Financing Medical Care

People with HIV infection report that among their biggest worries are the problems of financing medical care. Unfortunately, many of their worries are justified. Although the average medical bill for the care of HIV infection is no greater than the average bill for most other serious medical conditions, people with HIV infection should be prepared for expensive medical care.

The average cost of medical care for HIV infection was about $15,000 per year in 1995 and is still about the same in 2006, even when cost is adjusted for inflation. Where those costs are, though, has shifted dramatically. The major cost in 1995 was hospital care; the major cost in 2006, and for the foreseeable future, is at the pharmacy. The average cost of HAART is $10,000 to $15,000 per year.

One factor that greatly affects the cost of HIV care is the stage of the disease. The stage of the disease means the CD4 cell count and its impact on the need for antiretroviral drugs and for hospitalization. The costs of HIV care are modest in the early stages when the CD4 cell count is above 350 and antiretroviral drugs are not necessary: the only costs at this stage are for office visits and laboratory tests. During the second stage, when antiretroviral drugs become necessary but HIV is not caus­ing any of its complications, the costs are primarily for the pharmacy. The most expensive stage of the disease is the late stage, when the CD4 cell count is below 50 or 100 and HIV-related complications require hos­pitalization. The costs are especially high when the complications cause long-term disability, requiring substantial time in hospitals and chronic care facilities. In addition, many people in the late stages have intoler­ance or resistance problems with antiretroviral drugs and need increas­ingly complex drug regimens with many and newer drugs. The newer drugs always cost more, and the combined cost for HIV drugs alone can double.

The second factor that increases the cost of care is the presence of any conditions other than HIV infection. The co-occurring condition that’s particularly important is hepatitis C infection, which has its own costs; it also can indicate substance abuse, which carries substantial costs as well.

The mechanisms for financing medical care in the United States are phenomenally complicated and full of jargon. People finance their med­ical care either by themselves (called self-pay), or through private insur­ance, or through publicly funded state and federal programs. Private in­surance and public programs are together called third-party payers. Most people finance their care through a combination of self-pay and third-party payers.

Private third-party payers include commercial insurance compa­nies, managed care organizations or health maintenance organizations (HMOs), and the nonprofit conglomerate that is Blue Cross/Blue Shield. The main public third-party payers include Medicare, Medicaid, and the Veterans Administration. Medicare accounts for 17 percent of the fi­nancing for all health care in the United States; Medicaid for 10 percent; other government agencies for 14 percent; private insurance for 31 per­cent; self-pay for 25 percent; and private sponsors for 3 percent. An es­timated nearly 46 million Americans are uninsured.

Several aspects of financing medical care are unique to HIV infec­tion:

1. Federal spending accounts for most HIV care. This totaled about $5.5 billion in 2000, divided as follows: Medicaid (federal share is about 60 percent of the total), $2.1 billion; Medicare, $1.5 billion; Ryan White Care Act, $1.4 billion; and VA care, $0.4 billion.

2. Medicaid is the third-party payer for 14 percent of Americans and about 53 percent of those with AIDS. The reason is that this disease has, in recent years, moved more and more into disfranchised popu­lations, including drug users, racial minorities, and the impoverished.

3. Medicare accounts for an increasing number of AIDS patients be­cause many more are now surviving the twenty-nine months re­quired to qualify for disability.

4. The Ryan White Care Act has created a safety net for all people with HIV infection who are impoverished and uninsured. The act covers the lion’s share of outpatient care and outpatient medications for these people.

5. Most nonfederal third-party payers will not reimburse the full range of services commonly required for people with HIV infection; services that are reimbursed insufficiently or not reimbursed at all include home care, long-term care facilities, hospice care, and pre­scription drugs.

For more on paying for drugs, see chapter 8.

The following sections go into what may strike you as tiresome de­tail about financing medical care. But the more you know about what is standard or required or forbidden, the better you will be able to control your options for financing care.

Private, Third-Party Payers for Financing Health Care

All private, third-party payers—managed care organizations or health maintenance organizations (HMOs), Blue Cross/Blue Shield, and com­mercial insurance companies—offer two kinds of plans for financing medical care: group plans and individual plans. Group plans are offered by the third-party payer to an employer, and then by the employer to the employees. Individual plans are offered by the third party directly to the individual.

Group plans. Blue Cross/Blue Shield, managed care organizations or HMOs, and a large number of commercial insurance companies all sell group plans to employers. Commercial insurance companies are often national businesses that offer similar group plans to all employers throughout the country. Blue Cross/Blue Shield is a group of 77 not-for- profit, regional insurers who offer different group plans in each of their different regions. Managed care organizations or HMOs, whose rules for group plans are different from those of commercial companies and Blue Cross/Blue Shield, are discussed below.

