As the market for retail clinics reaches critical mass and the number of those employed directly or indirectly is becoming quite large, many people in this industry are wondering whether the outcome of the 2008 presidential election could have a positive or negative impact on a booming market.

  The answers are mostly good news.  First, there is little downside for retail clinics no matter who is elected president.  Legislators are all too familiar with the challenges of health care costs and access, so there is very little appetite for restricting retail clinics at the state or Federal level.

  The upside for retail clinics will be driven not so much by the specific policies by either candidate, but by forces that no longer can be ignored:  the limits of state and Federal governments’ ability to pay for health care and the growing problem of the uninsured.   Both candidates will be focusing primarily on insurance, albeit with very different approaches.  And both candidates claim to have plans to lower costs, although they have given few details on how they will accomplish that.

  In the end, we believe retail clinics will benefit from one important shift: how and where people buy health insurance, resulting in a more rapid move toward high-deductible plans.

Two Basic Facts

Before looking at each candidate’s proposals and how they might impact retail clinics, let’s look at some facts:

  1. Health Insurance in the United States -- According to a 2007 Kaiser Family Foundation report, 54 percent of Americans get their insurance from employer-sponsored group plans; 5 percent from non-group plans (individual insurance plans);  26 percent from Medicare (14 percent) or Medicaid (12 percent); and 16 percent (47 million) are uninsured, an increase of 8 million since 2000. http://facts.kff.org/?CFID=35052051&CFTOKEN=61928155

2.  Government Spending on Health Care – Medicare and Medicaid alone accounted for 19 percent of Federal spending in 2006, according to the Office of Management and Budget.  At current growth rates, Medicare and Medicaid will account for 30 percent of spending in less than 10 years.

What the Candidates Propose

Senator Barack Obama

The goal of Senator Obama’s plan is to increase dramatically the number of newly covered people and bring costs under control.  To do this, the senator proposes a
National Health Plan, a Health Insurance Exchange, a “Play-or-Pay” employer mandate, and a mandate that children be covered by health insurance.  Senator Obama also is a major advocate of paying for outcomes vs. procedures.  He does not tinker with the special tax treatment of employer-paid insurance premiums.

  The approach gets credit for attempting to solve the problem of the 40+ million Americans without health insurance.  The plan is criticized for its cost and increase in insurance regulation.

   The first element of the plan is a National Health Plan that would make available to everyone, without restriction, a plan similar to that offered to Federal Government employees, otherwise known as the Federal Employees Health Benefits (FEHB) program.  There are several insurance options in the FEHB, but the most popular is the Blue Cross Blue Shield Standard Option.  The BCBS Standard Option is a rich benefit plan, and though the government may be able to afford to subsidize the plan for its employees, it cannot afford to subsidize it for another 40 million people.  Consequently, what will likely be offered is a high-deductible version.  Many retail clinics today do accept the BCBS Federal employee insurance plan.  Another 40 million Americans on a high-deductible version of that plan would only help the retail clinic market.

  The second element of Senator Obama’s plan is a Health Insurance Exchange where individuals could purchase insurance policies that meet certain guidelines.  The National Health Plan (above) would be one option among many.  To participate in the exchange the insurance would have to be guaranteed issue (nobody is denied insurance) and community rating (you pay the same rate regardless of medical history).  There will be a mix of plans and price ranges in this exchange, similar to the choices offered by large employers.  This is likely where you would go as an individual or small employer to gain access to large insurance pools.  So this piece of the plan is part and parcel of the employer and child insurance mandates.  Senator Obama also proposes to modify Medicare and Medicaid reimbursement to favor positive outcomes vs. procedures as a way to reduce costs, something that is already under way at CMS.

  The bottom line is that the Obama health care plan works to expand the current system of providing health insurance through private carriers.  And under that plan, retail

clinic operators will continue to make choices on which plans they will contract with, based primarily on negotiated fee schedules.

  Says David Cutler, a professor of economics at Harvard and an advisor to Senator Obama, “Senator Obama’s proposal will modernize our current system of employer- and government-provided health care, keeping what works well, and making the investments now that will lead to a more efficient medical system.”

Senator John McCain

  The goal of Senator McCain’s plan is to promote competition and level the playing field for individual purchasers of insurance

vs. those who purchase insurance through their employer.   Senator McCain’s plan has three primary components:

  1. Eliminate the tax exclusion of employer health insurance subsidies as well as the income deductions of insurance premiums paid by employees.

  2. Introduce a refundable health insurance tax credit of $2,500 for individuals and $5,000 for families.

  3. Deregulate nongroup insurance by permitting insurance companies to sell policies across state lines.

Senator McCain does not pretend to propose a specific solution to the uninsured.  In fact, critics say his plan will only worsen the problem by moving many people out of group plans into individual plans.   When someone is out of the protection of a group plan, critics argue, they are more vulnerable to losing insurance.

