Any Healthcare Exclusion for Condition or Care Option is Failed Reform

Pres. Obama used his prime-time press conference last night to dive straight into the fray on healthcare reform, pledging commitment to bold action, demanding cost-cutting measures and promising to bring affordable coverage within reach of all Americans. He did not specify if he wanted an “individual mandate” that all Americans buy into one plan or another, and he did not promise that no insurer would be allowed to deny treatment under any circumstances.

But since we’re talking tough and being straightforward about what constitutes success and failure, it must be said: any amount of leeway for insurers to deny coverage or to limit treatment options will be a failure for the healthcare reform movement. Insurers are not substitutes for doctors and hospitals; they are insurance companies and payment systems, and that is all they should be involved in: they should have to survive without the market being rigged through allowances for denial of coverage and denial of care.

Allowance for exclusions based on chronic conditions, pre-existing conditions, or conditions that are costly to treat, will be a continuation of the status quo and will lead directly to patient deaths. Allowance for exclusions also allows the insurance industry to continue collecting huge sums of money for what is essentially a misleading business proposition: the money is taken in by what claims to be an insurance company, that will cover health costs when they arise, then the costs are ignored, vastly underpaid, perhaps up to 95% underpaid.

In many cases, the company with which the patient has entered into a good faith contractual relationship launches an expensive effort, organized by a full-time legal staff, oriented toward denying the patient coverage or even specific courses of needed treatment. The only way health insurance firms will return to behaving like insurance firms responsible for paying for people’s healthcare, is if they are barred from excluding any conditions or any methods of care.

In fact, if we are really going to talk tough, insurance firms and the bureaucrats within them who are part of this, should be charged with criminal impersonation of physicians for every case where they give medical advice to patients they have not personally examined. Doctors who make remote judgments on care, while on an insurer’s payroll, with the specific intent of saving that company cash in the short term, should be held liable for medical errors that result from the altered course of treatment they propose.

In the year 2006, 22,000 people died because they were denied treatment due to lack of healthcare coverage. If we add to those people all those who died after being denied treatment because their paid insurer refused to pay, or who received deliberate undertreatment in a persistent or haphazard way, due to insufficient coverage or lack of coverage, or died from the medical errors resulting from such inconsistent care, we find between 44,000 and 299,000 dying per year.*

We now have 13% more uninsured in the US, fully 52 million people. There may be millions more in immigrant communities and the unofficial labor market. But working from the 52 million figure, we have 68 people losing their lives, on average, every day, because they are denied treatment due to lack of coverage.

The figures relating to deaths from chronic undertreatment, mismatch of non-treatment with inadequate treatment and resulting errors, would now be 49,720 and 337,870. That means that anywhere between 68 and 926 people are dying every day, due to the systemic failure and moral corruption of our current system, which leaves 17% of the population with no access to care. That many people will continue to die, every day, due to the inadequacies of the current system, if reform is not achieved and a new model brought into effect. If that new model allows for coverage exclusions based on condition or treatment option, it will continue to produce that kind of needless and unconscionable deaths.

The insurance industry has tended to argue that without such exclusions, they cannot derive enough profit from the insurance game to make it worth their while. But, they want the private-sector insurance game to be the only game in town. Or do they. This year, we have seen a dramatic shift in attitude from private insurers and their lobby organizations.

Some are eager to see comprehensive healthcare reform, even if it pushes costs down for patients, even if it involves a “public option”. The reason: the insurers can’t actually produce the needed solutions by way of their current business model, but their current business model is failing and will not be sustainable if the needed solutions are not achieved. Therefore, legislation to achieve comprehensive reform is needed, more than ever, and a public option might be able to get closer to universal coverage, which would make the entire industry more sustainable.

The entire US healthcare industry is subject to intense market distortions, due to the fact of 52 million people carrying no healthcare coverage whatsoever. Costs are so extreme that without high-efficiency insurance coverage (meaning cheap to buy, but which pays out huge amounts to cover health costs) no one but the wealthiest in our society can actually afford the most advanced treatments, including life-saving surgeries and prolonged cancer treatments.

The fact remains that as a matter of economic theory, the insurance business only works when the largest possible pool of people is involved. In healthcare, where every last person has a need, the pool has to be 100% of the market, or costs will be pushed up by the need to deal with “uncompensated care”—emergency treatment which must be provided to those with no way to pay for it.

Price distortions are now as out of control as they are, because no major effort to bring everyone into the system has been successful, putting the dream of optimum pricing levels far beyond the reach of anyone in the healthcare sector. Surgeons may charge over $10,000 for a procedure and receive a minuscule payment of $400 from the insurer.

A dermatologist may perform a skin procedure for $270 and receive only a $12 check from the insurer, despite signed agreements with the insurer for a fee more than 12 times the amount paid. The insurer in those cases has begun to tell the doctor, get it from your patient, we’ve done our part. It is increasingly apparent that such anecdotal reports are indicative of a broad industry trend and that such a trend is in turn indicative of the deep and worsening unsustainability of customary profit-projections for insurers.

Market pressures demand that they continue to meet forecasts and expand their profit base, but recession, layoffs and skyrocketing costs mean their pool of insured patients is shrinking, a phenomenon whose ill effects are exacerbated by the fact that often only the sickest stay insured.

So, the fix: insurers must have something comprehensive imposed on the marketplace in which they operate, to justify the kind of fundamental cash-flow alterations and refined expectations they must bring in, if they are to make their businesses viable. They need to have a lower profit-per-client model, but ideally will be able to expand their customer base, the pool of patients they insure, because 52 million more people will be part of the insurance market, one way or another.

In order to make the necessary adjustments, to be truly health insurance companies, to perform as their clients expect, to compete in a market where health insurance is about taking in from each patient less than you are obliged to pay out—this is the unique high-risk model that makes insurance what it is—and where treatments and conditions are not excluded from coverage, private insurers need to be jolted into adaptive mode, made to compete, made to begin to operate in a way where exclusions are seen as contrary to the entire purpose of their business, and a potential cause for massive jury verdicts, not a convenient cost-cutting measure.

Human life must matter in this reform. It must matter more than cost; it must matter more than the bottom line of any one firm. Because if it doesn’t, the right reforms will not be introduced, and the insurance market will continue to be beyond the reach of tens of millions of Americans. And if that occurs, if even 5% of the population (15.45 million people) remain uninsured, needless deaths, escalating costs, mass bankruptcies (of patients, doctors and hospitals) and the chronic threat of collapse will continue to haunt the entire system.

* The first figure (22,000) is from the Urban Institute, while the second set of figures (ranging from 44,000 to 299,000) is derived from a confluence of other studies relating to chronic undertreatment, non-treatment, medical errors and misjudgments relating to insurance industry advice on treatment.

More on comprehensive healthcare reform in the United States:

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Originally published July 24, 2009, at

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