Society Pays for AIDS : The Cost of Compassion Is Soaring

One day in 1985, a middle-aged, working-class Los Angeles couple received a troubling telephone call. Their 23-year-old son had admitted himself to the Los Angeles County-USC Medical Center. The couple hurried over and in a span of five minutes absorbed the three hardest truths of their lives: Your son has AIDS. Your son is homosexual. Your son is going to die.

In the next year--the young man’s last year--the couple devoted themselves to their son. Nothing else mattered, certainly not money. The mother quit her job to act as nurse; the father took a month’s leave as death neared. In the end, the family was emotionally shattered and financially drained--even though the public, through federal, state and local taxes, paid the vast majority of medical expenses, totaling about $70,000.

Cold Reality

With each case of AIDS, or acquired immune deficiency syndrome, the human misery is underscored by the cold reality of medical bills. Those who become ill and their families typically suffer the greatest financial hardship. But ultimately, all of society stands to pay--through taxes, insurance premiums, increased medical costs and perhaps a decrease in public health services.

As the AIDS epidemic grows, the cost of compassion is going up. Only five years after doctors at UCLA first identified AIDS as a special new malady, the nation’s health care establishment is feeling woozy with its economic side-effects. At a time when hospital expenses already are at alarming levels and public health services are pinched by tight budgets, AIDS is emerging as a significant new cost column, creating anxiety among public health officials, hospital administrators, insurance executives and others.

AIDS has already infected more than 28,000 people in the United States, about half of whom have died. According to forecasts by the U.S. Public Health Service, the death toll will reach 179,000 by the end of 1991. About 145,000 AIDS sufferers will require treatment in 1991, with direct medical costs in that one year estimated between $8.5 billion and $16 billion. Another $2.3 billion is expected to be spent on non-personal medical costs related to AIDS, such as research, education and the screening of blood donors, pushing the low-end direct cost estimate to $10.8 billion. By comparison, the costs for the first 9,000 cases totaled $1.25 billion, an expense spread over five years.

A report for the federal Centers for Disease Control notes that if the $8.5 billion estimate for 1991 holds true, the cost of treating AIDS patients would rank along with that for auto accident victims. AIDS medical costs would likely surpass the costs of treating lung cancer, breast cancer and end-stage kidney disease.

“AIDS is a costly disease,” the report states, “and what aggravates the matter is that the patient population is concentrated in a relatively small number of metropolitan areas whose health care resources may become severely strained.”

Moreover, the federal estimates do not include the cost of caring for people afflicted with AIDS-Related Complex (ARC), the range of illnesses that are often a precursor to AIDS and sometimes fatal in their own right. Researchers commonly believe ARC cases to be at least as numerous but less costly than AIDS.

“Many ARC patients are as sick as AIDS patients from time to time,” said Kristine Gebbie, who heads the AIDS task force for the American Assn. of State and Territorial Health Officials. “There are far more of them, and they’re going to live longer. Some ARC patients use almost no resources but they all need a lot of the same psychological and social support. They will more than double the costs. So we end up with numbers all over the blackboard and our hands up in the air.”

‘Pure Guesswork’

The dollar costs for ARC will reach “easily” into the hundreds of millions, perhaps the billions, according to Anne C. Scitovsky, an economist for the Palo Alto Medical Research Foundation who prepared the CDC report on AIDS costs. However, she adds, there is such poor tracking of ARC that such estimates are “pure guesswork.”

The people who oversee the patchwork of public, private, nonprofit and profit-making entities that form the nation’s health system have discovered a morass of problems in the evolving economics of AIDS.

Among their findings:

- The cost of treating AIDS patients has varied greatly from one region to another. AIDS patients, subject to opportunistic infections, are typically hospitalized about three times before death. In San Francisco, the average length of hospital stay has been 12 days, compared to 17 days in Los Angeles and more than 25 in New York. The longer the stay, the higher the cost. Scitovsky estimated the national average of diagnosis-to-death medical costs at about $60,000 to $75,000 in 1984 dollars, but only about $45,000 in San Francisco. Part of the reason is the patient population--New York, for example, treats many intravenous drug abusers whose compounded health problems require longer hospitalization--and part is cost-cutting home-care services available in San Francisco.

