Death By Insurance - New York Times
The New York Times

May 1, 2006
Op-Ed Columnist

Death By Insurance
By
PAUL KRUGMAN

For lower-income working Americans, lack of health insurance is quickly
becoming the new normal. That's the implication of survey results just
released
by the Commonwealth Fund, a nonpartisan organization that studies health
care. The survey found that 41 percent of nonelderly American adults with
incomes
between $20,000 and $40,000 a year were without health insurance for all or
part of 2005. That's up from 28 percent as recently as 2001.

Many of the uninsured reported spending their entire savings on health care
and/or that they were having difficulty paying for basic necessities. And
most
uninsured adults reported cutting corners on medical care to save money -
failing to fill prescriptions, skipping medications, going without
preventive
care.

Here's the other side of the same coin: health insurers' business is
lagging, reports The Wall Street Journal, as "rising premiums and medical
costs push
more of their traditional-employer customers to shun or curtail company
health benefits." And some investors are feeling the pain. Aetna's stock
price
fell sharply last week, on news that its "medical cost ratio" - a term I'll
explain in a minute - rose from 77.9 to 79.4.

Taken together, these stories tell the tale of a health care system that's
driving a growing number of Americans into financial ruin, and in many cases
kills them through lack of basic care. (The Institute of Medicine, part of
the National Academy of Sciences, estimates that lack of health insurance
leads
to 18,000 unnecessary American deaths - the equivalent of six 9/11's - each
year.) Yet this system actually costs more to run than we would spend if we
guaranteed health insurance to everyone.

How do we know this? The medical cost ratio is the percentage of insurance
premiums paid out to doctors, hospitals and other health care providers.
Investors
are upset about Aetna's rising ratio, because it leaves less room for
profit. But even after the rise in the cost ratio, Aetna spends less than 80
cents
of each dollar in health insurance premiums on actually providing medical
care. The other 20 cents go into profits, marketing and administrative
expenses.

Other private insurers have similar ratios. And here's the thing: most of
those 20 cents spent on things other than medical care are unnecessary.
Older
Americans are covered by Medicare, which doesn't spend large sums on
marketing and doesn't devote a lot of resources to screening out people
likely to
have high medical bills. As a result, Medicare manages to spend about 98
percent of its funds on actual medical care.

What would happen if Medicare was expanded to cover everyone? You might
think that the nation would spend more on health care, since this would mean
covering
46 million Americans who are currently uninsured. But the uninsured already
receive some medical care at public expense - for example, treatment in
emergency
rooms that would have been both cheaper and more effective if provided in
doctors' offices.

And Medicare manages to spend much more of its funds on medicine, as opposed
to other things, than private insurers. If you do the math, it becomes clear
that covering everyone under Medicare would actually be significantly
cheaper than our current system.

And this calculation doesn't even take into account the costs our fragmented
system imposes on doctors and hospitals. Benjamin Brewer, a doctor who
writes
an online column for The Wall Street Journal, recently commented on the
excess expenses he incurs trying to deal with 301 different private
insurance plans.
According to Dr. Brewer, he currently employs two full-time staff members
for billing, and his two secretaries spend half their time collecting
insurance
information. "I suspect," he wrote, "I could go from four people in the
paper chase to one with a single-payer system."

Many pundits see red at the words "single-payer system." They think it means
low-quality socialized medicine; they start telling horror stories - almost
all of them false - about the problems of other countries' health care. Yet
there's nothing foreign or exotic about the concept: Medicare is a
single-payer
system. It's not perfect, it could certainly be improved, but it works.

So here we are. Our current health care system is unraveling. Older
Americans are already covered by a national health insurance system;
extending that
system to cover everyone would save money, reduce financial anxiety and save
thousands of American lives every year. Why don't we just do it?

Posted by Miriam V.