The President’s health care “reform” package has been deader than Social Security reform for weeks, and yet Mr. Bush remains atop his charger, madly taking on windmills wherever he can find them. The latest tilting was spotted at the American Hospital Association meeting in Houston, wherein Mr. Bush once again called for more Health Spending Accounts, malpractice tort reform, increased investments in technology…
Sen. Trent Lott (R MS) was seen yawning.
When Bush’s hometown paper and staunchest supporters both are less than positive about his so-called health care plan, it is truly dead.
Thank goodness.
Meanwhile, many states are taking control of their own destiny. One of the more intriguing efforts is West Virginia’s AccessWV program , which enables high-risk people to obtain insurance at somewhat affordable premiums, and by all accounts is working well. Although the premiums for AccessWV can be pretty high, the program is the best alternative for individuals and families unable to get coverage due to health conditions.

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

The report authored by the Center for the Study of Health Systems Change on the impact of demographics on inpatient hospital demand (discussed here earlier) is revealing on several levels: technology v demographics; shifts in utilization by type of procedure, and the impact of an aging population on inpatient v outpatient care.
One of the key takeaways is the note that local demographics can be quite different from national trends, and can actually counteract them entirely. For example, Phoenix is growing so rapidly, and has such a youthful demographic profile (about 10% of the population is over 65) that health care planners may as well ignore the national statistics as their population is significantly different.
At the other end of the spectrum is Syracuse NY, where a stagnant-to-declining population coupled with little influx of younger residents has resulted in a population bulge in the over-65 group (over 16% of the population is over 65, compared to a US average of 12.4%).
While local health care planners and politicians (well, maybe not politicians…) are well aware of these differences, those of us interested in national health care policy and planning would do well to remember that all health care is local, and the needs of individuals and areas trump national trends.

You’ve just got to read Matt Holt’s blow by blow report from the World Healthcare Congress.
Here is one of the more interesting excerpts.
Allan Hubbard, the Administration’s point man on health care
“Question to Hubbard – “Do you think HSAs could make the problem worse by driving the young, healthy or wealthy into these plans leaving the sicker in traditional plans which will drive up the cost of health care for the most vulnerable part of society?
Hubbard says that its not for the wealthy, as 40% of people getting them earn less than $50,000 (of course that means that 60% earn well more than the average, but lets leave that aside!) For the chronically ill–he says 2-5% of population–this doesn’t work so well. so Administration wants to allow employers to put a bigger amount in the HSA for the chronically ill. But thats the problematic part…”
Paduda comment – 2-5% of the populatin is chronically ill? Perhaps, although it depends on what your definition of “chronic illness” is. They drive a majority of health care costs, so Hubbard essentially admits that HSAs as conceived by the Administration don’t work for the chronically ill– and as for putting more dollars in there, isn’t that just encouraging usage?

While Massachusetts has adopted a program designed to cover almost all of the Commonwealth’s citizens with a pretty comprehensive health plan, Tennessee is pursuing a program that is considerably more modest in both plan design, expected enrollment, and cost.
According to the AP story published in Insurance Journal;
“The Cover Tennessee plan calls for a $150 monthly premium for basic health insurance, with the state kicking in $50. The individual would be responsible for the remainder, though businesses would be given the option of paying half.
The program would limit benefits, for example the number of nights for hospital stays, instead of requiring a high deductible to keep costs down for the insurer.” Copays will be modest for drugs and physician office visits, and individuals’ coverage will be portable.
This initiative began with a grant from the federal government (HHS in particular) to provide funding to study ways to cover the state’s uninsured. The report, a 119 page monster, provides a comprehensive and quite detailed review of the state’s population demographics, existing health insurance infrastructure,
Of note, “the largest portion of the uninsured worked more than 40 hours per week…for small businesses.” 20% of the uninsured work for employers who offer health benefits, but either can’t enroll yet, can’t afford their contribution, or are ineligible for the plan.
Unlike Massachusetts, the program will be limited to selected insurers. There will be competitive bidding, with the state soliciting bids from insurers, after which the plan will be implemented by the end of the year. My sense is this process will encourage insurers to adopt strict cost control measures.

Matthew Holt is doing an excellent job of reporting on the World Healthcare Congress