Introducing Campus Progress’ new health care column.
By Kate Steadman, UC Santa Cruz
Tuesday September 27, 2005
Recent estimates of uninsured Americans reach 46 million. In 2002, over 40% of uninsured adults postponed seeking medical care, and 28% say they needed but did not get medical care in the past year (Kaiser Family Foundation, “The Uninsured and Their Access to Healthcare,” Jan 2003). Another 16 million adults are underinsured, putting them at risk for financial disaster because the United States needs new solutions to soften health care’s costly blow. So, Kate Steadman, a recent grad of the University of California, Santa Cruz working in the field of health advocacy and policy, joins Campus Progress every other week to give overviews of the health issues affecting Americans in general, and college students and recent grads in particular.
Wait, a column on health care? Isn’t that for pointy-headed policy wonks? Or at least married people?
If you were lucky like me, you probably grew up on your parents’ health insurance plan. Being healthy was a given. When you were sick, you went to the doctor. When your tooth was knocked out by an unfortunate line drive or hockey puck-to-face contact during kiddie league games, you went to the ER. Years later you went to college and signed up for the University’s student health plan. If you caught the dorm flu, you went to student health, and if something got broken during Friday night debauchery, you woke up the next day in a fog of pain and limped over to urgent care.
But if you’re a recent grad like me, things have changed in the past few months. You can’t go to the University nurse anymore. Health insurance remains a mysterious beast – a Minotaur hanging out in a dank labyrinth – that you can’t keep avoiding. Because you are going to need it one day.
What are we going to explore here?
Good question. For those of you less interested in diving into 100-page policy briefs than I am, every other week I’m going to answer your questions about health care, health insurance, and health policy. I will explore not just how to deal with the aftermath of an emergency room visit (after that trip to Tijuana that we dare not speak of), but also focus on the social, political and economic forces that shape health care in America. Lucky for you, I’m a recent grad; lucky for Campus Progress, my labor comes cheap.
Okay, I’m ready for my tour. What exactly does health insurance do?
Health insurance, like any other insurance, is a way of paying for necessary costs without undergoing catastrophic financial pain. In the same way that someone buys insurance for their car in case they wreck it, health insurance buys you nights in the hospital, expensive medical procedures, and visits to the doctor. You (or your employer or the government) pay a certain amount of money to the insurance company every month for care, as do countless others.
Well, that was fun. Now how does this new super weight loss surgery work? Will my insurance pay for it?
Not so fast! That was the barest of bare bones descriptions. Health insurance, like hot classmates, comes in many colors, shapes, and sizes. Some are everything you hoped for; you walk away with an extra spring in your step because that investment gave you a new outlook on life, not to mention the antibiotics to keep living it. Others leave you fuming as you sift through pages of confusing notes and rules, frantically keeping that severed pinky in ice while you await authorization.
Insurance companies have come up with a dizzying array of methods to calculate monthly premiums. You’ve got to understand those to know why people are struggling to pay their health care bills every month. The most basic of these is something called community rating.
And what is community rating? Is it kind of like Hot or Not?
Not exactly. According to Thomas S. Bodenheimer and Kevin Grumbach, authors of Understanding Health Policy, community rating is a way to “distribute health care more in accordance with human need rather than ability to pay.” Basically, a diverse population – young and old, sick and healthy – pays the company the same amount – let’s say $150 – every month. Some of these people, like the old and sick, will need lots of health care so the insurance company will pay thousands of dollars every month. But the young and healthy probably won’t need any health care, or only their annual check up. Usually the money collected from everyone is enough to cover all parties’ health care costs, with funds left over in case one of the young and healthy people gets a little too drunk and tries to climb that sweet old tree in front of the dorm.
Unfortunately, community rating has been taken out by its bastard free-market offspring – experience rating. Under that system, insurers charge different prices to patients based on risk. The elderly and disabled will presumably need more health care, so they might be charged $175 a month. The young and healthy probably won’t need much, so they’re charged $50 a month. Before everyone paid an equal amount, but this new system identifies clear winners and losers. The young pay $50 less than before, the disabled and elderly pay $75 more than before, and the insurance company comes out on top by charging higher premiums to the sick. While this may benefit us more now, it certainly won’t when that 50th birthday rolls around, and sooner if health care costs continue to skyrocket.
So why don’t the elderly and sick just go back to the other company?
That’s the exact problem – only the expensive people will go back to community rating. The healthy young people get a sweet deal from experience rating, so they’ll stay. The community rating insurance company ends up with all sick people, high medical bills, and no invincible youth to balance the costs. That makes premiums skyrocket. Bottom line? Once you get “experienced,” you never go back.
The reason I bring up community and experience rating is that it models what’s going on with the self-insured. Forty-one percent of those 18-34 are uninsured, and fixing that problem with self-insurance can be quite costly. The Kaiser Family Foundation found that this same age group can expect to pay up to $244.39 on average a month, depending on where you live. That equals almost $3,000 a year, and that’s not including any out-of-pocket costs. Why does individual insurance cost so much? People who don’t have insurance through an employer, but purchase an individual plan, cause the insurance company greater financial risk. Many have expensive health conditions (in the insurance world called “preexisting conditions”), and the young and strapping aren’t enrolling to soften the blow. Instead the insurance company makes a deal – they’ll cover this one person, but only if they don’t have to pay for any care related to that expensive condition. Say you have diabetes—if the insurance company doesn’t pay for any care related to diabetes, you become a much cheaper liability. This is an extreme form of experience rating, one that leaves people with thousands of dollars of medical bills annually.
That’s a bum deal. What do I do if I don’t have a job?
That, my friends, is for next time. But for now, try not to develop any preexisting conditions and I’ll see you in two weeks.
Kate Steadman, a native of the reddest of red states, Kansas, graduated from the University of California, Santa Cruz in June with a BA in sociology and pre-med requirements fulfilled. Kate has worked at the National Women’s Health Network in Washington, D.C. and the Venice Family Clinic, the largest free clinic in the nation, in Los Angeles. She has an unhealthy fascination with health care and will be moving to Washington , D.C. to work in health policy. When she’s not reading about health issues, she enjoys staring at her computer, listening to NPR, and knitting.
If you have a question or suggestion for Kate regarding Critical Condition, contact her at ksteadman@gmail.com.