Band-Aids don’t stop the bleeding

Gov. Schwarzenegger sat down and talked to real people yesterday about their experiences with the insurance industry. (Click the link to read a transcript of his press conference with California consumers.) Two people were considered “uninsureable.”

Another young couple had to file for for bankruptcy after they incurred a $150,000 debt in the two-month window that they had been between jobs and uninsured.

Here is their story, in Mrs. O’Hagan’s words:

“We had always depended on my husband for the insurance; I worked for a
small company, I didn’t have insurance with them. So he was changing jobs,
and we were given the typical 60-day period before your benefits kicked in, and
our benefits were due to start on July 1st.

And it was like the middle of June, and he started having some stomach
pains. We put off going to the doctor, trying to make it to that July 1st
date. And he had to go to the emergency room, ultimately. His
appendix had ruptured, resulting in an appendectomy, and then he also had a
second surgery because there were so many complications.

He was in the hospital for 19 days. And when we got out, finally
home, recovery, the next month we received bills totaling to over $150,000 from
the hospitals, the physicians, and all the other bills that come along with
that.

We were kind of dumbfounded; we didn’t know what to do. So we
started with some of the help, the county-level, state and federal. And
after all of that, we basically over-qualified. Both of us were working
full-time, making roughly like $50,000 together, and we do have a small
child. We just kind of felt helpless, and we ended up struggling for about
6 months to kind of beat it.

And in January of ‘06 we filed for bankruptcy. All of our medical
debt was cleared, but we just felt that we under-qualified for paying for it,
and we were over-qualified for getting assistance. We just kind of fell
between the cracks, and I wouldn’t wish it upon anyone.

The O’Hagan’s combined income puts them — in wonk-speak — at about 300% of poverty. As Mrs. O’Hagan said, they couldn’t qualify for anything. With child care costs of $1,120 a month, and rent (then in Antelope, a suburb of Sacramento) there was less than $1,000 left afterward for food, gas and other life necessities. They decided to take a chance, in the intervening 2 months, rather than spend the extra $400 a month for COBRA.

Gov. Schwarzenegger was very sympathetic to the O’Hagan’s plight. As an advocate, I was happy to seem him balance out his week of health care discussions by talking with real consumers who are affected by the convoluted rules and regulations in the industry.

But I want to point out a couple of things.

  1. The governor’s current proposal would not help the O’Hagans. Mrs. O’Hagan’s company is still too small and would be exempt from the employer mandate. And there is nothing in the governor’s current plan that would compel Mr. O’Hagan’s employer (a nationwide bank chain) to begin providing insurance right away. They would still make too much to benefit from the subsidized insurance pool, yet, would have been required to pay for coverage.
  2. Gov. Schwarzenegger was asked to respond to criticism that high-deductible plans (which he has established as the minimum amount of coverage) would leave consumers — like the O’Hagans no better off.

In short, the governor said a $5,000 bill is a heck of a lot better than a $150,000 bill.

It’s true, $5,000 is a much smaller number. A couple points, though. High-deductible plans often have loopholes. The $5,000 deductible is a consumer’s liability on “qualified” medical expenditures. I have spoken to many consumers who have discovered that not all of their hospital bills were covered. The reasons are many. Certain tests weren’t approved. They were taken (by ambulance and no fault of their own) to an out-of-network ER, they needed special equipment because of a special condition and that ended up not getting covered (you get the picture).

Secondly, even if all the expenses are “qualified,” you don’t stop paying after the $5,000 deductible. High Deductible plans typically require co-insurance (20% to 30% of the procedure) after the deductible is met.

I do want to give the governor credit, here, for capping a family’s TOTAL ANNUAL out-of-pocket liability at $10,000.

But in truth, if you step into the shoes of a family — like the O’Hagan’s — with the combined income of $50,000 — could you really afford to even pay off the debt of $10,000?

For families, even $10,000 could be enough to tip them into bankruptcy.

Health Access California promotes quality, affordable health care for all Californians.

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