-- >> Let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year.

(applause) >> NARRATOR: Tonight on Frontline, as the federal government begins to grapple with health care reform, Frontline travels the country to investigate our broken health care system.

We meet Americans whose medical bills have driven them into bankruptcy... >> So she said, "Well, you're uninsured."

And I said, "Yes, I am."

She said, "Well, how are you going to pay the bill?"

I said, "You know, that's a real good question."

>> NARRATOR: ...and people who can't afford the treatment they need... >> There isn't any country in the developed world where you would have to put off major surgery because you couldn't pay for it.

>> NARRATOR: ...and others who are losing insurance coverage just when they need it most... >> Three days later, I received a letter telling me that they were rescinding my coverage.

The total amount came to in excess of $160,000.

>> NARRATOR: ...and some who completely fall through the cracks in the system.

>> Nikki didn't die from lupus; Nikki died secondary to the complications of a failing health care system.

>> It's designed to cut out on you right when you need it most.

It's like having an airbag in your car that's made out of tissue paper, you know.

I'm so glad that it's there, but if I ever get in a crash, it's not going to protect me.

>> NARRATOR: Tonight, what it's like to be "Sick Around America."

>> NARRATOR: Seattle, Washington.

February 2008.

Melinda Williams, four months pregnant, wakes up in the middle of the night.

>> I just knew that something was wrong, and so I flipped on the lights and I found that I was laying in a pool of blood.

And I woke up Mark, and we just... we just held each other and sobbed.

We were sure that we'd lost the pregnancy.

>> NARRATOR: She's rushed to Swedish Hospital in Seattle, where specialists do everything possible to save her baby.

Her pregnancy is stabilized, but Melinda is in and out of the hospital for the next few months.

And then at 27 weeks, her water breaks.

>> And we thought, "Okay, we're going to go in "and we're going to give birth to a baby, you know, barely halfway through our pregnancy."

>> NARRATOR: After a month in the hospital confined to bed, her baby, Rees, was delivered by C-section, still nine weeks premature and requiring state-of-the-art medical care.

>> He was just wired up from head to foot.

He had wires over every part of his body monitoring his vital signs, and a huge respirator over his face.

He had a feeding tube down into his stomach.

He just looked like a piece of electrical equipment rather than a little baby.

And he was so tiny; he was, you know, not even four pounds.

>> NARRATOR: The fact that Rees survived is a testament to the quality of American health care.

But what about the cost?

>> We got some statements while we were still in the hospital, but more bills started to come, I think, after we got home, when Rees was still in the hospital.

And, you know, the numbers were terrifying.

I mean, if you can imagine that 24-hour intensive care, including Rees was on a respirator.

He had phototherapy.

They had specialists.

They had neonatologists.

>> $3,000; $900; $900.

We've got two inches of bills, and I would say it's probably somewhere between half a million dollars... >> That's what I think, too.

>> ...and a million dollars.

We have not even added it up.

But it could be close to a million dollars.

>> NARRATOR: Fortunately, someone else paid the bills.

The medical costs for this million-dollar baby were paid by one of the world's most successful corporations, Microsoft, headquartered here in their campus in Redmond, Washington.

About 160 million Americans, like Mark Murray, get private health insurance through their employer and, by law, they cannot be rejected or charged more just for being sick.

But not many companies are as generous as Microsoft, where employees pay nothing for their coverage.

>> Really, you can say we have end-to-end support for just about every medical issue that you might face during your lifetime.

And that's important to us, because we really run the gamut of people who are just out of college all the way through to people who are, you know, well into and toward their retirement ages.

So we really have to cover the whole spectrum.

And we find that the investment in health care keeps that entire population healthier, coming to work more often, more alert, more productive.

>> NARRATOR: But with health care costs rising twice as fast as inflation, such generous coverage can no longer be counted on.

And in the current economic climate, even employees like Mark Murray can be vulnerable.

In January 2009, Microsoft staff learned that 5,000 of them would lose their jobs, and the company's legendary health coverage and all it implies.

Murray was not one them.

>> How do people do this if they don't have health insurance?

I mean, we... we were incredibly lucky.

I really believe that if it wasn't for the support that we got through our health insurance that we wouldn't have, you know, a baby boy right now.

>> NARRATOR: Microsoft is, in effect, pooling the risks of any major medical costs among its 55,000 employees, many of who are young and healthy.