Group plans held by companies with large numbers of employees usually do not require you to have a medical examination or to submit your medical records. Anyone with HIV infection currently working for a large company with a group plan will be covered by that plan. Smaller companies, however, are more likely to have group plans that require the employers to answer health questions about their employees.

If you are hired for a new job in a large company, the group insur­ance will often have a rule about preexisting conditions. To rule out peo­ple who take out insurance only when they become sick (called having a preexisting condition—see below, under “Individual Plans”), insur­ance companies sometimes enforce a waiting period—usually a matter of months—between the time of application and the time coverage be­gins. If you are hired for a new job and you have been diagnosed with HIV infection, the insurance company will usually wait for the period set by the preexisting conditions rule before covering you. This rule ap­plies to all preexisting conditions.

Blue Cross/Blue Shield, which has a group plan offered by many em­ployers, does not usually transfer from one employer to another. Each employer negotiates its own individual contract with the local Blue Cross/ Blue Shield company. If you transfer from one employer to another, preexisting condition rules will now apply under the second employer’s policy.

The insurer (whether a commercial insurance company or Blue Cross/Blue Shield) always sets limits on what the group plan covers. One of the limits is that group plans generally cover only some fraction of your medical expenses. They often cover around 80 percent of hospital expenses and about 60 percent of physicians’ expenses. In addition, most of the Blue Cross/Blue Shield group plans also cover home health care, the majority also cover hospice care, and about 30 percent also cover prescription drugs.

That part of the medical bill left over after the insurer has paid its fraction is called your co-pay.

A second limit on what group plans cover is that they will pay only for what they consider to be the customary charge for a service. For ex­ample, an office visit may be billed at $50, the customary charge (based on area charges by physicians for comparable services) may be $40, and the coverage may be 80 percent of the customary charge, or $32; so your co-pay for this bill will be $18. Customary charges can vary from place to place.

A third limit is not so much a limit as an incentive: some plans from Blue Cross/Blue Shield provide you financial incentives to choose spe­cific “participating physicians” or Preferred Provider Organizations (PPOs). In other words, certain physicians or groups of physicians agree to lower their fees, thereby also reducing the cost to you. In general, however, the group plans offered by both commercial insurance com­panies and Blue Cross/Blue Shield allow you considerable freedom of choice: you can choose your own physician and hospital.

A fourth limit: most group plans limit—or cap—total lifetime pay­ments at $1 million or $2 million.

A fifth limit is on prescription drugs. Most plans require a co­payment. Many have a ceiling on coverage; if the ceiling is $3,000 per year, this will cover about three months’ worth of the drugs commonly needed for HAART.

Most insurers periodically renew their policies with employers. Most policies are conditionally renewable, meaning that insurers can refuse an employer’s request to renew the policy only if the insurer re­fuses to renew all similar policies in that state.

In spite of the limits, being enrolled in a group plan through your place of employment is obviously desirable. Because group plans spread coverage over many people, many of whom make few insurance claims, insurers can afford to cover you without requiring that you give evidence of insurability (see below, under “Uninsurability”).

Managed care organizations or HMOs also offer group plans. These organizations provide comprehensive services for a fixed, prepaid fee. In other words, when you join a group plan offered by the organization, you pay a flat, fixed fee for all your health care bills, regardless of how much health care you actually get. The good news about the organiza­tions is that they finance nearly all medical care. In particular, Kaiser, the largest HMO in the United States, provides a comprehensive program of services for people with HIV infection.

The bad news about the organizations is that, unlike commercial in­surance companies and Blue Cross/Blue Shield, these organizations al­low little choice in physicians or hospitals. Because competition among the organizations for employer contracts is fierce, costs must be kept low. Consequently, the organization must carefully regulate hospital ad­missions, expensive drugs, and expensive procedures and must pre­approve any consultation or procedure done outside the resources of the organization. If your physician refers you to a specialist outside your or­ganization, for instance, the organization may rigorously review the re­ferral and often deny payment. As a result, many participants lack con­fidence in the quality of the health care providers and are disappointed in the range of services the organization provides. Do not be persuaded by organizations’ advertisements that emphasize the services offered; in practice, many organizations choose saving money over offering ser­vices.

You can find out the details of group plans by reading the policy or by talking to the claims and benefits office of the insurer that offers the policy. For details about group plans offered by managed care organi­zations or HMOs, often the best source of information is the other peo­ple who use the organization, especially those whose health care needs are complicated.

