NYT/Krugman: Insurance Horror Stories
kuac...@yahoo.com
September 22, 2006
Op-Ed Columnist
Insurance Horror Stories
By PAUL KRUGMAN
"When Steve and Leslie Shaeffer's daughter, Selah, was diagnosed at
age 4 with a potentially fatal tumor in her jaw, they figured their
health insurance would cover the bulk of her treatment costs." But
"shortly after Selah's medical bills hit $20,000, Blue Cross
stopped covering them and eventually canceled her coverage
retroactively."
So begins a recent report in The Los Angeles Times titled "Sick but
Insured? Think Again," which offers a series of similar horror
stories, and suggests that these stories represent a growing trend:
more and more health insurers are finding ways to yank your insurance
when you get sick.
This trend helps explain something that has been puzzling me: why is
the health insurance industry growing rapidly, even as it covers fewer
Americans?
Between 2000 and 2005, the number of Americans with private health
insurance coverage fell by 1 percent. But over the same period,
employment at health insurance companies rose a remarkable 32 percent.
What are all those extra employees doing?
Now we know at least part of the answer: they're working harder than
ever at identifying people who really need medical care, and ensuring
that they don't get it. In the past, they mainly concentrated on
screening out applicants likely to get sick. Now, it seems, they're
also devoting a lot of effort to finding pretexts for revoking
insurance after they've already granted it. They typically do this by
claiming that they weren't notified about some pre-existing
condition, even if the insured wasn't aware of that condition when he
or she bought the policy.
Welcome to the ugly world of American health care economics.
Health care is poised to become America's largest industry.
Employment in manufacturing, which once dominated the economy, has
fallen 18 percent since 2000, to 14.2 million. Meanwhile, employment in
the private health services industry has risen 16 percent, to 12.6
million. Another 1.3 million people are employed at government
hospitals. So we're quickly approaching the point at which more
Americans will be employed delivering health care than are employed
producing manufactured goods.
Yet even as health care becomes the core of the American economy, our
system of paying for health care remains sick, and is getting sicker.
Because everyone faces some risk of incurring huge medical costs, only
the superrich can afford to be without health insurance. Yet private
insurers try to refuse coverage to those most likely to need it, and
deny payment whenever they can get away with it.
The point isn't that they're evil or greedy (although you do wonder
how the people who cut off the Schaeffers can look themselves in the
mirror). The fact is that cruelty and injustice are the inevitable
result of the current rules of the game. Blue Shield of California is a
nonprofit insurance provider, yet as a spokesman put it, if his
organization doesn't follow the for-profit practice of selectively
covering only the healthiest people, "we will end up with all the
high-risk people."
Now, before you panic about the state of your own coverage, you should
know that the horror stories in The Los Angeles Times article all
involve individual insurance; if your coverage comes via your employer,
you're reasonably secure against sudden cancellation.
But employment-based insurance is in rapid decline, as employers balk
at the cost and more and more companies adopt Wal-Mart-style
minimal-benefit policies. That's why many people are turning to
individual insurance -- only to find out, in some cases, that they
didn't get what they thought they paid for.
And here's the thing: it's all unnecessary.
Every other wealthy nation manages to provide almost all its citizens
with guaranteed health insurance, while spending less on health care
than we do. And there's no mystery why: we're paying the price for
pointless, destructive reliance on private insurers. Medicare, which is
a universal health insurance program for older Americans, spends less
than 2 cents of every dollar on administrative costs, leaving 98 cents
to pay for medical care. By contrast, private insurance companies spend
only around 80 cents of each dollar in premiums on medical care; much
of the remaining 20 cents is spent denying insurance to those who need
it.
If we had a universal system -- Medicare for everyone -- there would be
no more horror stories like those reported by The Los Angeles Times.
And we'd almost certainly spend less on health care than we do now.