Drug Costs Soar (Again) in 2009

Prices for brand-name prescriptions soared 9.1 percent during 2009, which was the largest increase in the past five years, according to Express Scripts, a pharmacy-benefit manager quoted by the Wall Street Journal.

For 2009, the Bureau of Labor Statistics reports that the Consumer Price Index for Urban Consumers (CPI-U) rose 2.7, so branded prescriptions rose about 3.4 times faster than the all-items CPI-U.  For 2009, Medical Services component of CPI-U increased only 3.4 percent, meaning branded prescription drugs rose 2.7 times faster.

For 2009, CPI-U measured the increase in professional services at only 2.5 percent.  Even hospital and related service costs, one of the most rapidly increasing components of medical services, rose just 7.1 percent.  So branded prescriptions rose 3.64 times faster than physician services and and 32 percent faster than hospital costs. 

As Kaiser reports here, there have been many years in which prescription drug pricing has outpaced other health costs.  In fact, 2009 represents the eleventh year of the past 14 in which drug prices have risen faster -- sometimes far faster -- than the prices of professional services or hospital care.  Here's the picture.  (Click to enlarge graph.)

America's Health Care Compares Poorly, Part II

America ranks last in potential years of life lost to diseases of the circulatory system and the respiratory system.  

Gerard F. Anderson, Ph.D., and Patricia Markovich, Johns Hopkins researchers, have compared the performance of several nations' health systems in a report supported by The Commonwealth Fund, entitled Multinational Comparisons of Health Systems Data, 2008.  We ranked last among eight developed nations in potential years of life lost to diseases of the circulatory system.  (Click to enlarge graph.)

America suffered about 50 percent more potential years of life lost when compared to the next poorest performing country -- the United Kingdom.   France and Switzerland suffered fewer than half the potential years of life lost as the United States.

America also suffered the most potential years of life lost to diseases of the respiratory system.  Five of the eight countries compared had fewer than half as many potential years of life lost as did America.  (Click to enlarge graph.)

The Patient Protection and Affordable Care Act will help America improve its performance on these measures, and those discussed yesterday.  Health reform will provide improved access to preventive services and more timely diagnosis and treatment of disease.  

Our cardiologists and vascular surgeons, our endocrinologists and pulmonologists are among the best in the world.  Health reform will get patients to primary care physicians early so that some disease can be prevented.  Because more of us will have regular access to primary care physicians, more disease will get diagnosed early.  This will enable patients to see specialists soon enough that they will be able to use their skill and knowledge to heal more of us.

America's Health Care Compares Poorly

America suffers far more Years of Potential Life Lost for several disease categories than do other developed countries that provide universal coverage for their populations.  The years of potential life lost calculation considers the age at death, so more potential years of life are lost when a 20-year-old dies from any cause than when a 74-year-old dies from the same cause.

Gerard F. Anderson, Ph.D., and Patricia Markovich, Johns Hopkins researchers, have compared the performance of several nations' health systems in a report supported by The Commonwealth Fund, entitled Multinational Comparisons of Health Systems Data, 2008. Their research shows that the United States health system performed best in its treatment of malignant neoplasms (cancer) as you'll see in the following graph.  

While this was the best performance of the America's health system, we still ranked in the bottom half of the eight countries compared, with four countries suffering fewer potential years of life lost per 100,000 people, and three countries suffering more potential years of life lost per 100,000.   France, which has the world's top rated health sytem, turned in the worst performance of the eight countries compared.  (Click to enlarge graph.)

As I discussed here, America ranks last among eight nations in the potential years of life lost due to diabetes.  The United States' suffered nearly four times more potential years of life lost per 100,000 as did France, the United Kingdom and Switzerland.  America suffered about 50 percent more potential years of life lost per 100,000 than the next worst performing country -- New Zealand.

Tomorrow, we'll look at how the United States compared with other countries in potential years of life lost to circulatory and respiratory diseases.

Medicare: A Primer

The Kaiser Family Foundation has just released Medicare: A Primer.  This 32 page document provides most of what you might want to know about Medicare, whether you are currently covered by the program, or about to be.  It shows who is eligible to participate in the program, what benefits are available under each of the four parts of the program, and how much beneficiaries pay for benefits.  