- Insurance companies, which until recently had no reason to factor AIDS into their actuarial charts, have already paid out health claims totaling more than $200 million for AIDS and nervously anticipate that figure to reach into billions of dollars in a few years. The industry has thus pushed for laws that allow companies to identify and exclude people at risk of AIDS from health and life insurance. Many companies use blood tests to identify the presence of antibodies to the AIDS virus--a practice common in most states, but illegal in California. Gay activists allege that many firms have engaged in discriminatory practices against the gay male population by screening for “life-style” clues, such as an address in predominantly gay communities or a male who lists an unrelated male as a life insurance beneficiary. Similarly, some employers, wary that a worker who gets sick results in both a loss in production and higher insurance premiums, are testing prospective employees for AIDS antibodies and refusing to hire any who test positive. They include the U.S. military, the State Department and an Alabama newspaper, The Birmingham News.

- The combined federal-state Medicaid program (known as Medi-Cal in California) has paid about 23% of AIDS costs nationwide, according to officials at the federal Health Care Financing Administration. John Klemm, a HCFA actuary, estimates the federal-state Medicaid AIDS costs for 1986 at $200 million, or about .4% of the total Medicaid budget. Projecting from the federal estimates for spread of the disease, the agency anticipates Medicaid in 1991 will pay out between $1.8 billion to $3.6 billion for AIDS, accounting for 2.5% to 5% of the total Medicaid package. However, Klemm notes, the Medicaid load stands to increase to whatever degree that people who develop AIDS are shifted from insurance coverage. And though AIDS is covered by Medicaid, ARC is not; an expansion of guidelines would also increase the load. Meanwhile, AIDS also is a growing drain on federal Medicare, State Disability Insurance and Supplemental Security Income.

- Many private hospitals and nursing homes are shying from the epidemic. Some profit-making health firms are eyeing AIDS as a growth industry, such as American Medical International Inc., which recently opened the first AIDS-only hospital in Houston. But much more common are the hospitals and nursing homes that are reluctant to accept AIDS patients. Part of the reason is the bottom line. A 1985 survey by the Hospital Council of Southern California tracking 976 AIDS cases found that reimbursements through Medicaid, insurance and private payments were usually insufficient to cover costs incurred in caring for an AIDS patient. The difference--known as the “uncollectible”--was $5,214 per hospitalization, an amount that hospitals typically absorbed by raising prices for other services. And because Medicaid provides poorer reimbursement than insurance, the shift of patients from insurance to Medicaid could further discourage private hospitals from taking on AIDS patients. In addition, many hospitals fear the possibility of alienating employees and prospective patients because of the stigma associated with the disease and the unfounded fear that it can transmitted via casual contact.

- Major public hospitals such as the County-USC Medical Center, San Francisco General and Montefiore Hospital in the Bronx have thus shouldered a greatly disproportionate share of the AIDS burden, placing added strain on local taxes and services for the poor who are traditionally served by those facilities. The County-USC Medical Center is AIDS Central in Los Angeles, providing some service to one-third of all AIDS sufferers in the county. This de facto specialization on AIDS attracts more patients to major public hospitals, as do federally funded experimental drug programs administered at these facilities. Officials at San Francisco General Hospital say AIDS patients from throughout the country have come there for treatment.

Busy Outpatient Clinic

Signs of strain are already showing at the County-USC Medical Center in Los Angeles. Every week, scores of AIDS and ARC patients visit the center’s Room 5P21, a busy outpatient clinic getting busier by the day. Although the disease increases the health care needs of the community, the AIDS clinic was established without increased funding, but rather through a reallocation of the existing budget.

When the clinic opened in March, 1985, it was serving 202 clients. Today, the roster numbers more than 600--even though another 200 have died in the meantime. And on typical days, patients suffering AIDS and related illnesses occupy about 30 beds scattered throughout the 1,600-bed hospital.

Doctors and patients say the clinic has been a big step forward in the care of AIDS and ARC patients. But already, the epidemic is outpacing such progress. One year from now, the caseload is expected to number 1,200. The federal projections that show a tenfold increase in AIDS by the end of 1991 raise some obvious questions: Will Room 5P21 be expected to serve 6,000 outpatients? Will the medical center have to add and staff 300 beds just to care for AIDS patients?