Continuing group plans if you can’t work. A person who has been cov­ered previously under a group plan but who can no longer work, may have the option of continuing in the group plan for eighteen months un­der the Consolidated Omnibus Budget Reconciliation Act of 1985 (CO­BRA). Under COBRA, the former employee would pay a premium that is 102 percent of the premium previously paid by the employer—the ex­tra 2 percent is for administrative fees. Some states will pay these pre­miums for you, to delay Medicaid coverage (see below). Requirements for coverage under COBRA are as follows: COBRA applies only to busi­nesses with twenty or more employees; the former employee must pay the premiums; the former employee must be ineligible for Medicare (see below); the employer must continue the group plan for continuing em­ployees; and the former employee cannot join another plan.

People who are eligible for Social Security disability benefits (see below, under “Help with Income and Medical Bills”) when employ­ment ends may obtain eleven months of additional coverage (for a to­tal of twenty-nine months) with the same insurer, although the pre­mium may now be 150 percent for the additional eleven months. And some states have programs that extend COBRA for people with HIV infection.

People who are not eligible for COBRA because they worked for a company with fewer than twenty employees may still be protected under the Continuation of Comprehensive Benefits laws in thirty-five states; the duration of coverage of the employer’s group policy varies with different states, and ranges from three to eighteen months.

The alternative to COBRA, if COBRA is not available or if it runs out, is a conversion policy: the former employee converts the group pol­icy to a type of individual policy. Conversion policies cover less than group plans and cost more. Thirty-five states require employers to offer conversion policies to former employees when COBRA benefits run out. Premium rates tend to be high, since most people who buy conversion policies are in poor health. Nevertheless, the person with a serious dis­ease might have few other options, and conversion policies are available regardless of health status or preexisting conditions. The remaining option is an individual plan, which costs even more than a conversion policy.

Individual plans. Individual plans are offered by third-party payers di­rectly to individuals. About 15 million Americans have individual plans; approximately 10 million of them have individual plans with commer­cial companies, 4 million with Blue Cross/Blue Shield, and 1 million with managed care organizations or HMOs.

Individual plans offer four basic kinds of policies: major medical policies, hospital-surgical policies, hospital indemnity policies, and dread disease policies. The best coverage is under major medical poli­cies: they typically pay for hospital care, physicians’ fees, laboratory tests, drugs, ambulance services, and skilled nursing facilities. Hospital- surgical policies pay for hospital and surgical services only. Hospital in­demnity policies pay a fixed amount only while a person is hospitalized. Since a typical amount paid is $75 a day, and since the average hospital charge per day is ten times higher, hospital indemnity policies are re­garded as a rip-off. Dread disease policies will generally not provide cov­erage for people who already have the dread disease.

Individual plans have different requirements for eligibility, cover dif­ferent services, and reimburse at different rates than group plans. Gen­erally, an insurer will cover some percentage of your medical costs if you continue to meet certain conditions: if you pay your premiums; if you have not reached some (usually extremely high) upper limit or cap on expenses; if you ask the company to pay for only those items they con­tracted to pay for; and if you do not seem to pose to them an unaccept­ably high risk.

For commercial insurance companies and Blue Cross/Blue Shield, risks are classified as standard, for which the insurer will supply stan­dard coverage at the usual rates, or substandard, for which the insurer will supply coverage at increased rates or will exclude coverage for some medical conditions; if the insurer considers the risk excessive, the appli­cation will be denied, and the insurer will supply no coverage (see “Unin­surability,” below). For managed care organizations or HMOs, risks are either acceptable or unacceptable: that is, the organizations will either accept you at the usual rate or they will deny your application. For in­surers, virtually all people with HIV infection, cancer, coronary artery disease, and diabetes pose unacceptably high risks.

To assess the risk you pose, all private, third-party payers (that is, all private insurers) use similar mechanisms. You must fill out an appli­cation, which includes a health questionnaire. Nearly all health ques­tionnaires include questions about HIV infection: for example, Have you ever had AIDS or tested positive for HIV infection? Other questions may ask whether you have or ever had symptoms of HIV infection. Still other questions may be about drug abuse, age, and occupation: these questions are triggers for the insurer to scrutinize the application further. Questions about sexual orientation are also triggers, despite the fact that such questions violate the guidelines of the National Association of In­surance Commissioners.

