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Fri Sep 22 10:04:42 BST 2006

NYTimes. I know, I know, it's the most liberal newspaper in America. 

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. 

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