“If we plan to deliver care to patients the same way we are now,” says Dr. Peter Heseltine, co-director of the medical center’s AIDS program, “the answer might be yes.”

Healthy Become Sickly

Exacerbating these financial concerns is the fact that most AIDS victims are in the prime of their working years--people whose taxes and insurance premiums have traditionally helped subsidize care for the sickly and poor. But with AIDS, the healthy become sickly and poor, and then die.

“We’re not talking about 200,000 people dying of cancer in their 80s,” says Dave Gooding, executive vice president of TransAmerica Occidental. “We’re talking about 200,000 people who are mostly in their 20s, 30s and 40s and otherwise would be living productive lives.”

In fact, the indirect cost of AIDS--the loss in production due to premature disability and death--is perhaps more dramatic than the direct medical expenses. Working with Scitovsky, UC San Francisco professor Dorothy Rice, a former director of the National Center for Health Statistics, estimated the so-called indirect “morbidity and mortality” costs for AIDS at $55.6 billion for 1991--some $45 billion higher than the estimate of direct cost.

Indirect Costs

Rice said AIDS represents about 2% of the nation’s total morbidity and mortality expenses in 1986, but will account for about 12% in 1991. By comparison, consider Rice’s analysis of total indirect costs by diagnostic categories for 1980: The top three were heart disease with 18.7% of the total, accidental deaths and injuries with 18.2% and cancer of all forms with 11.1%. In 1991, Rice said, AIDS could well surpass all forms of cancer in terms of morbidity and mortality costs.

Unless cures are developed, these indirect costs may be unavoidable. Heseltine and other medical authorities are more optimistic about the possibility of direct medical costs being reduced through the development of more efficient services.

Hoping that the low costs in San Francisco can be repeated, the U.S. Public Health Service in October announced awards totaling $15.2 million to fund AIDS home-care, hospice, case-management and counseling in the four areas hardest hit by the epidemic--New York, Los Angeles, San Francisco and Miami. The Los Angeles grant, won by a joint proposal by the county and nonprofit AIDS Project Los Angeles, totaled $2.3 million for three years. In a tandem effort, the philanthropic Robert Wood Johnson Foundation is in the process of awarding $17 million for similar programs. Most of the Johnson Foundation money is expected to fund efforts in 10 smaller cities, including Dallas, Seattle and Atlanta.

Despite these efforts, many health officials say that the problem dwarfs the expenditures.

“We’re still trying to catch up with the present,” explains Dr. Caswell Evans, chairman of the county health department’s AIDS task force. “We--the whole health care industry--are so busy with the current situation that the long-term planning that must occur and will occur is taking longer to come about.”

Steve Pieters is one of the AIDS outpatients served by the County-USC Medical Center. Every two weeks, the 34-year-old unpaid adjunct minister for the gay-oriented Metropolitan Community Church of North Hollywood goes in for a check-up. Sometimes he simply visits Room 5P21; other times he makes the rounds to the labs for blood tests, electrocardiograms and chest X-rays.

Pieters’ illness dates to the summer of 1982, when he developed a cold, a rash and swollen lymph glands. “I didn’t know what was happening,” he said. The gay community was just starting to comprehend the AIDS threat.

At the time, Pieters was a pastor in Hartford, Conn., with plans to move to California. After his resignation from his pulpit, the Blue Cross health plan that the church had taken out on Pieters was supposed to convert to an individual policy, with Pieters assuming the premiums. But after he moved, the church was slow in forwarding the insurance bills and Pieters neglected to contact Blue Cross. By then he had developed hepatitis. “When you’re that sick, you do only the things you feel are necessary to get through that day, like getting food. . . . I let it slide.” By the time the grace period had lapsed, Pieters’ poor health made him uninsureable.

AIDS Diagnosis

Soon doctors told Pieters that he had ARC. In April, 1984, doctors detected both a skin cancer called Kaposi’s sarcoma as well as cancer of the lymph glands. Pieters’ diagnosis was elevated to AIDS. “A nurse told me I wouldn’t live to see 1985,” he recalled.