When you apply for an individual plan, the insurer will request your medical records. Everyone applying for individual insurance must authorize the insurer to request medical records. The insurer might also request a statement, called an Attending Physician Statement, from your physician. Your medical records must be complete, includ­ing HIV status. Withholding or falsifying any information on a med­ical record is grounds for the insurer to deny payment and cancel the policy. Most insurers also require the applicant to take a medical ex­amination.

Whether an insurer can require you to take an HIV antibody test is still a matter of legal argument. Some insurers require HIV antibody tests for all applicants for individual plans; most will require the tests if the answers on your health questionnaire merit the test. California and Washington, D.C., have banned HIV antibody testing for insurance pur­poses but allow insurers to use CD4 counts instead.

What insurers want to rule out with all these questions and tests and checks is what they call a preexisting condition. A preexisting condition is defined by the National Association of Insurance Commissioners as “the existence of symptoms which would cause an ordinarily prudent person to seek diagnosis, care, or treatment,” or as “a condition for which medical advice or treatment was recommended by a physician or received from a physician within a five-year period preceding the effec­tive date of coverage.” In short, a preexisting condition is a medical con­dition for which you have received advice or treatment (assuming you are an ordinarily prudent person) from a physician within the last five years. Some insurers will accept an applicant with certain preexisting conditions as a substandard risk; others will deny the application for the same condition.

To be certain the applicant does not have a preexisting condition that has escaped everyone’s notice, insurers usually enforce a waiting pe­riod—usually a matter of months—between the time of application and the time coverage begins. If, during the waiting period, the applicant shows no evidence of a preexisting condition, the company will accept the application and will pay eligible medical benefits. If you develop AIDS well after you enrolled in an individual plan with the insurer, that company is ethically obligated not to drop you. The company could, however, legally contest that obligation.

The bottom line: An asymptomatic person with a positive HIV blood test does not fit the definition of having a preexisting condition. Insurers nevertheless will often deny the applications for individual plans from people with HIV infection. Some of these denials have been contested in court.

Note that the preexisting condition rule affects people who apply for individual plans with a new insurer. For this reason, people with HIV infection who have a long-time plan with an insurer are often advised to stay with that insurer.

You can find out the details of individual plans by reading your pol­icy or by talking to your insurance agent.

Uninsurability. About 8 percent of the applicants for individual plans are denied. Those whose applications are denied include virtually all people with HIV infection, cancer, coronary artery disease, and dia­betes. This and other health-related information obtained by insurers is recorded in the Medical Information Bureau in Boston, an insurance in­dustry clearinghouse. Most people with preexisting conditions will find their access to individual insurance coverage limited unless that cover­age comes through what is called an exclusion rider or unless they pay extremely high premiums.

People unable to purchase insurance because of preexisting condi­tions may have access to high-risk pool insurance at inflated prices. Pool policies are provided in twenty-three states. Requirements for eligibility include residency in the state for at least six months and a notice from an insurance company of rejection, of a high-risk rate, or of an exclu­sion rider. Problems with the pool policies are that only twenty-three states carry them, that waiting lists are long, and that premiums are high. Information about pool policies can be obtained from state insurance departments.

Another option is the open enrollment policies periodically available in some Blue Cross/Blue Shield plans in thirteen states. Open enrollment means that any applicant, including anyone with HIV infection, is granted insurance regardless of health status. Not surprisingly, the pre­miums are higher, the waiting period for preexisting conditions is longer, and some preexisting conditions have limits on their coverage.

Public Programs for Financing Health Care

Help with financing health care is offered by both state and federal gov­ernments. One kind of help, called Medicaid, is available to those who are indigent; that is, people who are unable to support themselves. The other kind of help with finances is called Medicare. Medicare is an add­on to Social Security benefits. Therefore, if you are over 65 years old, or are disabled by Social Security standards, and if you are eligible for So­cial Security benefits, you should qualify for Medicare.

Medicaid. Medicaid is a combination of state and federal programs for medical care of those who are indigent. Both state and federal govern­ments therefore dictate the requirements for eligibility and for benefits. Medicaid is the major third-party payer for people with HIV infection. Whether you qualify as indigent, what services are available, and what services will be reimbursed, all vary from state to state. Most state Med­icaid programs are moving toward requiring that all members belong to a managed care organization or HMO. The purpose of the requirement is to control costs of publicly funded health care. The benefits covered are variable, especially the benefits for mental health care, dental care, long term care, hospice care, substance abuse treatment.

