Health Care: Equity Vs. Efficiency

In my blog post yesterday arguing that health care is a commodity, I noted that Rashi Fein, one of the architects of Medicare, argued that health care needed to emphasize equity over efficiency.  I claimed that “a system that emphasizes equity over efficiency will end up with neither, while a system that emphasizes efficiency over equity will end up with a good deal of both.”

Here are some examples:

Medicaid: Equity over Efficiency.  One purpose of Medicaid is providing the poor with access to care similar to that available to the middle and upper classes.  But it doesn’t seem to be achieving this goal very well.

negativeequity2Among all physicians, nearly one-third are no longer seeing new Medicaid patients and that number may well be over 45 percent for some specialists. The most likely reason is that Medicaid’s reimbursement rates are among the lowest. This creates access problems.  Medicaid patients have more difficulty getting timely appointments with primary care physicians, specialists and ambulatory clinics than patients with private insurance.

There is research showing that access to health care for Medicaid patients is as good as it is for those with private insurance.  However, if Medicaid patients didn’t have access problems to physicians and clinics, why do so many go to the emergency room for care versus patients with private insurance?  And, for the most part, they are going because they need the care, not because they are there for some minor ailment.

Medicaid doesn’t come close to achieving care equitable with those who have private insurance. How does it do on efficiency?  Well, the U.S. spends over $415 billion on Medicaid, and according to the Oregon health experiment, Medicaid has no noticeable impact on patient health.  Other research suggests that children at hospitals that are more reliant on Medicaid funding have more adverse events, and that patients with Medicaid are more likely to receive a diagnosis of late-stage cancer than patients with private insurance who are more likely to receive diagnoses at earlier stages.  Such results probably don’t satisfy any reasonable definition of efficiency.

Minute Clinics: Efficiency over Equity.  Minute clinics are walk-in clinics, usually located in a pharmacy like CVS or Walgreens, that employ physician assistants and nurse practitioners to provide primary care.  (I’m using the term “minute clinic” generically here, even though that is what they are called at CVS.  Walgreens calls them Healthcare Clinics and Wal-Mart calls them Care Clinics.)  The companies that run minute clinics want to make a profit, and thus they were created with efficiency in mind—that is, to make it more convenient, in terms of both time and money, for patients to receive care. More patients increases the likelihood of profitability.

Their efficiency is partially reflected in how much they have grown. The first one was launched in 2000 by CVS and there were 1,400 by 2012.  Accenture anticipates that (1) the number will grow to 2,800 by 2015 due to increased demand brought on by ObamaCare and (2) they will save the health care system about $800 million.

But are they making care more equitable?  Well, prices are relatively cheap, with most visits at CVS costing $79-$99 with some going as low as $59.  At Walgreens they are about $60 and at Wal-Mart some visits are as low as $40.  Those are prices that are affordable, even for many low-income people.  (Also see this study on the costs of more involved health care cases—minute clinics still were the cheapest.)

Minute clinics reduce another cost that is a barrier for the poor: time.  As a recent article from Health Affairs shows, poor people often have a big “time cost” in getting to a physician’s office—taking time off work, setting up transportation, etc.  Minute clinics reduce that cost by offering evening and weekend hours, something that physicians offices don’t do, at least not with the frequency of minute clinics.  Moreover, easier access to such care results in fewer emergency room visits.

In short, minute clinics are creating a great deal of both efficiency and equity.

The National Center for Public Policy Research is a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems. We believe that the principles of a free market, individual liberty and personal responsibility provide the greatest hope for meeting the challenges facing America in the 21st century.