The speed and particular pathway of AIDS varies greatly with each case. As AIDS sufferers go, Pieters’ health has been relatively good and his medical bills far below average. Early on, he says, a doctor did not charge him for office visits, and for several months, his parents helped support him and paid about $8,000 worth of medical bills. Pieters has since asked them to save their money for their later years. In 1985, he was selected to participate in the medical center’s tests of the experimental drug suramin. At first, the drug put Pieters’ cancers into remission and suppressed the AIDS virus. But then a potentially lethal side-effect emerged. The suramin program was scrapped. Pieters spent six days in the medical center, picking up the $750-a-day tab himself. Among the six patients in his test group, only Pieters and one other survive.

Too Wealthy for Medi-Cal

He applied for Medi-Cal, only to learn that, with about $50,000 in assets, he was too wealthy to qualify and must deplete his resources--or “spend down”--to $1,700 in assets to be eligible. So far, his total assets have dwindled to about $25,000.

Still, the taxpayers are picking up the cost of Pieters’ twice-monthly visits to Room 5P21. As a matter of policy to protect the public health, the AIDS clinic--like clinics for tuberculosis and sexually transmitted diseases--does not take payments from individuals, relying instead on reimbursements from “third-party payers” such as insurance and Medi-Cal. The county absorbs costs for Pieters and other patients not otherwise covered. “All I know,” Pieters says, “is I don’t have to pay for it.”

For many AIDS sufferers, the financial consequences are worse. The blue-collar couple who witnessed their son’s demise prefer to remain anonymous. The family--their son was an only child--immigrated from Latin America to Los Angeles on legal work visas in the mid-1970s. In an interview, the father said he held down two jobs, logging 60 to 70 hours a week, while his wife put in 40 hours a week in a factory along with the household chores. Proudly they watched their son mature into a bright college student destined for a professional career.

Family Paid $4,000

But following his diagnosis, the young man was hospitalized five times in all, three times at the County-USC Medical Center and twice at private, nonprofit hospitals. During the year, the family paid about $4,000 out of their own pocket for consultations with specialists, for ambulance expenses not covered by Medi-Cal, for some medications. The mother, in quitting her job, lost about $12,000 in income. The father’s monthlong leave cost $2,000 in pay, and in the meantime, he developed a heart ailment.

Atter their son’s death, the couple decided to return to their home country, and to bury their son’s body there as well. “There is really no reason to exist here anymore,” the man explained. The shipment and the burial cost $6,000. Although his wife has already returned, the man plans to remain in Los Angeles another four months. There is more than $10,000 in debts to be paid.

“I want to make good,” he said. “If I ever return, I would like to do so with my head high.”

If somebody develops AIDS in San Francisco, health authorities say, he will likely receive care that is as good as any in the world--and at the lowest cost.

The patient may also benefit from the services of The Shanti Project (pronounced shawn-tee ), a large, nonprofit group that provides AIDS sufferers with two volunteer “friends”--a counselor to provide moral support and advocacy with the bureaucracy, and another person to provide domestic help for those weakened by their illness. As the patient’s health deteriorates, he may return to the hospital or choose palliative hospice care in the home from Hospice of San Francisco, another nonprofit agency subsidized by the city. The Shanti Project even provides 10 low-rent homes for AIDS sufferers, two of which are staffed as hospice settings. Even in AIDS-conscious San Francisco, the location of all these homes are kept secret for fear of alienating neighbors.

‘Tremendous Savings’

“A terminal patient in a hospital setting costs about $850 a day, but a hospice nurse in the home might cost $150,” says Dr. Paul Volberding, director of the AIDS program at San Francisco General. “Right there you’re seeing tremendous savings.”

The Los Angeles Visiting Nurses Assn. now provides home care to about 60 AIDS patients on average. Its president, Sharon Grigsby, acknowledges that San Francisco’s delivery of services is more efficient than Los Angeles’.

“They’ve got, for lack of a better term, these half-way houses going where the patients congregate,” she says. “You could have two or three nurses take care of six or eight people. But L.A. has not been able to get that going.”

Grigsby says the sprawling geography of Los Angeles creates expenses that don’t exist in San Francisco. Similarly, an AIDS patient in New York getting over a bout with pneumonia may not be sent home in the middle of a New York winter.