There is also a lot of helpful information such as the types of supplemental policies Medicare beneficiaries carry, how Medicare is financed, and a discussion of the access Medicare beneficiaries have to the health system. 

The document has been updated to reflect programmatic changes that were made with passage of the Patient Protection and Affordable Care Act.  It includes a discussion and graph which shows the health reform law's impact on spending over this decade, as the average annual growth rate in spending slows from 6.8 percent to a projected 5.5 percent per year.

Medicare:  A Primer includes an implementation timetable showing the dates and changes that the health reform law will make to this program between 2010 and 2015.  

The primer also includes a thoughtful discussion of the funding challenges facing the program as the ratio of workers to beneficiaries declines.

The Kaiser Family Foundation has produced a document that is a solid source for clear, unbiased information on a program that benefits almost one in five Americans.

U. S. Health System Produces Mixed Results

The U. S. health system has produced mixed results in two measures of mortality when compared with eight other countries in Multinational Comparisons of Health Systems Data, 2008.

The U. S. looks good when compared with six other countries in acute myocardial infarction (AMI or heart attack) deaths per 100,000 population in 2006 showing the third fewest deaths among the seven countries.  But we can do better.   As good as the United States compared, the death rate from AMI here was 77 percent higher than the AMI death rate in France.  (Click to enlarge graph.)

The United States looks far worse in the number of bronchitis, asthma and emphysema deaths per 100,000 population during 2006, when compared with six other countries.  The United States had the highest death rates for these diseases, and rates that were twice that of Canada and much higher than those of France, Germany and the United Kingdom.  (Click to enlarge graph.)

For those who think America has the best health care in the world, these data argue we have quite a distance to go to do as well in all areas as other developed nations.  Tomorrow, I'll look at more data that makes this point.

Universal Care Produces Bigger Life Expectancy Improvement

In work done a year earlier than that I've been looking at recently, Gerard F. Anderson, Ph.D. and Patricia Markovich of Johns Hopkins, did more detailed analyses of mortality variances among nations for The Commonwealth Fund.  In the study, entitled Multinational Comparisons of Health System Data, 2008, the authors report the change in life expectancy at birth for the 20 year period 1986-2006.  For the period, covering nearly a generation, the United States showed the smallest improvement among the nine countries compared as you can see in this graph.  (Click to enlarge graph.)

In another look at relative change in life expectancy between countries, the authors looked at how life expectancy at age 65 has changed over the same 20 year period.  Here, the United States' relative position improves modestly, but still shows the eighth smallest change among nine nations for the period.  (Click to enlarge graph.)

These data support an argument in favor of health reform.  In nations which have universal coverage, life expectancies are generally longer than in the United States, as we saw here.  And, as noted today, progress in improving life expectancy has been better in countries with universal coverage than the progress made in the United States during the period from 1986 to 2006.  I expect that the Patient Protection and Affordable Care Act will begin to bring some of these benefits to America, when the law takes full effect.

Universal Coverage Improves Preventive Care

One area where America is far behind in delivering high quality health care is in the area of preventive services.  Preventive services are not terribly expensive, yet they pay enormous dividends in avoiding far greater costs that come from needing to treat preventable illness, or to treat poorly managed disease.

Gerard F. Anderson and Patricia Markovich, two researchers at Johns Hopkins, completed a study funded in part by Commonwealth Fund entitled Multinational Comparisons of Health Systems Data, 2009.  Two interesting comparisons show the strong benefits of universal coverage in obtaining better preventive healthcare outcomes.

The following graph shows the impact of poor diabetic care in the United States versus nine other countries.  Americans lose 99 years of life per 100,000, a rate that is 50 percent greater than the next worst performing country, and a rate that is three to five times greater than eight other countries.  American endocrinologists can manage diabetes as well as specialists in other countries, but patients need the financial resources to allow for regular follow-up care, routine monitoring and supplies, and insulin and/or medicines required to treat the disease.  (Click to enlarge graph.)

While not a perfect comparison, the following chart, which shows immunization rates for those over age 65, supports the argument that with universal coverage, we do about as well as other nations.  Because of Medicare, those over 65 are the only American population cohort that currently enjoys universal coverage.  When compared with other nations immunization rates, the United States' senior population falls in the middle of the pack -- having the fifth highest influenza immunization rate among 10 countries.  (Click to enlarge graph.)

