The other AIDS crisis; who pays for the treatment?

• Author: Waldman, Steven

The Other AIDS Crisis

Early in 1984 a 29-year-old resident of Paterson, New Jersey learned he had AIDS. As a result of the illness he lost his job, and with it his health insurance. Shocked and depressed, he secluded himself in his apartment for several weeks, emerging to discover he had lost his opportunity to take advantage of the automatic conversion clause that would have changed his group health plan to an individual plan. No private insurance company would sell him a new policy because of his disease. So he threw himself into the government "safety net.' He qualified for Social Security disability insurance, but those benefits were delayed for five months. Meanwhile, he spent all of his savings on utilities, rent, and food. Family and friends helped tide him over. Eventually, the disability checks began coming--$480 a month. That covered most living expenses, but left no money to pay for expensive chemotherapy. So he skipped some of the treatments.

Next, he turned to the government's special medical assistance programs. Medicare offers a special program for the disabled, but he learned that it also has a rather macabre catch-22: you have to wait two years before becoming eligible. Most AIDS victims don't survive two years after their diagnosis. Medicaid, designed to help the poor, seemed a better bet. But, he found to his disbelief, his $480 disability payment made him too wealthy to be eligible for Medicaid. In New Jersey, the Medicaid income cutoff is $356. All else having failed, he moved to New York City, where the eligibility laws are more lenient.

This AIDS patient discovered that the disease that battered his body's natural defense system is also straining the health care system that is supposed to protect the ill. Calling the maze of public and private facilities and programs in this country a health care "system' is actually a bit of a misnomer. Unlike most industrialized countries, the United States has no one coherent health care network but a mix of several disconnected systems that are supposed to meet everyone's medical needs. We assume that for-profit and nonprofit insurance industries, with the support of employers, will help most Americans pay for medical care by reimbursing health care providers. In certain cases, when people are too poor to afford proper health care, the local and federal governments are supposed to fill the gap by providing financial assistance and inexpensive public facilities, spreading costs throughout society.

But in practice, our health care system works more like a misdesigned jigsaw puzzle in which the pieces don't fit. About 50 million Americans under age 65, or close to one-fourth of that population, are inadequately covered by private insurance, Medicaid, or Medicare. Many receive no coverage at all. While no one knows how many AIDS patients forgo treatment because they can't afford it, studies have shown that roughly one million Americans have had at least one family member who was refused treatment for some illness because of prohibitive costs. And as the AIDS crisis demonstrates, when two major components--the federal government and private insurers--flinch at high costs, the burden shifts to local public hospitals that are hindered by woefully inadequate funding and poor municipal planning.

Expensive killers

Fifteen thousand people have contracted AIDS. The U.S. Center for Disease Control (CDC) estimates it costs $147,000 to treat an AIDS patient, or almost $1.5 billion nationwide for the first 10,000 patients. If, starting today, the virus did not attack a single additional person, there would still be approximately 100,000 new patients diagnosed within the next five years. That's $30 billion in new health care costs. Some estimate several hundred thousand new AIDS victims with costs conceivably reaching $70 billion in that period. Even if the numbers are inflated, there can be no doubt that the impact will be devastating to major cities such as New York, San Francisco, Los Angeles, Miami, and Newark, where half of the victims are concentrated.

For the same reason that AIDS is a cruel killer, it is an especially expensive one. When the immune system is taken out of the battle early on, medicine must pick up where the body's natural defenses have failed. Complications are the norm, and patients often need constant monitoring. Treatments such as chemotherapy are expensive, and doctors must often use specialized equipment. The average daily cost of treating AIDS patients is about 60 to 70 percent higher than that of other hospitalized patients, according to officials in New York City. High costs are compounded by unusually lengthy hospital stays-- an average of 35 to 50 days per year in New York compared to average stays of seven days for other illnesses.

With such a huge financial crisis looming, what has our national government done to prepare? The Reagan administration has sponsored research and public education but has generally avoided the issue of who is going to pay for AIDS treatment. Instead, the administration has casually assumed that the private sector, states, and cities, will come to the rescue.

Unfortunately, the private sector, in this case the insurance industry, will pay only a modest portion of the cost of AIDS treatment. In San Francisco and New York City, private insurance companies currently pay about 40 percent of all hospital costs and only 13 percent of the costs for patients in public hospitals. The role...