But outside the Microsoft campus, things can be very different, especially for smaller businesses.

Drew Altman heads Kaiser Family Foundation, one of America's top health policy think tanks.

In addition to studying insurance, they have to find it for their 120 employees, like any other smaller business.

They faced a real challenge when one of their staff also had a million-dollar pregnancy.

>> We offer our employees two choices of plans.

One is a very high-end PPO, and the other one is an HMO with a name that sounds a little like ours.

And so last year, we had an employee who happened to have a couple of very expensive premature babies, and the cost was in the millions of dollars, and I came in one day to learn that our premiums from the PPO had increased by 78%.

We asked for justification.

Under California law, we're not entitled to any information whatsoever.

So there we were, the most expert organization in the land on health insurance, helpless.

What did we do?

We did what the hardware store would do, or the pizza place or the dry cleaner-- the only thing we could do, we switched insurers.

>> NARRATOR: But even with problems like that, people who get insurance through work are fortunate.

One of the harshest realities of employer-provided health insurance is that, when you leave your job or are laid off, you lose your health coverage.

And with 4.5 million jobs lost since the recession began, it can happen to anyone.

Five years ago, Paul Stephens was living comfortably, working as a manager for a Houston-based telecommunications company.

He owned this large house.

He had comprehensive group health coverage.

Then, in 2005, when he was 58 years old, Paul Stephens was laid off.

>> This is my living room.

The company dumped 600 hourly employees and one manager, me.

So I left my job... or was downsized first of April of 2005.

Get up here, come on.

>> NARRATOR: Under the federal COBRA law, people like Paul Stephens can continue their health insurance usually for 18 months, provided they pay the entire premium.

>> I elected not to take it because the premiums were, like, $750 a month, which is pretty hefty when you consider you've got a mortgage payment and everything else going on at that time.

>> NARRATOR: COBRA premiums are so expensive that 90% of those eligible don't use that option.

Paul Stephens says he felt sure he would soon find another job with health benefits.

But after a few months of failure, he set out to get insurance in the private, individual market.

Unlike employee-based health care, in this market, the insurance companies don't have to cover you.

In fact, they take steps to avoid anyone who's already sick, a practice called medical underwriting.

>> And that means that the insurer will ask you to fill out a lengthy form answering a lot of questions about how healthy you are now, and how healthy you've been in the past, and when's the last time you went to the doctor, and when's the last time you took a prescription.

And you have to sign a little form that says the insurer has access to any and all medical records ever developed, ever kept about you.

And they will study up on those and decide.

If you are a good enough risk, they'll sell you health insurance.

And if they think you're going to cost money, generate more losses, they might turn you down.

>> NARRATOR: And according to Georgetown University professor Karen Pollitz, it's not only serious conditions like diabetes and heart disease that can get you rejected.

>> You might be surprised.

People are turned down because they have hay fever, because they have acne.

People are turned down if they're 20 pounds overweight, bedwetting, I mean... ear infections in kids.

Things that are really common, little ailments can get you into trouble when you are trying to buy an underwritten policy.

>> NARRATOR: As for Paul Stephens, he had a history of diabetes, so he was turned down flat in the individual market.

He then turned to Texas's high-risk pool, the insurer of last resort.

But this required Stephens to wait 18 months, and the premiums were still expensive.

>> I believe the premiums were $600 a month with a... it was either $5,000 or $10,000 deductible.

So I'm going, "Whoa, I can't afford this either."

>> NARRATOR: Then, unemployed and uninsured, Paul Stephens had a heart attack and was rushed to a cardiovascular center in Houston.

>> I had four arteries blocked.

And I told them I don't want to be, you know, going to open heart surgery because that's going to cost a big pile of money.

And here comes this woman in a pair of high heels, dressed to the nines, carrying a clipboard, and she goes, "Mr.

Stephens?"

And I go, "Yes?"

And she said, "You didn't give us any insurance information when you checked in."

And I said, "Well, I don't have any to give."

So she said, "Well, you're uninsured?"

And I said, "Yes, I am."

She said, "Well, how are you going to pay the bill?"

I said, "You know, that's a real good question."

>> NARRATOR: Paul Stephens was treated and his life saved, but the bills came to over $200,000.

After struggling to pay for a few months, he sold his house and almost all his possessions and declared bankruptcy.

>> And now, the week is complete.