Social, Political Climate

But many health officials and doctors suggest that the crucial difference is the social and political climate. By investing money early, they say, San Francisco has had better control of long-term costs.

Responding to the politically powerful gay community, San Francisco officials in November, 1982, committed $180,000 to AIDS education and prevention. In the subsequent years, San Francisco has dug into its own coffers for $31.6 million to fund hospital services, Shanti, Hospice and continued educational programs. These figures represent only local taxes--not state and federal contributions such as Medi-Cal.

At first, the AIDS epidemic did not move as swiftly in Los Angeles--although now the county has caught up and passed San Francisco in the number of cases. Los Angeles County supervisors, charged with public health responsibilities, did not directly earmark county dollars for AIDS until 1985. In two years, the county has devoted a total $7.3 million of its own money to AIDS.

Many medical authorities criticize the supervisors’ response.

‘Where Is the Creativity?’

“Five years into the epidemic I had expected a lot more from Los Angeles,” says Michael Gottlieb, the UCLA physician who in 1981 made the first reports to the CDC of the strange disease striking homosexual males. “At two years . . . I could understand how San Francisco was more involved than the people in Los Angeles.

“It’s as if they are depending on a miracle, a magic bullet. It gives a false impression that AIDS will go away. True, the county is in a bad way financially, but where is the creativity?”

Health officials agree that the future of AIDS is fraught with question marks. “As far as planning goes, AIDS is a moving target,” says Dr. Evans of the county health department.

While hoping for a vaccine and a cure, several authorities suggest that the toll in deaths and dollars could exceed the federal government’s worst-case forecast of 270,000 cumulative cases in 1991 and single-year medical costs of $16 billion.

Many questions, for example, remain about the degree to which the AIDS epidemic will spread into the heterosexual population. If there is significant spread, many researchers suggest that it would be initiated primarily through intravenous drug users, who tend to be poor, and would follow a pattern similar to other sexually transmitted diseases--again, hitting harder among the poor. Such a pattern would further exacerbate the impact on county services and Medicaid.

Big Question Mark

One big question mark rests in the “incubation period” of the AIDS virus. Federal health authorities estimate that 1 million to 2 million people have been exposed to the AIDS virus, of whom about 25% to 30% are expected to develop full-blown AIDS. The same researchers used to say 10% would develop AIDS. That percentage could go higher, researchers say. “I’ve even seen in writing the theory that positivity (for exposure to the virus) may only be a precursor to the condition,” Evans says. “Who knows?”

Still another troubling scenario comes with the documentation that the AIDS virus attacks not only the immune system, but the neurological system, causing a form of dementia. New York health officials have already developed a specialized hospital wing expressly for AIDS dementia. Evans says it is conceivable that the future may hold treatments to bolster the immune system, but nothing to address the neurological concerns. How would society care for tens of thousands of persons who are mentally incapable of caring for themselves?

The hypotheses go on and on. Meanwhile, there is still the problem of catching up with the present.

On a recent day at Room 5P21, a dozen men sat on the hard wooden benches in the lobby and more were expected to arrive. Four doctors were in this day.

‘Numbers Keep Growing’

Some days are better than others. On another recent day, 18 patients were being served by only one doctor.

“Some people left here grumbling,” said Michael Hedderman, the charge nurse. “We have a problem of keeping up with the resources. We’re constantly juggling. . . . We’ll ask for a position, and eventually we’ll get a position filled. . . . But the numbers (of AIDS patients) just keep growing.”

The phone rang. The caller, an AIDS patient, wanted to enroll in an experimental drug program. “What I can do,” Hedderman said into the phone, “is put you on the waiting list right now.”

There are more than 700 names on the list.

AIDS AS AN EXPENSIVE ILLNESS Cost projections are based on the medical inflation index and estimated rates of disease growth. 1984 costs are in black, 1991 estimates are represented by hatched bars. Dollar figures are in billions.

AIDS $.52 x $8.5 Auto Accidents $5.6 x $8.02 Digestive Cancer $3.4 x $4.89 Lung Cancer $2.7 x $3.88 Kidney Disease $2.2 x $3.17 Breast Cancer $2.2 x $3.11

Source: Centers for Disease Control, the Health Care Financing Administration