Friday, August 21, 2009

Nataline Sarkisyan and private insurance "death panels"

 title=AP/AR is is business shorthand for "accounts payable / accounts receivable". In theory, as long as AR > AP on the corporate ledger, a company is profitable and satisfies the needs of its stakeholders (business partners, customers, vendors, employees, and stockholders). So, most large companies employ teams of individuals who manage corporate risk. Guidelines and protocols are established to enable these teams to make decisions on when it makes economic sense to spend money, approve projects, and invest in research and development.

It's all about risk management. Keep this in mind as you read further — because you are a risk, not a client — to your healthcare, life, auto, and homeowners insurance providers.

Many Americans were outraged in Dec., 2007 by the case of 17 year old Nataline Sarkisyan. The short story, for those who may need their memories refreshed:

Ms. Sarkysian had leukemia, and was admitted to a California hospital for a bone marrow transplant. As is possible with such procedures, there were complications, and her kidneys and liver failed. Her brother donated a kidney. She was ready for a liver transplant (a relatively routine procedure in this day and age), but even though hers had failed, her family's insurance company would not approve the procedure by claiming it was "experimental". In other words, a bean counter at Cigna made the decision that since they had already shelled out a lot of cash for the bone marrow and kidney transplant, that the cost of a liver transplant and followup care was just too high.

The bean counter at Cigna effectively sentenced Nataline Sarkisyan to death. Even after Cigna reversed course following a public outcry, it was too late. Ms. Sarkisyan passed away the evening that Cigna finally agreed to cover her procedure.

So, what was the value of Nataline's life to the risk managers at Cigna? I did about two minutes worth of research, and found the following:


According to the United Network for Organ Sharing (UNOS), estimated charges for liver transplantation are:

   Estimated First-Year Charge: $314,600
   Estimated Annual Follow-up Charge: $21,900

To Cigna, the cost of Nataline's transplant was like buying a Nintendo Wii. When you buy a Wii, it's not so much the initial investment in the game machine, but the ongoing followup costs in purchasing games and other hardware add-ons. The risk managers at Cigna who made the decisions in Nataline's case weren't so much looking at the cost of the initial transplantation procedure, but the annual cost of followup care and medication.

Nataline was 17 years old. The average lifespan of a woman in America is 79.1 years. So, rounding off, for actuarial purposes she had the potential to live another 62 years. In effect, the costs of the transplant and her first year care ($314,000) were chump change to Cigna. Plus, there were already "sunk costs" - business jargon for payouts already made for her prior procedures. So what was the value of Nataline's life to Cigna?

The cost of her followup care for the next (projected) 62 years: $1,302,000.

When I first heard the story of Cigna's denial of coverage for Nataline, two thoughts entered my mind. Why doesn't the hospital just do the damn procedure, then sort out the financial details afterwards? The second thing: where are the screaming hoards that descended upon Terri Schiavo's deathbed in Florida back in March of 2005? Wasn't Nataline's life just as important? Wasn't Cigna (in effect) removing her feeding tube by denying coverage?

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