Universal coverage also produces better outcomes for diseases that we know how to treat.  You can read more here about how America ranks last among 19 countries in preventing mortality resulting from diseases that we can treat successfully when patients have access to insurance coverage.

When the Patient Protection and Affordable Care Act is fully implemented, life will be better, and there will be more of it for American diabetics.  When this important law is fully implemented, life will be better, and there will be more of it for all Americans.

U. S. Has Lower Life Expectancy

Johns Hopkins researchers Gerard F. Anderson's and Patricia Markovich's study Multinational Comparisons of Health System Data, 2009, includes the following graph showing life expectancy at birth for 12 countries.  The U. S. ranks last, having the shortest life expectancy for males and females among the 12 countries compared.  (Click to enlarge graph.)

Using data from the Organization for Economic Cooperation and Development, I have developed a graph to show life expectancy at age 65.  While the U. S. position improves modestly, it still ranks near the bottom of the 12 countries measured. (Click to enlarge graph.)

It is reasonable to expect that as more Americans come to receive the benefits of health insurance coverage and preventive care through the Patient Protection and Affordable Care Act, our life expectancies should increase.

Universal Coverage Leads to More Physician Care

It is reasonable to assume that a country that covers its entire population will experience more physician visits per capita than a country, like the United States, which covers only 83 percent of its population.  

The study Multinational Comparisons of Health System Data, 2009, funded in part by Commonwealth Fund and conducted by Johns Hopkins researchers  Gerard F. Anderson and Patricia Markovich supports that assumption.  

Here's a graph showing physician visits per capita for 11 countries.  The United States has, on average only 60.3 percent of the physician visits as the average Organization for Economic Cooperation and Development country studied.  (Click to enlarge graph.)

Some have worried that as government plays a larger role in the health care system, the supply of physicians will shrink.  After all, physicians in nearly every country around the world earn less than physicians in the United States.   Without a strong financial incentive, why would anyone endure a long course of study in medical school and years of work in a residency program?   

The following chart seems to dispel that concern.  Of 12 countries studied, the average OECD median number of practicing physicians per 1,000 population was 50 percent higher than the number of practicing physicians in the United States, as seen in the following graph.  (Click to enlarge graph.)

Knee, Hip and CABG Rates

Today, I continue to explore how medical services are provided in the developed world using Johns Hopkins researchers Gerard F. Anderson's and Patricia Markovich's study Multinational Comparisons of Health System Data, 2008.  

The following graph shows the rate of knee and hip replacement operations performed in five developed countries.  Note the U. S. ranks first in the rate of knee replacements performed per 100,000, but last in the number of hip replacements.  In Italy, the United Kingdom, Germany and France, roughly two hip replacements are performed for each knee replacement.  In the United States, 1.2 knees are replaced for each hip replacement.  Are Americans equipped with stronger hips but weaker knees than Europeans?
(Click to enlarge graph.)  

The United States ranks second among 12 countries in its rate of coronary artery bypass grafts (CABG) performed per 100,000 people.  Interestingly, the rate of CABG in Germany is 55 percent above the rate in the United States.  (Click to enlarge graph.)

These data do not provide evidence of severe restriction of health services in countries which provide universal health coverage for their populations.  

Less Hospital Care in U. S.

Continuing to explore Gerard F. Anderson's and Patricia Markovich's  study Multinational Comparisons of Health System Data, 2008, today, I look at the provision of services.  One of the reasons often cited for opposing the Patient Protection and Affordable Care Act is an irrational fear that government will withhold services or restrict the supply of services in ways that harm the population that elects the government.  

So, how do things in the United States compare with the rest of the developed world which has adopted programs to provide universal health care coverage?  The following chart shows that most of the world gets more hospital care than do Americans.  The number of hospital discharges per thousand is higher in eight of the 12 countries examined, and lower than the rate of discharges per thousand in the United States in only two countries.  In France and Germany, the number of discharges per thousand averages two times as many as in the United States.  (Click to enlarge graph.)

Following a heart attack, the amount of time patients spend in the hospital is longer in eight of 11 countries studied, than in the United States, and shorter than the United States' average in only two countries.  (Click to enlarge graph.)