>> NARRATOR: Too rich to qualify for Medicaid, too young for Medicare, Paul Stephens moved to Indiana to live in his mother's house.

A Harvard Law School study estimates about 700,000 Americans go bankrupt each year partly because of medical bills.

No other developed country's health care system lets that happen.

>> Thankfully, this house was here; it was my mother's.

And otherwise, I'd be living under a bridge somewhere, quite frankly.

So, I was able to come here, and I was able to pick up a few jobs that I could make a few dollars at.

>> NARRATOR: Paul Stephens' plan now?

Wait to grow old enough for Medicare.

>> I'm 63.

I've got two more years and Medicare can kick in.

And then I can go and get some extensive health care, perhaps, or whatever.

So, I'm really rolling the dice until I'm 65, at this point, and gambling that I'm going to make it.

>> NARRATOR: As millions lose their company-sponsored health insurance, many Americans will find themselves in this individual market.

In any given three-year period, one-in-four Americans will spend some time here transitioning between jobs.

And if you've ever been sick, it's a challenging place to be, even if you're the CEO of an insurance company.

>> I, personally, am uninsurable.

I couldn't get insurance.

I could not get insurance; I've had heart surgery.

And so I am completely uninsurable in the private market.

So, it's important that I keep my job.

>> NARRATOR: Karen Ignani, who heads the health insurance industry lobbying group, has the same dilemma.

>> I haven't tried to buy individual health insurance in D.C., but it may be very hard because I have a serious condition with respect to asthma.

I may have to wait 12 months for coverage, number one, or I may find that I'm out of the system altogether.

>> NARRATOR: Medical underwriting in the private market spares no one.

It enables the insurance companies to avoid the sick and select the healthy.

That may be a good business model, but it's hard for people with any history of illness.

Often, they are forced to seek jobs just for the health benefits.

23-year-old Matt Johnson works at Menards, a regional home improvement store near Minneapolis.

But this wasn't his first choice of job.

A gifted student, Matt recently graduated from Concordia College, and had his heart set on a career in industrial chemistry.

But in his final year of college, he had a health crisis.

>> About a month into my final semester, I started getting sick.

In three weeks, I lost about 21 pounds, so a pound a day.

>> NARRATOR: Matt was diagnosed with severe ulcerative colitis.

To save his life, doctors put him on a regimen of powerful and very expensive drugs.

As a full-time student, Matt was still covered by his parents' family plan.

But weeks after he graduated, Matt lost that insurance and faced monthly drug bills of nearly $1,000 and costly physician visits.

So, he tried to find individual coverage.

>> We looked at some of the individual health insurance policies, but most of them were either astronomically expensive or did not cover pre-existing conditions.

>> NARRATOR: Matt realized he needed a job with good health insurance immediately, so he put his career dreams on hold and went to work for Menards.

Its comprehensive health plan covers everything, and costs Matt only about $200 a month.

>> ...finished choices.

>> NARRATOR: Matt has found lifesaving health care by temporarily trading in his dreams.

>> A little bit of a fancy finish there.

>> NARRATOR: But for now, he's locked in his job.

And even this job, which six months ago looked secure, seems less so in a global recession.

>> There are people who stay in jobs-- we still have job lock.

There are people who stay in marriages-- a friend of mine called that "slob lock"-- because they just can't afford to divorce their health insurance.

They just can't afford to.

I think people do make kind of heroic changes in their lives-- take a job or keep a job that they don't want, decisions about getting married, decisions about retiring-- driven by health insurance.

That's... that's got to be a drag on our whole... our whole society, at some point.

>> NARRATOR: Sometimes, people simply have to leave a job and look for insurance on their own.

For healthy Americans with no pre-existing medical conditions, there are many new products to choose from, so-called consumer directed health plans, cheap enough for anyone on a tight budget.

But there are tradeoffs, as Patricia Campbell of San Diego found out.

Three years ago, Campbell left her well-paid job in the L.A. television industry, which carried full health benefits.

She moved to San Diego to care for her mother with Alzheimer's.

Campbell found an individual policy with monthly premiums of only $248.

>> I got the insurance because I had to be there for my mother, you know.

I mean, I just would not want to put her in a home.

I just wouldn't do it.

So it just seemed like a good option at the time, even though the deductible was completely ridiculous-- $7,500, you know.

>> NARRATOR: Campbell's plan not only had an annual $7,500 deductible; on top of that, she would have to pay 40% of any hospital bills.

