Insurance Horror Stories - New York Times
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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.

Copyright 2006
The New York Times Company

Posted by Miriam V.