These data, while not definitive, do not support a concern that health care services are severely restricted to hold down costs.  For hospitalization, and for care following AMI, OECD countries in general provide more care than is provided to Americans. Tomorrow, I will be looking at data for knee and hip replacements, and coronary artery bypass grafting.

Spending More, Getting Less Coverage

Gerard F. Anderson and Patricia Markovich of Johns Hopkins University have completed Multinational Comparisons of Health System Data, 2008 supported by the Commonwealth Fund.  The report includes an extensive series of charts that illustrate the strengths and weaknesses that exist between health systems.  Over the next several days, I will be including graphic examples from the report.

Today I look at coverage under public programs.  The following chart, combined with yesterday's charts, points out the fallacy of arguments that extending coverage to everyone is unaffordable.  In fact, what is unaffordable, is leaving millions of Americans without coverage.

The following chart shows that many countries cover their entire populations for what the United States spends to cover less than one-third of the population with Medicare, Medicaid, S-CHIP, CHAMPUS, the VA system and the Indian Health Service.  And many of these countries have populations that are substantially older, and need more health care than that of the United States, as seen here or here.  The chart also shows that among the eight nations compared, the United States has the second highest level of out-of-pocket spending for health services, exceeded only by Switzerland.

We Spend Most and Have Fastest Rising Costs

Gerard F. Anderson and Patricia Markovich of Johns Hopkins University have completed Multinational Comparisons of Health System Data, 2008 supported by the Commonwealth Fund.  The report includes an extensive series of charts that illustrate the strengths and weaknesses that exist between health systems.  Over the next several days, I will be including graphic examples from the report.

To begin, we'll look at cost comparisons, and see that the U. S. spends more per capita than any of the nine countries compared.  This chart shows spending per capita for 2006, adjusted for differences in cost of living between respective countries.  OCED is the Organization for Economic Development which is made up of European countries and Canada, Mexico, Australia, New Zealand, Japan, Korea and the United States.  (Click to enlarge graph.)

And costs are rising faster in the United States, than in any country with which it is compared.  (Click to enlarge.)

The Patient Protection and Affordable Care Act will begin to address this cost problem, by extending health insurance coverage to an additional 32 million Americans.  By doing so, we will improve our competitive position in the world economy, helping us improve exports, while keeping more jobs at home. 

Financial Concerns Delay Heart Care

If you are uninsured or underinsured, worry about the cost of a possible false-alarm keeps people from getting to a hospital where immediate treatment can prevent more extensive and expensive treatment later.  A study released in yesterday's edition of the JAMA, The Journal of the American Medical Association, and described here, confirms what many physicians have known for years.  

For the millions of American adults who don't have health insurance, and those who have it but worry that illness might ruin them financially, the signs of an impending heart attack do not set in motion the kind of rapid, lifesaving response that medical professionals urge, according to a study conducted at 24 urban hospitals across the nation.

Instead, when uninsured or financially insecure adults feel stabbing chest pain, burning in the shoulders and jaw, or extreme pressure across the midsection, they are more likely than the reliably insured to consider the economic consequences of a false alarm and put off getting help .

Patients who delay getting immediate medical attention for a heart attack are more likely to be rehospitalized for heart problems, to go on to develop congestive heart failure, to suffer the ongoing chest pains called angina, and to have generally poorer health.  

While it isn't part of this study, the costs for some of the care of those who are uninsured or underinsured are passed on to those with health insurance, and those costs are higher because treatment was delayed.

This is just one area where recently passed health reform will bring important changes for the better:  costs will be lower and the care delivered will be more effective because treatment won't be delayed.

A Lesson for The Party of Hell No

In reading Jill Quadagno's One Nation Uninsured, Why the U. S. Has No National Health Insurance, I ran across an interesting discussion concerning the American Medical Association, that I expect has applicability to the Republican Party.

According to Quadagno's research, in 1945, 75 percent of Americans supported national health insurance; by 1949, only 21 percent favored President Truman's plan because of the outright opposition of the American Medical Association.  But the opposition came at great cost to the AMA according to Quadagno's book.  She quotes several sources for these paragraphs,

"During the campaign, the AMA drew heavily upon physicians' cultural authority as experts on health issues.  By the end of the decade, the abuse of this authority for such blatantly selfish ends made the public increasingly critical of the AMA, perceiving it as a negative organization that was against everything.  The AMA had opposed aid to medical schools on the grounds that federal aid would lead to federal control.  The AMA had also helped kill disability insurance and had blocked measures to provide school health programs and medical care to veteran's dependents. People were especially outraged when the AMA paid the Reverend Dan Gilbert $3,000 to mail Protestant clergymen a letter calling national health insurance 'this monster of anti-Christ.'

