During a talk that I enjoyed several years ago, New Yorker writer David Owen revealed that his carbon footprint had ballooned because of a recent plane flight to Australia. Blaming efficiency, he said he went because it was so easy. Board a plane, watch a movie, eat a few meals and in 13 hours you are there presenting your single lecture.
By contrast, decades ago with four or more stops along the way, getting to Australia was too much of a hassle for one commitment. Multiply that by thousands of people deciding not to fly half way around the world and your total emissions go down even though an individual plane spewed more muck.
Owen’s explanation reminded me of the “rebound” effect. Described by William Jevons in an 1865 book called The Coal Question, the “rebound” effect surfaced when the energy efficiency created by the steam engine encouraged more energy use rather than less. Jevons said, “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is truth.”
And that takes us to retail healthcare clinics.
Healthcare Spending at Retail Clinics
Many of us used to endure several days of sinusitis or some other “low intensity” condition before getting better or seeing a doctor. Now though, we can immediately visit the nurse practitioner at our nearby Walmart, CVS or another store with a retail health clinic. Sometimes eliminating the copay, retail health clinics encourage walk-ins, have minimal wait time and quick diagnoses. Inexpensive, nearby, and an easy way to be sure you don’t have some horrible disease, the retail health clinic is convenient.
As a medical system add-on, the retail clinic was supposed to lower costs. Instead, like Owen’s flight to Australia and Jevons’s steam engine, it might be adding to our medical spending. According to a 2010-2012 study based on 6 million people insured by Aetna, 2000 (or so) clinics provided more new medical care than doctor visit substitutes. The result was just $14 more spending per person annually but with millions of people, it adds up.
Below we have the graph showing that physician office and emergency department (ED) visits were not sufficiently displaced by clinics to lower overall cost:
Our Bottom Line: Elasticity and Demand
With certain goods and services, there is an usually large response to a price change. Yes, the quantity we are willing and able to buy typically goes up when price goes down. But sometimes, when our reaction is especially pronounced, economists say our demand is elastic. Although each of us is spending less, we buy so much more that total spending rises by a relatively large amount.
The result of the elasticity and the shift? Healthcare spending moves upward and we have what has been called a disruptive innovation.
But remember, this is economics. We have to say, “On the other hand…” the variables are multiple, the sample size was relatively small, and the overall impact of spending for the entire healthcare system was not known. So we cannot be sure of the retail health clinic impact.
Still, let’s not forget the “rebound effect.”