Then, in September 2007, she got appendicitis and went in for surgery.

While her insurance saved her from the full costs of the operation, she was left with a $6,000 bill, which, for now, she's paying off with credit cards.

Several months later, she got some more bad news-- doctors found a cataract in her left eye that needed surgery.

But she's decided to forego the operation until she's paid off what she owes for her appendectomy.

>> I'm having to make a decision between, you know, the procedure and the reality of my finances, my budget.

It does cause problems.

I get nervous driving at night because, basically, you know, one... one eye is not so good.

I'm grateful that I had the insurance for when I had my appendectomy.

But there isn't any country in the developed world where you would have to put off major surgery because you couldn't pay for it.

>> NARRATOR: Unlike the comprehensive coverage of many large employers, consumer-directed health plans are loaded with caveats-- high deductibles, co-insurance, co-payments.

Some don't cover drugs, and some have caps that limit what can be spent, even in a catastrophe.

>> Some people have come into the system and bought coverage that's junk.

As many as 25 million Americans may be underinsured.

They may be out there with policies that really won't take care of them if they get very sick, that will still leave them bankrupt and without access to health care.

>> NARRATOR: The individual insurance market is a tough place to be if you've been ill or if you can't afford comprehensive coverage.

But even for people who can afford good coverage in this market, that doesn't mean their troubles are over.

Jennifer Thompson is a realtor from Palm Desert.

Until 2004, she got insurance through her husband, Reed.

After he died of cancer, she continued coverage through the COBRA option for three years, and then, when that was exhausted, sought insurance in the individual market.

In 2007, she says she had a full physical and then filled out a form with an agent over the phone for an individual policy with Blue Cross of California.

>> It was at that time that I mentioned to him that I had been diagnosed and treated for breast cancer back in 1996.

And at that point, he explained to me that that didn't matter because this particular policy required only a ten-year health history, and as that had all taken place prior to the ten years, that we did not need to mention it.

>> NARRATOR: Thompson got a letter from Blue Cross accepting her.

It read: >> "Congratulations!

"You have been approved for coverage "with Blue Cross of California, "the most recognizable name in health coverage.

The immediate value of your coverage is peace of mind."

>> NARRATOR: But soon after signing up, Thompson faced a new crisis.

>> I happened to be diagnosed, within a month of changing companies, with some further cancer, which required surgery.

I was hospitalized for six days for the surgery, and arrived home just before Christmas.

And it was three days later that I received a letter from Blue Cross telling me that they were rescinding my policy retroactively back to the very beginning, and would cover me for none of the procedures, which I'd needed to have done.

>> NARRATOR: And then, the medical bills started to arrive.

>> The total amount came to in excess of $160,000.

Your head spins.

You don't know what to do.

You really and truly...

I didn't know what to do.

I...

I had no clue how to begin to tackle this problem that I had had landed firmly in my lap.

Didn't know what to do with it.

>> NARRATOR: So why did Blue Cross rescind her policy?

>> They told me that I had failed to disclose that I had been bleeding prior to changing from one insurance company to another.

I had indeed had a very minute amount of spotting, which I had mentioned to the doctor when I went for my annual physical.

And all of my tests-- my pap smear was clear, my cancer test, blood work was clear, everything was clear.

And that is the basis of this whole debacle.

>> NARRATOR: WellPoint, which owns Blue Cross, Thompson's insurer, says they can't discuss cases like hers because they're in litigation.

Sam Nussbaum is their chief medical officer.

>> I believe that people should get care for their cancer.

I believe people should get care for their heart disease.

But I don't believe people should misrepresent, if that was the situation on an application, what wasn't true.

>> NARRATOR: We reminded him that Blue Cross didn't check her records until after she filed a claim for medical expenses.

>> Yeah, and... and I can't speak to that circumstance.

But what I can speak to is, first, no one, no one ever likes to see a situation like this.

People are buying health security.

>> NARRATOR: Bruce Bodaken is CEO of Blue Shield of California, a separate insurance company.

It also practices recision.

>> We don't focus on this-- this is a... is not a big part of what we do.

It's a tiny part of what we do, but let's stop it altogether.

>> NARRATOR: So we asked, if you think the insurance industry should stop recision, why doesn't Blue Shield just stop?

>> The system that we're playing in now is a voluntary system, and so people come in and out of that system when they need coverage.