"A lot of us laymen are fed to the teeth with the AMA's methods.  With its persistently negative approach to everything.  With its unvarying misrepresentation of the efforts other countries are making to solve the problem.  With its "crusade" and its "battle" and its vilification of the government, the public, and its own members who speak out." 

If this can happen to the AMA, can it not happen to the Republican Party?  Clearly they have borrowed from this history in their distortion and misrepresentation of health reform with their references to non-existent death panels, charges of a government take-over of healthcare, and threats of Armageddon.  

They voted unanimously to oppose passage of the Patient Protection and Affordable Care Act, when even the American Medical Association had endorsed the legislation.  In addition, Republicans have worked to obstruct the extension of unemployment benefits for those most affected by the Great Recession, they have voted almost unanimously to oppose the fiscal stimulus bill that is helping to end the Great Recession, they oppose climate change legislation which can help us end our dependence on Middle Eastern oil, and they seem poised to oppose the financial regulatory reform that is required to reduce the chances of the Great Recession occurring again.

And is all this occurring because Republicans, who inherited budget surpluses in 2001, then passed trillions of dollars of unfunded tax cuts, an unfunded Medicare prescription drug benefit, two off-budget wars in Afghanistan and Iraq, and passed on a trillion dollar annual deficit in 2009,  have suddenly gotten fiscal discipline?  Or is it, as Jim DeMint (R-SC) said about Republican opposition to health reform, "If we are able to stop Obama on this, it will be his Waterloo.  It will break him."

At what point will the Party of No, or as they like to brag, the Party of Hell No, simply be seen for what it has become -- a persistently negative organization that is against everything for brazenly selfish ends?  Once in awhile, people vote against a candidate or a cause. More often, people want to vote for a candidate or cause.  Branding themselves as the Party of Hell No, and doing so for the primary purpose of regaining power, no matter the consequences to the country, does not seem like a winning political strategy to me.

Health Industry Supports Health Reform

A recently completed survey of healthcare opinion leaders undertaken by Commonwealth Fund and Modern Healthcare, which you can find here, shows broad support for key provisions of the Patient Protection and Affordable Care Act recently signed into law.  

Nearly nine of 10 leaders in health care and health care policy believe the comprehensive health reform legislation passed by Congress and signed into law by President Obama will successfully expand access to affordable health insurance coverage, the latest Commonwealth Fund/Modern Healthcare Health Care Opinion Leaders Survey finds. Virtually all of the key features of the health reform law—including income-related subsidies, new insurance market rules, and innovative payment methods—are supported by an overwhelming majority of opinion leaders.

Rescission Case #2

In this case, involving Blue Shield of California and Steven Hailey, a health insurance rescission was upheld by court review.  The case demonstrates the desperation of those who cannot find health coverage because of pre-existing health conditions, and the personal and societal impact that comes from allowing small group and individual health plans to exclude coverage for pre-existing conditions.  As I've written when asking "Should Health Insurance Be Sold For Profit?", the enforcement of pre-existing condition exclusions is mostly limited to the small group and individual health insurance market.  It doesn't happen in government run health plans like Medicare, Medicaid, CHAMPUS or the VA, nor does it happen in large group health plans.

In this case, Mr. Hailey, who had been covered through his wife's small group health insurance policy for nearly seven years, was badly injured in an auto accident.  While recovering at home, and facing medical and hospital bills of more than $450,000, of which Blue Shield had already paid $104,000, Blue Shield rescinded Mr. Hailey's coverage, because his wife had understated his weight on his application for insurance by some 45 pounds, and had omitted important parts of his medical history, dating to childhood, that would have been grounds for the insurer to decline coverage initially.

