Let Health Insurance Be Insurance

Let Health Insurance Be Insurance

One of the many flaws with our current health care system is that, too often, health insurance coverage fails people precisely when they need it the most. It’s as if your car insurance has been paying the cost for your oil changes for years, but won’t pay the costs to fix your car following a major accident.

A disturbing example of this failure currently impacts patients living with end-stage renal disease (ESRD), or kidney failure. More than 660,000 people in the U.S. are living with ESRD. It is a devastating condition that would be fatal without regular dialysis.

Patients who cannot receive their dialysis at home, need to spend an average of four hours at a dialysis center, three times a week. While life sustaining, the treatments are debilitating, time consuming, and can make living a normal life, including holding down a job, all but impossible. According to the American Kidney Fund, over 70 percent of dialysis patients, most of whom suffer from multiple disease conditions, are too sick to work full-time.

Beyond the impact on their health and quality of life, ESRD also creates financial hardships. The average income of ESRD patients is less than $20,000 a year, which is well below the median household income of $59,039. While ESRD patients are poorer than average (in part due to their inability to work), their medical costs are overwhelming. Their out-of-pocket health care costs are estimated to be more than $7,000 a year according to the American Kidney Fund.

The costs for insurers are even greater due to the high costs for dialysis treatments and the high rate of hospitalizations —the average annual total cost of care, per patient, is around $89,000. Due to the seriousness and costs of the disease, ESRD patients are eligible for Medicare, even if they are under the age of 65. Medicare alone spends $34 billion a year treating patients with ESRD. Including private payers, Medicaid, and patient out-of-pocket expenditures, total U.S. health care expenditures related to ESRD are around $42 billion a year.

It is easy to see how, given these realities, patients who have private insurance may need assistance paying their insurance premiums. Without it, many people suffering from ESRD would not be able afford their current health insurance coverage and would thus be transitioned to Medicare coverage.

For some people, coverage by Medicare may be their preferred option. For others, particularly patients who may have had a health insurance plan through their employer that they value, their preferred option may be to keep their current health insurance. For these patients, there are assistance programs available to help them afford their premiums and keep the insurance coverage they believe best suits their needs.

But, this is where the current health insurance system fails to be insurance. Currently, insurance companies are trying to cancel, and in some cases are successfully canceling, coverage for ESRD patients if they receive premium assistance that helps them cover the costs of their insurance policies.

While it would seem logical that who pays the premium on behalf of the patient should be of no concern to insurance companies, or politicians in Washington D.C., due to the distorted U.S. health care system, it does matter.

Since Medicare’s reimbursement rates are significantly lower (on a per patient basis) relative to private payers, proponents of the current policy claim that the alleged purpose of the premium assistance programs is to divert patients from the less expensive Medicare coverage to the more expensive private coverage to the benefit of the providers who then earn higher revenues. Therefore, the hope is that prohibiting assistance programs will move patients from private coverage to Medicare and, consequently, reduce overall health care expenditures.

Of course, such a perspective is completely backward. The purpose of assistance programs is to empower patients, and give patients control over what type of coverage best fits their needs as they manage a very difficult disease. And, it is the patient, of course, who should be driving the coverage decisions.

Toward this end, bipartisan members of Congress are pushing to eliminate the insurance industry-created rules that are currently preventing dialysis patients from getting aid from industry-supported charities. If implemented, this reform would be an important step that would help put patients back in control of their own health care decisions.

More broadly, policies that empower patients are the exact types of reforms that the U.S. health care system needs. Such reforms are the best way to improve health outcomes and make the health care system more affordable.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.