The definition of indigence is, in general, stringent. It ranges from an income that is 23 percent of the poverty level in South Dakota to one that is 97 percent of the poverty level in California; in thirty-four states, the definition is 50 percent of the poverty level. In other words, if the poverty level is around $7,000 per year for one person, then most states will find you eligible for Medicaid if your income is $3,500 per year or less. Some states have a definition of indigence with a higher income level for people with AIDS; that is, people with AIDS can qualify for finan­cial help from public funds and still be relatively able to support them­selves. Some states also have definitions of indigence that are substan­tially higher for women who are pregnant and for children.

In defining indigence, Medicaid also considers resources you have other than income. To be considered indigent, you may have liquid as­sets (for instance, a savings account), a car, a house, or other property only if their values are below a certain level. What that level is differs in different states.

Medicaid pays for most medical necessities but pays relatively little for each one, especially for physicians’ fees. Depending on the state, it may pay for inpatient services, outpatient services, and time-limited skilled nursing home services. In some states, Medicaid also pays for home health care, private nursing, and drugs. Some states pay for as few as fourteen days of hospital care; some states have no limit. Some have special programs for people with HIV infection. Professional fees such as physicians’ bills are usually reimbursed at only a small fraction of the physicians’ customary charges. As a result, unfortunately, many physi­cians do not accept patients who are on Medicaid. Home care, hospital care, and chronic care are also reimbursed at low rates, and some facil­ities will reject Medicaid patients on similar grounds.

Medicaid restricts payment to drugs that the FDA has approved and sometimes pays only for conditions the drug is specifically approved for. In the case of protease inhibitors, many state Medicaid programs cover all protease inhibitors that are FDA approved. Some state Medicaid pro­grams will cover only some of these drugs. This means that if a clinical trial shows a drug is useful, Medicaid will not pay for the drug until the FDA has approved it. If the FDA has approved the drug but has not ap­proved it specifically for a certain condition, Medicaid may deny pay­ment until the drug is approved for this condition.

Requiring that recipients join managed care organizations will have a profound impact on HIV care: 53 percent of people with AIDS receive Medicaid, and the reimbursement rate will be a small fraction of the health care costs. The reason for the low reimbursement is the lack of any adjustment of rates for people with AIDS—obviously a high-cost population. This means that most AIDS care units in the United States will have substantial financial losses if they care for people who receive Medicaid.

Medicare. Medicare, unlike Medicaid, is funded entirely by the federal government. The various eligibility requirements and services do not vary from state to state but are uniform over the whole country.

Medicare is primarily for the aged, but it is also for the disabled and those with severe kidney disease. To receive Medicare, you must have contributed to Social Security, but you need not be indigent. Most of the people with HIV infection who are eligible for Medicare are over 65 years old or are disabled. You receive Medicare after applying for Social Security Disability Income (see below, “Help with Income and Medical Bills”). After you apply, Medicare enforces a waiting period of a total of twenty-nine months. During these twenty-nine months, you may also qualify for Medicaid, depending on your income and illness; if so, you will usually but not always lose Medicaid when Medicare finally kicks in.

Medicare pays for hospitalization and physicians at rates that com­pare with the rates of private third-party payers; it asks you to co-pay for these services. It pays little for long-term care: it will pay for 100 days a year in a skilled nursing facility (see chapter 7). After the 100 days, you must self-pay or spend down until you are eligible for Medicaid.

As of January 2006, Medicare cooperates with pharmacies and in­surance companies to pay for drugs. A prescription drug plan is avail­able to anyone with Medicare. Different plans with different pharma­cies cover different drugs, offer different discounts, and require different monthly premiums. You sign up for the plan that best meets your needs. More information is online at www.cms.hhs.gov/partnerships/.

Veterans Administration (VA). About 30 million Americans are veter­ans and are potentially eligible for care through the Veterans Adminis­tration, or VA. The VA hospital system is the largest health care system in the United States: it has 171 acute care hospitals, 133 of which are af­filiated with medical schools.

Eligibility for the services of a VA hospital includes having spent time in the armed services, plus having a disability connected with that service or an income below the poverty level—for the VA, poverty level is around $18,000 for a couple. Eligibility for HIV services includes only having spent time in the armed services and having an honorable dis­charge. HIV infection does not have to be service-connected.

The VA provides a comprehensive program of services, including hospital care, outpatient care, and medications. The VA does not require any co-pay.

The budget for the VA has not kept pace with the rising costs of med­ical care, so the VA has made a rigorous effort to reduce costs. The re­sult is a corresponding reduction in services. The best quality of care is provided in the VA hospitals affiliated with medical schools, though most of this care is supervised by medical residents.

Some VA hospitals have comprehensive programs for people with HIV infection. Like most health care, the availability of resources and expertise varies in different locations.