I’m been somewhat skeptical about the Enzi AHIP bill, but in the spirit of fairness wanted to carefully evaluate the potential of the bill to address its main driver – the lack of affordable health insurance.
I’m even more skeptical now.
The growing trend to consolidation in the health insurance industry would likely be accelerated by the bill proposed by Sen. Mike Enzi (R) WY. Enzi’s bill would, among other things, strip out much of the states’ power to regulate health insurance, establish a uniform benefit plan, and end many of the restrictions on insurance underwriting. (this last will actually serve to increase the number of uninsured as they will not be able to meet strict underwriting guidelines)
Proponents of Enzi’s bill claim that it would enable small businesses to pool their buying power, thereby getting better deals from insurers. While that makes sense in a free market, the market for health insurance is anything but free. In fact, with most local markets dominated by a single carrier, I’m not clear as to how group buying will help any employer gain any pricing power.
The health insurance market has become an oligopoly, generally defined as a market where 4 or fewer sellers control more than 40% of the market. In reality, a study released by the American Medical Association and supported by a newly-released GAO report, clearly shows we have passed this benchmark and are now approaching monopoly status in many markets.
Of the 294 metro areas studied by the AMA, 56% were dominated by a single insurer who controlled over 50% of the market. In essentially all of the 294 markets one insurer had market share of at least 30%.
Nine states are dominated by a single health plan, one of the Blues, with over 50% market share. And this trend has accelerated considerably over the last four years.
My sense is that Enzi’s bill would do little to address the core problem of health care coverage – it is just unaffordable for many small businesses and their employees. Enzi et al seem to think that buying power alone will help solve the problem; clearly current market conditions make that argument moot.
What does this mean for you?
Yet another opportunity to study the process of furniture arrangement on the Titanic.

Members of Swiss insurance plans living in the Basel region will be able to go to Germany to get their care, under a pilot program announced by the Swiss government. For those unfamiliar w the health systems in the two countries, both have mandatory coverage through licensed insurers and mostly private providers. Recent changes in German laws have enabled primary care and some other providers to more fully compete for patients.
The driver behind the new program is, you guessed it, cost containment. The Swiss are faced with cost increases of (gasp) 5.6 percent this year, and are desparate for solutions to this crisis. In addition to the cross-border care, the Swiss are also negotiating for lower rates on prescription drugs (what an innovative idea!) and further encouraging the use of generics.
The consensus is that there is an oversupply of physicians in private practice in Germany, thus they may be less expensive than their Swiss cousins.
Now here’s the interesting part. The Swiss health care budget is about 11.1% of GDP; the German budget is 10.7%. (Pikers, you say, we Americans are over 16%! ) I find it kind of morbidly fascinating that Swiss health care planners think they may actually save a few francs by sending patients across the border, into a country with a demonstrably “sick” health care system, one that has not done any better job of delivering quality care at a low cost.
Now if they were going to send their patients to India, now they might be getting somewhere.
In fact, that’s not a bad idea for some budding young insurance Entray-pra-noor here in the US of A. And I’m only half joking.

UPDATE – One of the most thoughtful, well-written, and best pieces on what health insurance is, what it ought to be, and the different philosophies about same was written by Malcolm Gladwell of The New Yorker last year and subsequently posted by Marc Kashinsky.
Matt Holt posted a review/commentary/expansion on the Gladwell piece, once again demonstrating he knows his stuff.
Mr. Gladwell delves into the depths of ‘moral hazard’ and its role in the Bush Administration’s health care policy thinking, as well as its impact on individual decisions about care.
Re the latter, here is one of the more striking passages.
“Sered and Fernandopulle tell the story of Steve, a factory worker from northern Idaho, with a “grotesquelooking left hand–what looks like a bone sticks out the side.” When he was younger, he broke his hand. “The doctor wanted to operate on it,” he recalls. “And because I didn’t have insurance, well, I was like ‘I ain’t gonna have it operated on.’ The doctor said, ‘Well, I can wrap it for you with an Ace bandage.’ I said, ‘Ahh, let’s do that, then.’ ” Steve uses less health care than he would if he had insurance, but that’s not because he has defeated the scourge of moral hazard. It’s because instead of getting a broken bone fixed he put a bandage on it.”
Print it, stick it in your “to be read” file, and absolutely read it.

If consumerism is going to help reduce health care cost inflation, we’ll need two things – information and appropriate financial incentives. Actually, we’ll need another ‘thing’ – consumers will need the intelligence and expertise to be able to make the correct decisions when (or more likely if) reviewing information about conditions, procedures, outcomes, costs, side effects, providers, facilities, and alternatives. That’s a tough one…but I digress.
So far, the information has been sorely lacking, in part because it’s just so massive it’s hard to put it together, in part because the Feds won’t give out any data on the largest payer on the planet, Medicare, and in part because providers are really really reluctant to sign on to anything that might reveal they aren’t individually perfect.
OK, so we’re not quite there yet in the information department. What about financial incentives? We’re a lot further along there, aren’t we? Well, aren’t we?
Nope. For two reasons.

Continue reading The two reasons consumerism won’t solve the health care cost problem