James Miller notes a New York Times story on corporations setting up in-house health clinics. Miller comments,

Much of economic growth comes from specializing. Whatever is requiring firms such as Pepsi to “unspecialize” by providing health care is greatly harming our economy

Indeed. What corporation wants to take on the hassle of managing a health clinic? Miller is right to ask what is wrong with this picture.

I think that the original sin here is employer-provided health insurance (for which the original sin is WWII wage controls and current tax law. See Clark C. Havighurst.).

What many people do not realize is that in most cases, insurance companies are merely the administrators of employer-provided health care. That is, if Aetna is the “insurer” for XYZ corporation’s employees, and their total health bill comes to $800,000, then XYZ pays the $800,000, with Aetna merely taking a cut to administer the plan. (Aetna might insure XYZ against a catastrophic health care bill of, say, $10 million.)

So in most cases, the consumer does not care about cost. And the insurance company does not care about cost–as long as the corporation stays below its overall “catastrophic” limit. The only party with a real interest in controlling cost is the corporation.

So I think that the reason we are seeing company health clinics is that companies probably feel that they can directly control the choices of doctors in order to minimize unnecessary procedures and select the most cost-effective treatments.

I think that if we had catastrophic health insurance obtained by individuals, not through employers, we would not observe company health clinics. However, we would observe medical practices that pay more attention to cost-effectiveness.