Eight years after the auto accident and rescission decision by Blue Shield, Orange County Superior Court Judge Peter J. Polos ruled in favor of Blue Shield on every issue, finding that the Hailey's willfully omitted and willfully mis-represented information on their application for insurance, and that Blue Shield's rescission investigation was timely and its investigation procedures were reasonable.  Mr. Hailey had many "health issues," as reported here.  These included heart problems, shortness of breath, acid reflux, obesity, swallowing difficulties and he took several prescription drugs for these problems, which would have caused Blue Shield to decline coverage for Mr. Hailey had these conditions been disclosed.  

What of the societal impact?  Mr. Hailey's problems will be covered with no questions asked by Medicare if he lives to age 65.  If the Hailey's were poor enough to quality for Medicaid, his problems would be covered.  If Mr. or Mrs. Hailey worked for a large employer, his problems would be covered.  It is only because Mr. Hailey is self-employed, and Mrs. Hailey works for a small business that underwriting of Mr. Hailey's health occurs, and an intrusive health insurance application must be completed to obtain health insurance coverage.  To its credit, Blue Shield is reported here, to have offered an alternative policy, with a different premium (likely a higher premium for less coverage) that would have provided coverage from the beginning.  There is no word as to whether Hailey purchased such coverage.  If he did not, or could not afford such coverage, or if he did buy the coverage, but it left him with large deductible, co-pay and coinsurance obligations, it is not unreasonable to expect that his medical debts will be discharged through bankruptcy, and these costs will be spread among those of us who have health insurance.  

What of the personal impact?  Blue Shield garnished the wages of Mrs. Hailey to recover the $104,000 that it had paid out, and the Hailey's were left with half a million dollars worth of health expenses.  Because of the rescission, Mr. Hailey's health was adversely affected.  Because he waited so long for surgery to repair an injured urethra, his bladder stopped working, and he had to depend on an implanted catheter to drain urine into a bag strapped to his body.

Blue Shield of California's news release, issued on May 28, 2009, concludes:

While we are very pleased with today's victory, we acknowledge that the healthcare system needs to be reformed. We will continue our longstanding advocacy of universal health coverage regardless of pre-existing conditions because we believe everyone has a right to quality health care.

Once the Patient Protection and Affordable Care Act has become fully effective, we will see the end of tragic stories like this one involving the Haileys and Blue Shield.

Tear Down This Sign

A Florida urologist comes very close to breaking his Hippocratic Oath and to abandoning his patients who supported President Obama over Senator McCain, in 2008. 

The modern Hippocratic Oath requires a physician to respect his patient's privacy.  Since how a patient voted two years ago is unrelated to the patient's need for health care, asking a patient for information that is not needed in their treatment seems, to me, to violate this obligation.  The Hippocratic Oath also obligates the physician to prevent disease, since prevention is preferable to cure.  Since the Patient Protection and Affordable Care Act requires coverage for preventive services, it is not unreasonable to assume that it may provide benefits to this physician's patients -- preventive care benefits that have long been recognized as important by physicians who have taken the Hippocratic Oath.

"I'm not turning anybody away — that would be unethical," Dr. Jack Cassell, 56, a Mount Dora urologist and a registered Republican opposed to the health plan, told the Orlando Sentinel on Thursday. "But if they read the sign and turn the other way, so be it."

Patient “abandonment” is a legal term developed primarily in medical malpractice litigation. According to the case of Lee v Dewbre, abandonment is defined as “the unilateral severance of the professional relationship between [the physician] and the patient without reasonable notice at a time when there is still the necessity of continuing medical attention.”

If I saw this sign on the office door of a physician who was providing care to me, I would feel as if my professional relationship with that physician had been unilaterally severed, with no notice.   As attorney James W. Saxton writes here:

Patient discharge has serious implications. If done incorrectly, the patient can make a claim of abandonment. An abandonment claim means leaving a patient without appropriate care or guidance while the physician-patient relationship exists. An abandonment claim has serious implications since there could further be a claim of unprofessional conduct and the Bureau of Professional and Occupational Affairs could become involved. Further, a lawsuit could be instituted. The claim of abandonment could lead to a claim for punitive damages not insured in the Commonwealth of Pennsylvania. When a discharge occurs patients can also be bitter and consider other possible bases for a professional liability claim.

I strongly advise:  Dr. Cassell, tear down this sign! 

