Sally Pipes is a think-tank leader out on the west coast who appears to be a “free-market-as-cure-for-healthcare’s-ills” advocate. Her latest effort appeared in USAToday earlier this week, wherein Ms Pipes reveals her belief that Massachusetts’ health plan legislation is a thinly-veiled attempt to force the state into a single-payor solution.
While the entire editorial is, well, interesting, one of the most bizarre statements in her editorial is this –
“Individual health insurance is not always a good deal in Massachusetts, thanks to state-imposed community rating regulations that require companies to charge the sick and healthy the same rates.”
Uh, that’s kind of the point of insurance – everyone pools their funds to pay for the claims of the few with high expenses. If you don’t do that, you have what is known as pay-as-you go. And that’s not insurance. But for some reason Ms. Pipes thinks that’s bad.
Wait, there’s more.
Ms. Pipes then says that the Mass plan will saddle the state with the “same health plan design (that is) threatening General Motors Corp.’s viability and bankrupted its suppliers.”
Oh jeez, that’s about eight errors in less than one sentence.
Health plan design is not the main problem at GM – lousy cars, poor union negotiation tactics, aging plants, high gas prices, and bad management are GM’s biggest problems. And health care. But GM’s health care plans are WAY different from the new plan in MA. And cost-shifting from the uninsured, an aging population, too many retirees, inadequate cost controls, and lack of effective disease management are the biggest problems with GM’s health care program.
Here’s the silver lining – Ms. Pipes went on to say “The legislation will not control the true costs of these plans.” That’s absolutely true, and she is right on point, and I agree.
It’s great to find common ground.

Bob Laszewski is one of the most insightful observers of health policy matters inside the Beltway, and his recent comments on Enzi’s proposed AHP legislation continue that record. Bob has noted that the bill now before Congress is a far cry from the original AHP legislation, and has potentially far-reaching consequences for the health insurance industry.
AHPs were health insurance plans set up by trade associations who used them to generate fat commissions. Back in the eighties and early nineties, trade association members signed up for these programs in large numbers. While they did not have much in the way of managed care or “cost containment”, many AHP type programs thrived even after the initial entry of managed care programs into the market, on the basis of their ability to select the best risks and price accordingly.
As HMOs and health plans became more sophisticated, the AHPs’ advantages in these areas declined significantly, and their cost management capabilities were overmatched by those of the managed care experts in HMOs and larger health plans. Faced with very tough competition, AHPs all but died out in the late nineties.
For those that can afford them, small employers’ helath insurance costs are significantly higher than their larger competitors’. This additional cost is in large part due to higher administrative expenses; fewer premium dollars go to pay health care costs because it costs more on a per-person basis to bill premiums, issue cards, set up computer systems, track elgibility, etc. This differential has led Sen. Enzi, at the behest of the Chamber of Commerce, NFIB and others, to try to come up with a way to make insurance “affordable” for the small employer.
Enter the Enzi bill, titled, with much editorial license the “Health Insurance Marketplace Modernization and Affordability Act”. A product of the “sausage-making” that is our legislative process, the bill seeks to eliminate most state mandates, thereby allowing both insurance companies and associations to offer stripped-down plans.
While that sounds great, the likely effect of the bill, if it is passed, will be to allow insurers to do a much more effective job of risk selection, thereby avoiding the less healthy (i.e. more costly) people. I’m not blaming the insurance companies; insurance is about avoiding avoidable risk.
What Enzi’s bill will not do is make health care more affordable for small businesses. It will certainly make insurance more affordable for some businesses – those with healthier employees and lower risks. The rest will be even worse off than they are today.
What does this mean for you?
More health policy by folks without any health policy expertise equals no solutions to our health care cost problems.

OK, congratulations to Massachusetts’ legislators and governor for creating the nation’s first potentially viable universal coverage program. While everyone is busy congratulating each other, (free registration required) I hate to be the one to harsh their mellow. But so I shall.
I’ve read numerous reports of the new program, but nowhere have I seen any reference to any aspect of the program that convinces me it will work over the long haul. Why not?
There don’t appear to be any cost-control mechanisms, price or fee or utilization or frequency controls, nor any constraints on supply.
Yes, the program should eliminate excessive costs in the system due to cost-shifting, as long as the fees paid by all payers are high enough to cover associated costs. And, with cost-shifting accounting for about $1000 of the average family’s annual health insurance premium, the savings should be significant.
But that’s it. I’m afraid Massachusetts’ noble efforts have built a giant new demand mechanism, one that will produce healthier people, a one-time drop in premiums due to elimination of cost shifting (fingers crossed on that one), and ever-higher costs for the state’s citizens.
If we are relying on private industry’s innovators to come up with a solution, one that will effectively hold down costs over the long term for the entire population, we may have a long wait. For there are few incentives and lots of risks for any insurer to develop bold new programs when all they have to do is out-market their competition to capture their slice of the Mass pie. And there certainly has been ample opportunity for private companies to develop and deliver new programs over the past two decades, programs that could successfully constrain costs. That just hasn’t happened.
I hope I’m wrong, I hope I’m wrong, I hope I’m wrong.
But if I’m not, naysayers will have another example of an “experiment” that did not work out, an example they can, and will, point to as an image of another failed attempt by government to solve a huge problem.
The reality is government did not do too much, but rather did not go far enough.