May 04, 2008
The Rise of the Uninsured Insured
Today's New York Times leads with a story documenting inadequacies in a growing number of health insurance policies. Rising co-pays, deductibles and caps on coverage are leaving many families with huge and unpayable bills despite thinking they were insured for serious or sudden illnesses. Here's a major anecdote worth highlighting:
Shirley Giarde of Walla Walla, Wash., was not prepared when her husband, Raymond, suddenly developed congestive heart failure last year and needed a pacemaker and defibrillator. Because his job did not provide health benefits, she has covered them both through a policy for the self-employed, which she obtained as the proprietor of a bridal and formal-wear store, the Purple Parasol.But when Raymond had his medical problems, Ms. Giarde discovered that her insurance would cover only $22,000, leaving them with about $100,000 in unpaid hospital bills.
Even though the hospital agreed to reduce that debt to about $50,000, Ms. Giarde is still struggling to pay it — in part because the poor economy has meant slumping sales at the Purple Parasol. Her husband, now disabled and unable to work, will not qualify for Medicare for another year, and she cannot afford the $758 a month it would cost to enroll him in a state-run insurance plan for individuals who cannot find private insurance.
Here, writ small, is a description of everything wrong with today's insurance market and the conservative approach to health care reform.
* The individual insurance market is notorious for selling inadequate policies that do not cover the true cost of serious illness. Policies that cover just $22,000 of a $122,000 hospital bill aren't insurance in any meaningful sense of that word. They are more properly categorized as a "bait and switch" scheme to defraud the unwary. The Federal Trade Commission should take note.
* Individual "health savings accounts" can never generate enough savings to cover such shortfalls. Moreover, while the newspaper account doesn't reveal how or why Raymond Giarde "suddenly" developed congestive heart failure, HSAs also make it less likely that he would have sought out preventive care long before he developed the disease.
* State programs for the uninsured are far too expensive to provide a meaningful alternative for the uninsured. At $758 a month or $9096 a year, Washington's plan appears to be charging the full cost of family insurance.
Now let's turn to the health care plan of presumptive Republican nominee John McCain annnounced last week and see how it would help this family.
* The $5,000 tax credit for families would not have covered the cost of even the state-run pool for the uninsured, much less a decent family plan. Indeed, it was $250 a month short.
* McCain would expand HSAs, which would be no help to a family like the Giarde's facing a $50,000 hospital bill not covered by inadequate insurance. Given their inability to afford the state plan and the fact their faltering business was already struggling to afford their existing plan, how likely is it that they would have also put aside a few hundred dollars a month for first-dollar coverage decisions like preventive care? Isn't it more likely that, if they had the money, they would have used it to buy adequate coverage for serious illnesses like Mr. Giarde's?
Would McCain's promised Guaranteed Access Plan to make state programs to cover the uninsured affordable have made the difference for this family? His proposal lacks any details. But as I said earlier this week, his advisers' claim that it would cost a maximum of $10 billion nationwide lacks any credibility. That's just $200 per uninsured person in the pool. For every Giarde (someone who suffers from a serious or chronic illness), there would need to be over 600 people who didn't cost the system a dime. How likely is that?