#Krugman: health insurance horror stories

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" Zepp " <zepp

Fri, 22 Sep 2006 07:26:00 -0700

[Zepps_News] #Krugman: health insurance horror stories

 

 

 

 

 

 

 

 

OP-ED COLUMNIST

*Insurance Horror Stories**

*

* By** PAUL KRUGMAN

<http://topics.nytimes.com/top/opinion/editorialsandoped/oped/columni

sts/paulkrugman/index.html?inline=nyt-per>

*

 

" 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.