Health Insurance Falling Short for More People

--

By KRISTEN GERENCHER
June 13, 2008 3:38 p.m.

SAN FRANCISCO (MarketWatch) -- People without health insurance risk
potential financial disaster if they should need expensive medical care,
but a growing number of underinsured Americans also find themselves on
shaky financial ground.

Despite the U.S. economy's growth in the last five years, the number of
people with health insurance who face high out-of-pocket medical
expenses relative to their incomes has risen sharply since 2003,
according to a new study.

More than 25 million working-age Americans were underinsured last year,
up 60% from the 16 million who had inadequate coverage in 2003,
according to a report from the Commonwealth Fund, a private foundation
in New York. The rate of underinsurance nearly tripled among middle- and
higher-income families, those with at least $40,000 in family income.

"Lack of insurance is only one part of the problem, as even the insured
have serious gaps in coverage," said Karen Davis, president of the
Commonwealth Fund. "Insurance coverage is the ticket into the
health-care system, but for too many, that ticket doesn't buy financial
security or genuine access to care."

The upward trend in the underinsured rate reflects how much rising
health-care costs have outpaced wage gains. Premiums for family coverage
have jumped 78% since 2001, while wages have risen 19% and general
inflation has gone up 17% in that time, according to the Kaiser Family
Foundation.

Researchers considered people who had coverage all year long
underinsured if they had out-of-pocket medical, prescription, dental and
vision expenses that amounted to 10% or more of their total household
income, or 5% if they were low income. People who had deductibles equal
to or greater than 5% of their income also qualified as underinsured
because of their potential financial exposure.

During 2007, 42% of adults, or 75 million people, were either uninsured
or underinsured, up from one-third in 2003, according to the study of
2,616 people ages 19 to 64. It was published online Tuesday in the
journal Health Affairs.

Similar patterns to uninsured

Employers burdened by rapidly rising health-care costs have been
shifting more of those costs to workers or limiting benefits, the study
found. The underinsured were more likely to have individual or
small-group coverage, and those with employer-based health insurance
were more likely to work in low-wage jobs or at small firms than their
adequately insured counterparts. What's more, the underinsured were more
likely to report paying high deductibles and many paid high annual
premiums.

The underinsured often resembled the uninsured more so than the insured
in their health-care choices and experiences. More than half of the
underinsured -- 53% -- and 68% of the uninsured avoided needed care
because of cost, compared with 31% of the adequately insured who went
without, the study found. That includes not seeing a doctor when sick,
not filling prescriptions and not getting recommended diagnostic tests
or treatments.

About 45% of the underinsured reported difficulty paying medical bills,
being contacted by collection agencies or changing their way of life to
keep up on health-care payments, just shy of the 51% of uninsured who
said the same.

In the U.S., even people with health insurance can rack up medical debt
or face bankruptcy, said Cathy Schoen, senior vice president of the
Commonwealth Fund. "As a nation we are losing ground. We need to move in
new directions."

Leon Rousso, a certified financial planner in Ventura, Calif., who sells
health insurance as part of his business, said he tries to place
moderate-income people in health plans that have a sensible annual
out-of-pocket maximum and reasonable coverage for their biggest
potential out-of-pocket costs. Sometimes that means moving them to a
higher deductible plan in exchange for lower premiums.

Of course, many people have to take whatever their employer offers them,
he said.

Insured people "don't really have a lot of clout," Rousso said. "Middle
to lower middle class, that's really where the vulnerable spot is. You
see a lot of people who don't have a lot of money."

Those who shop for their own plan are wise to look for coverage of
big-ticket items. Rousso advised focusing on financial protection for
hospitalization charges and prescription drugs.

"Those are the biggest places to lose your fortune," he said. "It's all
about protecting your assets."

Many of the underinsured are in scaled-down, more affordable health
plans, said Nancy Davenport-Ennis, chief executive of the nonprofit
Patient Advocate Foundation in Newport News, Va. The group tries to help
people with chronic, debilitating and life-threatening conditions get
the care they need, with 78% of its annual cases involving cancer
patients.

"We actually found that an underinsured consumer has a tougher time
getting to resources than a completely uninsured consumer," she said.

The underinsured are often in plans that have limits such as dollar caps
on diagnoses and specific services and restrictions on the number and
kind of drugs covered, which can undercut the kind of aggressive care
many cancer patients count on, Davenport-Ennis said.

"In affordable plans, it's almost standard to see a cap on the number of
radiation visits you can have a year - somewhere between 12 and 15 --
while most cancer therapies that have radiation as part of the treatment
protocol historically require six consecutive weeks of daily
treatments," she said. "If you're capped at 12, you're going to be a
private-pay person for the next 18."

The Patient Advocate Foundation offers free case management for
health-insurance issues of the seriously ill. Its hotline is
1-800-532-5274.

Controversy over cost controls

The U.S. spends enough on health care -- 16% of its gross domestic
product -- to extend adequate health insurance to all, said Alan Sager,
a health policy and management professor at Boston University's School
of Public Health.

"It's something everyone wants and deserves, and crafting durably
affordable health care is essential to rebuilding the economy," he said.

"If we continue to accelerate toward the cliff, we'll be spending more
money on care but will have more uninsured and underinsured people,
which means hospitals and doctors will work harder to overserve those of
us who still have good insurance."

In Massachusetts, a statewide reform law passed in 2006 that aimed to
cover all residents "took an important step" but introduced new
tensions, he said, especially around politically palatable cost-control
methods. Many of the ones currently in vogue in national politics as
well won't do the trick, Sager said.

"The ideas that are under widespread political discussion -- electronic
medical records, prevention, chronic-care case management or deinsuring
patients so they will be more motivated to shop by price and quality --
none of these things will work to contain costs," Sager said. "They're
all being pushed because they offer the shallow political promise of
containing costs without actually disrupting business as usual in health
care. Business as usual in health care means regular, large infusions of
more money every year."

Still, Sager said he's optimistic that the next five years will bring
major improvements in the nation's health-care system.

"We all know we're medically vulnerable because none of us is going to
live forever, but as more of us realize that we're also financially
vulnerable, we'll demand change and [solutions] that work financially,
medically, ethically and politically."

Write to Kristen Gerencher at kgerencher@dowjones.com