This is very similar (and really interesting) though I’m not sure if Walmart has a special condition on use of insurance.
Amazon appears to be incentivizing customers to not use insurance to pay for their drugs. I’m not sure if Walmart does the same. If so, that’s also noteworthy.
Discount programs everywhere focus on the uninsured (the insured have the insurance company also paying discounted rates, generally, but those are individually negotiated; the sticker price is just to have a starting point for negotiations with deep pocket public and private insurers.)
In many cases, the discounts in the discount programs are subsidized by the drug companies for uninsured patients.
Yep, for full disclosure, I work in healthcare pricing and payments and adjust claims myself.
While discount programs focus on the uninsured, this is the first time I’m seeing the discount being framed in such a way that it effectively incentivizes paying out of pocket. It’s an important incentive if your goal is to decouple routine drugs from the third-party-payer model of insurance.
Health insurance in the US is actually 3 different services bundled into one: (1) risk sharing for catastrophic care, (2) access to low prices (called "fee schedules"), and (3) tax advantaged pre-payment for non-catastrophic care. 40-80% discount on drug prices essentially competes with insurance company fee schedules, i.e. service (2). By offering what amounts to insurance rates without charging insurance premiums, Amazon is essentially decoupling the fee schedules from risk sharing. That's a really underrated side effect of this product offering, and can have long run impacts on the industry (IMO for the better).
I would add a 4th service for health insurance in the US to be a way for healthy, young people to pay for the care of sicker, old people due. AKA, a tax, due to the following stipulations of the ACA.
3) Elimination of pre-existing conditions, i.e. accepting all lives no matter how costly
4) The recently eliminated mandate to purchase health insurance.
The above conditions mean that premiums from healthy people that don't use healthcare is used to pay for the healthcare for sick people. It gets a little complicated with the ability for employers to silo their employees' lives from the rest of the population, but in general, US health insurance premiums are basically a tax on the healthy to pay for the healthcare for the sick.
That’s captured by (1) risk sharing. Pooled risk sharing is great for things like fire departments where out of 1000 homes, one might catch fire every few months. It’s also great for societies where out of 1000 people, a small handful suffer from chronic illnesses or tragic accidents and the remaining are healthy. The problem is that it’s just a hammer, and not everything in healthcare is a nail.
Taxes are basically risk sharing across the whole population. But I wanted to specify that it's not risk sharing like your auto insurance is, or home insurance, or term life insurance. Those are infrequent, random events for the most part.
Whereas, healthcare is a guaranteed expense, so the premiums are just prepaying for the coming expenses. But today, you're not paying for your healthcare expenses, but for the older, sicker person's healthcare, just like FICA taxes are paying for healthcare for those 65 years and older.
I know. I wasn’t complaining about it being a tax. I wish it was implemented properly by dumping everyone on healthcare.gov and removing employers from the equation. And reinstating penalty for not buying health insurance.
Amazon appears to be incentivizing customers to not use insurance to pay for their drugs. I’m not sure if Walmart does the same. If so, that’s also noteworthy.