America's Looming Health Care Disaster

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America's Looming Health Care Disaster

Rising Unemployment Threatens Health Care of Even Those Who Keep Their

Jobs By DAN CHILDS, ABC News Medical Unit

Nov. 24, 2008— Last year at this time, health coverage may well have

been among the last things on Terri Rushing's mind.

Her husband, , was 55 years old and working for Champion Homes in

McKenzie, Tenn. It was a job he had held for nearly a decade and a

half. He had a good Blue Cross and Blue Shield health care plan

through his employer, and it was also affordable. Terri Rushing said

that she and her husband paid less than $200 in premiums each month.

" We never worried because we always had insurance, " she said. " My

husband has worked all of his life. We've always had health care;

we've never had to worry about not having it. "

But on Feb. 7, everything changed. Rushing said her husband went to

work as usual, only to find that state troopers blocked his way. The

factory had burned to the ground. And with the loss of the plant came

the loss of the job Rushing had worked for the past 14 years.

It is a story that is becoming more common as the country weathers the

worst economic downturn in decades. And health policy experts say it

may not be long before all Americans feel the impact of what is

shaping up to be a national health care disaster.

Today, Terri Rushing's job as an office worker affords her a

catastrophic health coverage plan that only kicks in once she is

hospitalized. Rushing, an insulin-dependent diabetic, was able

to maintain his health coverage through the health program known as

COBRA. But even though it covers only him, the plan costs nearly $400

per month -- twice what they were paying before.

As difficult as the situation is, eligibility for the COBRA program

expires after 18 months.

" The COBRA is just going to last until the first of September of next

year, " she said. " After that, we have no way to pay. "

The only way for the family to enjoy the same health coverage they had

before would be for Rushing to find another job that offers

similar health coverage benefits as his old position. But now at age

56, and living in a community with two other major plant closings in

recent months, 's job prospects are grim.

Terri Rushing has started to shop around for health plans she and her

husband can afford.

" I did call several plans when we found out that we were going to

start paying for COBRA, basically because we could not afford coverage

for both of us, " she said. " I was told over and over again that we

couldn't qualify. "

And she has encountered little sympathy. In one conversation with a

health insurance company she contacted, she explained to the customer

service representative her difficult situation.

" I asked him, 'So, basically, what you're telling me is that we have a

choice between having a house payment and having health insurance.'

And he says, 'It sounds like you have a problem.'

" That's it. That's all. "

No Longer an Isolated Story

While the number of Americans in a situation like the Rushings' grows,

solutions remain elusive.

" There is a huge, looming problem about what to do with people who are

unemployed, " said Dr. Nash, dean of the Jefferson School of

Health Policy and Population Health in Philadelphia. " The short

answer, regretfully, is that there is no good answer for these people. "

According to the Bureau of Labor Statistics of the U.S. Department of

Labor, the unemployment rate rose to 6.5 percent in October, with the

number of unemployed people increasing to 10.1 million. Since last

year, unemployment rolls have increased by 2.8 million.

And more bad news arrived last week: the number of newly laid-off

workers is officially at a 16-year high.

As these workers face the loss of their employer-provided health

insurance, about 1 in 5 looks to COBRA (an acronym for the

Consolidated Omnibus Budget Reconciliation Act of 1986) for help.

Through COBRA, a laid-off worker can maintain the same insurance

coverage he or she had through their previous employer, but at a cost.

Specifically, they must pay the portion of their premiums that they

had been responsible for, plus the portion that their employers

previously paid -- as well as an extra 2 percent of this combined premium.

The increases are a bitter pill to swallow for someone who has just

lost a job and likely has less money to spread around. And the small

relief provided is only temporary. Those who cannot find another

option within 18 months face a new scramble for coverage once this

window expires.

" Unfortunately, the COBRA legislation guarantees laid-off workers the

right to continue coverage at their own expense, but does not make

that coverage affordable, " said Dr. Himmelstein, associate

professor of medicine at Harvard Medical School and co-founder of

Physicians for a National Health Program.

" Under COBRA, health insurers may charge higher premiums to sick

individuals, so anyone with a chronic condition who really needs

insurance will face astronomical premiums, " he added. " As a result,

the vast majority are likely to become uninsured quite quickly. "

" The cost for coverage, coupled with no or substantially reduced

[income], may force additional steps to secure cash flow, including

mortgage leveraging, credit card and family borrowing, to the extent

it is even available, " said Jay Wolfson, associate vice president of

Health Law, Policy and Safety at the University of South Florida. " And

then, without new employment -- perhaps even before COBRA expires --

there is no reservoir for cash, and the cascade of additional economic

difficulties may create a deadly flood. "

Uwe Reinhardt, professor of economics and public affairs at Princeton

University, has studied the U.S. health care system for the past two

decades. He agreed that if the economic picture gets much worse, many

families could be heading for disaster.

