Recession can be fatal for those too poor for insurance

by Lesley Politi on April 20, 2009

Recession can be fatal for those too poor for insurance

By Cathleen Decker
April 12, 2009

Those looking for good news last week were not drawn to the subject of healthcare.

The Los Angeles County public health system reported that it was facing enormous budget deficits that are expected to balloon to $1.2 billion annually by 2011. Additional reporting in The Times showed that patients, having lost health insurance or under other financial threat, are putting off doctor visits meant to keep medical conditions from spiraling out of control.

In short, both the public healthcare system and the private system are feeling the effects of the recession, which has lofted the state’s unemployment rate to the highest level in 25 years, decimated housing prices and retirement savings and shot fear through the ranks of the jobless and the still-employed alike.

Add to it this missive from state Insurance Commissioner Steve Poizner, who last week implored Californians not to drop their legally required car insurance as they ponder how to make ends meet. Poizner called attention to a low-cost auto insurance program available to eligible good drivers.

Taken together, it was hard to miss: As the government’s safety net has frayed dramatically under the weight of record levels of applicants for food stamps, unemployment and other assistance, the private safety net that is supposed to provide a soft landing in hard times is wearing away as well.

A survey this year by the Insurance Research Council, an industry study group, found that in 2007, an estimated 18% of California drivers were uninsured, and it said that it expected “a sharp rise” in that category because of the foundering economy. The survey said that as the unemployment rate goes up a point, the uninsured rate climbs by almost as much.

Given that the unemployment rate has risen by almost five points since 2007, it would mean that close to one in four California drivers now lacks insurance. That puts the uninsured in legal jeopardy and raises the prospect that insured drivers will increasingly be involved in accidents with the uninsured.

Insurance industry officials were, along with Poizner, strongly recommending that Californians find some other way of saving money.

“Penny-wise decisions may become pound foolish in the future,” said Pete DeMarco, corporate relations manager in California for Allstate. He said the company would recommend that its 1,200 independent brokers work with their clients to keep them in the system.

“There are far too many examples of people who thought they were saving money and ultimately found themselves in a much worse financial position,” he said.

Having a car accident is, by definition, a matter of chance. So it is the frailties of the healthcare system that most potently underscore the fiscal realities for some: They are forgoing visits to the doctor for illnesses they know will get worse without proper care.

Asthma, diabetes, heart disease — all, untended, escalate in danger.

“We know that people will actually die as a result of this downturn,” said Dr. Andrew P. Wilper, an internal medicine physician who last year published a study that determined 25% of uninsured adults had chronic illnesses that were not well-managed. “People will die.”

Wilper works at a Veterans Administration facility in Boise, Idaho, where, he said, patients who once had private insurance are turning up, uninsured, to claim their veterans’ benefits. As with car insurance, he said that for every one-point hike in the unemployment rate comes a one-point jump in the uninsured rate.

Wilper and other physicians said that for many patients, the government assistance thus far has been limited. COBRA, the program under which group insurance can be continued after a job dismissal, was extended to allow much longer coverage. But it is still “prohibitively expensive,” Wilper said, particularly for those who are unemployed.

Other programs for the economically stressed, like food stamps and unemployment payments, are no doubt helpful for those who qualify but don’t translate into money spent on illnesses.

“That’s not money that they are inclined to spend on health care,” said Dr. Howard R. Krauss, president of the Los Angeles County Medical Assn. “They’re inclined to spend it on food and rent.”

Krauss says that, down the road, these problems will affect everyone, those jobless and those still hanging on or, happily, succeeding. Chronic illnesses will end up in emergency rooms, where they will compete with everything else at a time when emergency rooms are already reeling from unpaid bills and a shrinking numbers of hospitals.

“Later this year it’s likely to create increased demand on emergency services,” Krauss said, adding, “We have a contracting emergency care network right around the time we’re about to need their help.”

Recessions force people into tough decisions, economists say, and perhaps only the size of this one has made the choices wrenchingly obvious. It is all very familiar to Stephen Levy, director of the Center for the Continuing Study of the California Economy.

“Poor people are always hard hit,” he said. “What’s new is that it is broader.”


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