The bottom line for Senator McCain’s plan is to attempt to move people out of employer plans and into individual plans under a more competitive national health insurance marketplace.  Leaders on both sides of the aisle believe this is a necessary step to bringing costs down because, like all other industries in this country, the consumers (patients) would be paying for services with their own money.  If a service is not necessary or borderline, the consumer will think twice before purchasing vs. opting for it because it isn’t their money.

Some argue that elimination of the tax exclusion will result in employers dropping coverage altogether.  But eliminating special tax treatment means higher costs for health insurance for the employee, not the employer.  And that higher cost will be partially offset by a tax credit as well as by opting for high-deductible plans.  Furthermore, we know employers offer health coverage because it helps recruit good people.  Otherwise we would have seen employers force employees into “full replacement” high-deductible plans a long time ago.  However, nobody can predict the effect that dropping special tax treatment will have on ERISA rules.  These are the rules that force employers to treat all employees the same with their health benefits.  Theoretically the rules go away if special tax treatment goes away, opening the door to giving special health benefits to high-value employees.

Another element of Senator McCain’s plan is to do away with laws that restrict selling health plans across state lines.  If that plan becomes reality, expect group insurance plans to face more competition, resulting in lower rates.

 “The McCain health plan would do two remarkable things,” says John Goodman, president of the national center for policy analysis.   “First, it would virtually eliminate long-term uninsurance.  Almost no one would remain uninsured for more than a year.   Second, it would completely transform the type of insurance people are able to buy — as much as doubling the value of the typical insurance contract by encouraging smarter, more efficient ways of purchasing medical care.”

Bottom Line for Both Candidates

Our conclusion is that, regardless of which candidate is elected, it is inevitable that the financial burden of health care will begin to shift more dramatically from government subsidies in the form of income tax treatment and public insurance programs to the individual.

It is inevitable that the Federal Government will pull the plug on special tax treatment of health insurance premiums for employer sponsored plans.  Senator McCain says he will do it sooner; we believe Senator Obama will have to do it at some point.    This will make the effective price of health insurance dramatically higher, but that will be offset by tax credits and the adoption of high-deductible health plans.

It is also inevitable that both the Federal government and state governments will reduce the benefits offered through Medicaid and force Medicaid recipients to acquire health insurance through mechanisms similar to those offered by Senator Obama.  Again, the most likely impact will be greater use of high-deductible plans.

The adoption of high-deductible plans has been slow and disappointing until now.  The latest Kaiser Family Foundation survey on employer health benefits (http://ehbs.kff.org/images/abstract/7791.pdf) shows that the percentage of companies offering high-deductible plans is still only 13 percent, and the number of workers covered by high-deductible plans is only 8 percent.    But removing special tax treatment for 54 percent of Americans will have a major effect on this adoption rate.

These high-deductible plans will create more of a market between individuals, who re-learn how to buy health care services, and their medical providers.   That market between individuals and providers can only be good for retail clinics because retail clinics make it easy to understand what you are getting and how much it will cost.  However, despite the inevitability of this shift to individual responsibility, the shift will be slowed by its political unpopularity.

In case you missed it, in the last two years the start of the flu shot season has moved up considerably. And the implications for retail clinics are mostly positive. In fact, this could be the best news retail clinics have seen in a long time.

We are all familiar with the predictions of a booming retail clinic industry. But if you think those predictions have ceased, think again.  Merchant Medicine estimates 2,050 retail clinics by the end of 2014.

Of any company we have followed in the retail healthcare space, Solantic seems to hit all the strategic buttons:  stand-alone urgent care centers in high-traffic shopping centers, clinics in Wal-Mart, joint ventures with area health systems, a clinic in the Orlando airport, franchises for physicians, outstanding consumer marketing and a relentless pursuit of customer satisfaction.

Over the long term, it could be that seasonality is the least of a retail clinic operator’s worries. As we noted last month in an article about the long road to breakeven for retail clinic operators, traditional medical practices are taking a page out of the retail clinic playbook and focusing more than ever on patient convenience and consumer marketing. The result is a trend that we call “ConvUrgentCare™,” the merging of convenient care, urgent care and any type of walk-in medicine that involves non-emergent acute medical care.  Today you can see retail clinic techniques crossing over not only to urgent care and emergency care, but also pediatrics, family medicine and work-site clinics.   And these techniques appear to be working to change the game in walk-in medicine.

He has lived in the world of corporate travel management and now the world of healthcare.  Oddly enough, the corporate travel world seems to know a lot more about Hal Rosenbluth than the healthcare world.  But that may be about to change.