So, right now, we do take an effort of... of looking at their health status.

We don't think that's the right way to go.

We wish we could change it.

We wish, as a single company, we could simply stop doing that.

But if we did it as a single company, we'd go out of business.

>> NARRATOR: Much of what we know about rescision has surfaced thanks to the reporting of "LA Times" reporter Lisa Girion.

Insurance companies say the basic justification for rescision is to protect them against fraud.

>> Fraud means that an individual knew something, was aware of something, and didn't put it down.

They were trying to put one over on the insurance company.

But that is not what typically is happening in these recision cases that I uncovered.

It would be something where individuals would fill out an application and the question would be: "Do you have a mental illness?"

And they would say, "No, I'm not mentally ill." And the thing that they get rescinded for is being on Prozac for six months after their father's death ten years ago.

You know, a brief period of grieving didn't seem to be, you know, the answer to the question, "Are you mentally ill?"

>> NARRATOR: Most insurers practice recision.

It turned out that Jennifer Thompson's insurer, Blue Cross, has an entire department dedicated to investigating people who had filed substantial medical claims.

Girion's reporting revealed that another California insurer, HealthNet, took it even further.

>> What some people describe as a smoking gun was the discovery, through litigation, that HealthNet had actually paid bonuses to their employee who was in charge of recisions, based in part on how many recisions she carried out in a given year.

And in some years, it was how many recisions she carried out, and in other years, it was how much money those recisions allowed the company to avoid paying.

>> NARRATOR: Girion's articles caused something of a PR disaster for the California health insurance industry.

They triggered state regulators to go after the big players.

And recently, several insurers-- including HealthNet, Blue Cross and Blue Shield-- have agreed to a major settlement reversing thousands of recisions and reinstating policyholders while not admitting any fault.

But the practice, which affects at least 1 in 100 policyholders in the individual market, continues across the country.

As for Jennifer Thompson, she's now pretty much uninsurable in the private market in California, but she's hoping she'll be reinstated by Blue Cross soon.

>> Sitting in the United States without health insurance, at my age, is just a very, very scary place to be, and, really, based on that, I have had to make a decision.

And I have decided I'm going to return back to New Zealand for a year or two, until such time as I get some sort of resolution with this, or perhaps until I am of an age when I can get coverage with Medicare.

>> I mean, it's kind of an irony.

We buy health insurance in case we get sick, but health insurance is profitable when it covers people who don't make claims.

Insurers lose money when people make claims; in fact, those are referred to as "losses."

And you can get a lot of pushback if you... if you make claims for insurance.

>> NARRATOR: Pollitz and other experts argue that a fairer system would be to require companies to cover everyone, just as Microsoft covers all its employees, and just as other developed countries do for all their citizens-- what insurers call "guaranteed issue."

That's just what many states tried in the '90s, but they ran into a big problem.

Given the choice, many Americans won't sign up for insurance.

They'll behave like this man, Chaim Benamor.

He's a self-employed Baltimore renovator, and he avoided buying insurance until he absolutely needed it.

>> Well, I never had health insurance, you know, because I was young and healthy, and I didn't feel like I needed it, so, you know... Never been sick, never been in a hospital.

>> NARRATOR: Then, age 51, returning from a trip to Israel, he had a heart attack.

>> And when I got to the hospital, they did all this examination.

And when they put the dye through the heart arteries, they saw that I had a 95% blockage.

And they put the stents.

And put me on medication for... for a long time, for the rest of my life, I think.

You know, I got home from the hospital and I said, I got to get insurance.

This is Plavix, 75 mg, that keeps me... that keeps me alive.

>> NARRATOR: But he found that no insurance company wanted to take him.

>> I have to get it with my credit card.

>> NARRATOR: It's not hard to see why.

He'd need heart medicines for life, costing at least $300 a month, plus he was at high risk for another heart attack.

Benamor is an insurance executive's nightmare.

>> You get incredible selection in the individual market.

People wait until they have cancer before they enroll.

They wait until they're pregnant before they enroll.

So, if you only wait until they are very sick before they enroll, the cost of premium has to be very high.

I mean, literally, if the 1% of the population, or 35% of the costs, are the only people who enroll, then the monthly premium to break even is $10,000.

So it's very expensive.

>> NARRATOR: Premiums soared in states with guaranteed issue.

So, in the end, most states, including Maryland, dropped it.

