Develop plans for government and private industry to provide affordable insurance against the catastrophic costs of long illnesses, President Reagan ordered his secretary of health and human services, Dr. Otis R. Bowen, in his State of the Union message. It was a tacit admission that despite the billions the government spends on medical care, millions of people still aren`t protected financially from devastating health problems.
A patient with Alzheimer`s disease easily can need far more medical and nursing care than Medicare provides or an elderly spouse can pay for. Young parents of a baby with severe birth defects can run up hospital bills far beyond their insurance coverage or earning abilities. Self-employed and unemployed people often have difficulty affording enough health insurance to pay for major or chronic medical problems. Catastrophic illness now is the major cause of personal bankruptcy.
The elderly, in particular, need protection and help with medical costs beyond what Medicare now covers. Complaints that hospitals are forcing elderly patients out before they are well enough are growing, as the DRG (diagnosis-related groups) system of payment is fully implemented. Medicare now pays hospitals a fixed fee for treating each patient, based on average costs for the diagnosed ailment.
DRG fees are supposed to average out for hospitals, with some patients needing more care and others less. But patients, families and physicians`
groups say some hospitals are telling the elderly ill that ”your DRG has run out” or ”your Medicare days are up” and discharging them too soon, with unhealthy and occasionally fatal consequences.
In drafting its insurance plan for catastrophic illness, the Reagan administration can benefit from several cautionary examples. It will have to guard against creating incentives for physicians and hospitals to overtreat patients–one reason medical costs have been driven so high. It must not build in temptations to undertreat, as the DRG system does. It must calculate costs and demand factors realistically–a major problem with the federal government`s kidney dialysis program, which now costs more than $2 billion a year.
A sound insurance plan somehow must avoid adding to the forces that still push health care costs up at annual rates far exceeding inflation. And it must be affordable–by the government, which faces painful Gramm-Rudman budget cuts, and by everyone else involved in paying medical bills.
The solution probably will have to be found in increasing deductibles and copayments, shifting the funds into catastrophic coverage. This will be a hardship for many patients, especially the elderly, whose share of hospital charges has doubled since 1981 and increased tenfold since 1966 and who now pay an average of 15 percent of their income for health care. But most of them may consider the catastrophic coverage worth it.