Rescission Case #1

Health reform is now the law of the land.  One of the most despised practices of the health insurance industry will no longer be legal as this law is implemented:  rescission.  Rescission is the insurance industry practice of cancelling coverage when a beneficiary files a significant claim, if the insurer can find an error or omission in the insured's application, even when it is unrelated to the problem for which the beneficiary needs health services.  Having health insurance to cover significant claims is why we pay for insurance coverage in the first place.

Every individual and small group health insurer has its underwriting department review applications for insurance before granting coverage.  They look for reasons to deny coverage.  Pre-existing conditions, like heart disease, diabetes or cancer are immediate red flags.  But, if an insurance policy is issued, rescission gives the insurer another chance to avoid paying a significant claim.  When a beneficiary presents a significant claim, or is diagnosed with a condition that will generate significant claims over time, many carriers ask their rescission departments to review applications to see if there were any errors or omissions, previously overlooked by underwriting, that could be the basis for rescinding the policy, and avoiding a large claim payout.  These departments will compare the application against medical records which applicant's are often required to provide as part of the insurance application process, looking for a lab result, a physician's note, test result or physical finding that differs from the application.

Health Net, Inc., one of our nation's largest health insurers, cancelled Patsy Bates' policy after she began treatment for breast cancer.

Bates, 51, said the first notice she had that something was awry with her coverage came while she was in the hospital preparing for lump-removal surgery. She said an administrator came to her room and told her the surgery, scheduled for early the next day, had been canceled because the hospital learned she had insurance problems. Health Net allowed the surgery to go forward only after Bates' daughter authorized the insurance company to charge three months of premiums in advance to her debit card, Bates alleged. Her coverage was canceled after she began post-surgical chemotherapy threatments.

The reason for the rescission?  Health Net alleged that her application for health insurance indicated her weight was 35 pounds less than it actually was, and that she had been screened for heart damage due to taking the diet drug combination known as fen-phen.  Nothing in the story indicates the fen-phen drug combination caused any heart damage, only that she was screened for it.  There is no allegation on the part of Health Net that either her weight or heart screening in any way contributed to or caused her breast cancer, although obesity is a known risk factor for breast cancer.

Her application for insurance was completed by the insurance agent who stopped by her beauty salon, and promised her he could saver her money on health insurance.  He asked her questions while she styled a customer's hair.  She is not certain that he asked her every question on the application, and given that the insurance agent earns a commission of as much as 10 percent of premium, it is in the agent's interest to complete applications in a way that will pass underwriting, so it's not impossible to believe that an unscrupulous agent would have shaved a few pounds off her stated weight, or decided that since her heart screening may have been negative, there was no need to report it.  Over my years of working with the health industry, the underwriting department is known by the sales and marketing staff as the "business prevention unit," because underwriting turns down applications the agent thought were solid.  When underwriting declines an application, the agent earns no commission. 

This case is made more egregious by the finding that Health Net set goals for the rescission unit for the number of policies they cancelled, and provided bonuses to underwriters who exceeded their goals.  The Los Angeles Times found this:

Woodland Hills-based Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed.

And what of the beneficiary/patient?  Ms. Bates chemotherapy was delayed for four months because Health Net had terminated her coverage.  Eventually a program for charity care covered her treatment -- a program which collected no insurance premiums from her.  Meanwhile, the company which had collected health premiums for at least six months, declined coverage when the patient desperately needed it.  Three years later, Ms. Bates was still uninsured, now with a pre-existing condition -- a breast cancer diagnosis -- far worse than being overweight. 

The Patient Protection and Affordable Care Act will help Americans like Patsy Bates.  It will also help the rest of us who know not when we would have been in a situation like that of Ms. Bates.

The rest of the story can be found here.  Health Net was ordered by a private arbitration judge to pay Ms. Bates $9 million.

Calling Health Net's actions "egregious," Judge Sam Cianchetti, a retired Los Angeles County Superior Court judge, ruled that the company broke state laws and acted in bad faith.

"Health Net was primarily concerned with and considered its own financial interests and gave little, if any, consideration and concern for the interests of the insured," Cianchetti wrote in a 21-page ruling.

Sadly, Health Net will undoubtedly pass the cost of this judgement, less any reimbursement they may have received from their own errors and omissions insurance policy, along to policy holders in the form of higher health insurance premiums. Policyholders will pay for the outrageous behavior of their health insurer.