" If this recession gets any deeper and lasts several years, many

Americans may lose whatever savings they have, should they or their

family members get sick, " Reinhardt said.

Will Everyone Be Caught in the Collapse?

But the problems may not be limited to the growing ranks of

unemployed. Nash said that even if you have a secure job with a good

health care plan, there is still reason to worry. The massive uptick

in job losses, he said, are setting into motion a domino effect within

the health care system.

The first domino falls when those who lose their jobs seek assistance

through COBRA. If they can afford it, they will remain under their old

policy and still pay premiums. But if they cannot, they will join the

ranks of the uninsured.

For every person who becomes uninsured, health insurance companies

lose revenue from monthly premiums. The situation worsens 18 months

later, when those who opted for COBRA but have not yet been able to

find a new employer-based plan, become ineligible for coverage. The

insurance companies will take yet another hit.

" Insurance carriers, even the not-for-profit Blue Cross plans, are

going to suffer mightily as layoffs accrue, " Nash noted.

And this hit from lost revenue gets passed on to employers, who, in

turn, pass it on to existing policyholders.

" Many employers have faced double-digit increases in the costs of

their share of health benefits this year, and that is going to

continue, " Wolfson said. " In response, many employers elect to shift

or eliminate cost burdens associated with health benefits to employees. "

Nash calls this additional cost burden on the average family

" catastrophic. "

" The average family of four with private health insurance in the U.S.

already spends $10,000 a year [for health insurance coverage], " he

said. " That's in addition to what their employers provide. ... It's

staggering. "

For such a family, an increase in premiums or a decrease in employer

support could mean thousands of dollars more per year -- even if none

of the wage earners in the family suffer a layoff.

For the health industry, the outlook may be even bleaker, at least in

the short term. Nash said the signs of the U.S. medical system's

imminent catastrophe are already being seen. Along with postponement

and cancellation of elective surgeries and an increase in bad medical

debt, more people are experiencing decreased access to medical

services. Likewise, more people are unable to afford their medication.

Unpaid health care bills are the single leading cause of personal

bankruptcy in the United States. A surge in this statistic, combined

with unemployment and bad medical debt, could be enough to capsize

some major players in the health care industry, Nash said -- an

industry that contributes 17 percent of the country's GDP.

" Nobody ever thought of this toxic byproduct of health insurance being

tied to the work place, " Nash said. " This is a really dreadful

knockout punch that you are not hearing anybody in positions of

authority talk about.

" Very soon you can predict that the American Hospital Association will

be at the White House looking for the same kind of handouts that we're

giving the auto industry. "

'There Is Not a Silver Lining'

Most health policy experts said that, while the future of the American

health care system remains uncertain, what is clear is that a change

is needed.

" As someone who grew up in Germany and lived for some years in Canada

and got used to portable, life-cycle health insurance, I have always

been amazed that Americans preferred the ephemeral health insurance

that comes with the job at a particular firm and is lost with losing

that job. " Reinhardt said. " Now, the foolishness of that preference is

becoming clear to many middle-class Americans who spent their life

denigrating 'government' health insurance.

" ly, I find it hard to muster much sympathy for people who are

waking up only now. "

" There is not a silver lining, " Nash said. " What's coming home to

roost here is the historical accident of having private health care

insurance tied to the place of employment. There is no way out if it

is tied to the source of where you work. "

Some options still exist for those who need health care coverage, but

still need to make ends meet after a layoff.

" One is a high-deductible plan, or a limited-benefits plan, " said

Merrill s, executive director of the andria, Va.-based

Council for Affordable Health Insurance. " In addition, there are

what's known as 'bridge' or 'gap' policies. These are very easy to

get, with usually only one page to fill out and they will cover you

immediately, assuming you don't have AIDS or a life-threatening heart

condition. "

" To be very clear: these aren't comprehensive policies, " he added.

" But they can be a good option for someone with limited means who

needs some coverage. "

Nash said families should also plan to see health care spending

encroach into other areas of the family budget.

" I would urge families to have an emergency health care cash fund

available, and I would tell them to think very carefully about what

they're spending for Christmas, " he said. " I know retailers don't want

to hear that, but 18 months from now, there are people who are going

to regret very much that Christmas spending. "

But for some, like the Rushings, frugal living proved to be no sanctuary.

" We don't live extravagantly, " Terri Rushing said. " We have a

three-bedroom, two-bath house. We don't drive fancy cars; we drive

older cars. "

Now, she and her husband have used the money in his 401(k) to keep up

with their costs of living. received his second to last

unemployment check Thursday.

" As far as surviving, we're looking at the possibility of losing our

home, " Terri Rushing said. " It just feels like our lives have been

turned upside down and put in a paper bag, and now we're waiting for

someone to come by and shake us out. "

Her advice for others who find themselves on the brink of a personal

health care disaster is brief.

" Expect nothing. Prepare for everything. And pray, " she said.

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