries and worker’s compensation cases. Employees can now stop by for check-ups, allergy and flu shots, pregnancy tests or routine monitoring for chronic diseases like diabetes and asthma.

When prescription drugs are required, some employers arrange for the pills to be delivered the next day at the office or plant, while others even maintain fully stocked pharmacies.

The last time this was tried, in the 1970s, the model collapsed as companies discovered that they could not keep costs below the market. However, costs have increased so rapidly that some believe once again that they can get in-house delivery of these services at a cheaper rate than what they pay in negotiated rates through group insurance. If this works, it could provide a market alternative to the notion of a single-payer, government-run health industry.

The arguments against this can be easily anticipated, and some of them should be considered. Given the history of abuses when corporations offer services to their employees, it's natural that this may make some people very nervous. Mining companies used to offer housing and groceries paid in company script, but when the miners either left their jobs or became too infirm to work, they found themselves homeless and penniless -- or even in debt to the mining company for "advances" on their wages. As late as 1994, tobacco and produce farms continued to operate in this manner, making virtual slaves out of their employees.

Given that impulse, the negative may be that the employer will set the cost on the employee, requiring higher co-pays to access outside doctors, or perhaps disallow any other providers except those provided by the company. They could also then require referrals to specialists from their doctors, who would have an incentive to keep such referrals to a minimum. The employees would then get stuck within a single system, with no economic ability to seek expensive private medical care, without any way to insist on high-quality medical care within these company stores.

However, all of that can equally be said about government-run systems. All of us would be stuck inside a single system, with no ability to work outside of it. Doctors within this system would have disincentives to write referrals to specialists, and thanks to rationing, it would take months to get in to see one in any case. When the government runs health care, there will be no market pressure or even regulatory pressure to ensure high-quality delivery of medical care. That has been the experience in both Canada and Britain.

In the end, it makes little difference in who runs the company store if all of us get nothing but script with which to bargain. Single-payor is an invitation to abuse, whether the payor is Toyota or Washington DC. Markets may be messy, but at least they offer consumers a choice.

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Posted by Ed Morrissey at January 14, 2007 11:10 AM

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