Now, only five still do it: New York, New Jersey, Maine, Vermont and Massachusetts.

>> Let's look at those states that have said, "Everyone who comes needs to be insured."

And there are five states that have what's termed "guarantee issue."

And if we look at the average premium for those states, in the individual market, that premium is three times higher, on average-- maybe $600 to $700 in some cases-- versus a premium where the insurance market has allowed medical underwriting.

>> NARRATOR: But other developed countries guarantee coverage for everyone.

We asked Karen Ignani why it can't work here.

>> Well, it would work if we did what other countries do, which is to have a mandate that everybody participate.

And if everybody's in, then it's quite reasonable to ask our industry to do guarantee issue, to get everybody in.

So the answer to your question is: we can, and the public here will have to agree to do what the public in other countries have done, which is a consensus that everybody should be in.

>> NARRATOR: That's what other developed countries do.

They make insurers cover everyone, and they make all citizens buy insurance, and the poor are subsidized.

But America still has a complicated patchwork of private insurance for individuals and employees, and public programs like Medicare and Medicaid.

And sometimes, people fall through the cracks in the system.

Take the story of Nikki White.

It's a story about lupus, a very serious chronic auto-immune disease which, if left untreated, can be fatal.

When she was 21, Monique White, known as Nikki, learned she had lupus.

After leaving the University of Texas, where she had studied psychology, she found she was no longer covered by her parents' health insurance, and so Nikki found jobs that carried health benefits, working stints at a local book shop in Austin and a hospital trauma unit.

But in 2001, her lupus worsened, and she moved back home to Bristol, Tennessee, to live with her parents, abandoning her dream of becoming a doctor.

She had no health insurance, and her parents say they couldn't afford the rapidly escalating medical costs.

Her primary care physician was Dr. Amylyn Crawford.

>> Good to see you.

>> Good to see you.

>> Why don't you tell me how things have been going?

I think one of the great things as being a physician is finding a patient or an individual who is invested in understanding their disease, their disease process, and really wanting to take control and... and be responsible for their own health.

And Nikki was absolutely one of those individuals.

She had hopes and dreams, but just was unfortunate to have lupus.

>> NARRATOR: Dr. Crawford told us that most lupus patients can be treated.

>> Ideally, her symptoms could be controlled, her lupus could be controlled, and she could go on to do some of the things that she... or we would all expect that someone her age would be able to do.

>> NARRATOR: But it didn't work out that way.

Outside the employer-based system, Nikki was uninsurable, and she couldn't afford the costly medicines and regular visits to specialists vital for treating lupus.

In 2003, Nikki secured coverage with TennCare, Tennessee's Medicaid plan for the poor and disabled.

But in 2005, following state budget cuts, Nikki was told she was no longer qualified and her benefits would end.

Over the next few months, sick and scared, Nikki appealed her case in letters describing her desperate situation.

But she got nowhere.

Her condition worsened.

In November 2005, with pancreatitis and failing kidneys, she was rushed to the emergency room of Bristol Regional Medical Center.

(sirens wailing) Over the next ten weeks, she underwent 26 operations to remove dead tissue from her internal organs, racking up nearly $900,000 in medical bills she couldn't possibly pay.

Then she learned that she could get a private insurance policy under a federal law that mandated a continuation of the coverage she'd received from Medicaid, but the new policy was expensive and had a high deductible.

She took it anyway, and was flown to Duke University hospital for further surgery.

But her lupus was too advanced, and in May 2006, Nikki died.

Ironically, eight days later, TennCare sent a letter-- there'd been a mistake.

They should not have told Nikki she'd been thrown off Medicaid after all.

>> I'm not afraid to say it.

I believe in my heart that, if Nikki had not lost her insurance, she would be alive today.

I find it highly ironic that a society that denied her her health care, then all of a sudden, spent hundreds of thousands of dollars for her to be in the intensive care unit and to undergo all of these treatments and all of these interventions that still failed to be able to heal her and let her have the life that she really needed.

Nikki didn't die from lupus; Nikki died secondary to the complications of a failing health care system.

>> NARRATOR: According to a study by the National Academy of Sciences, around 20,000 Americans die each year because they can't get the health care they need.

We asked Karen Ignani if that was acceptable to the health insurance industry.

>> No.

It's a tragedy.

We've been at the front of the line, one of the first organizations, two years ago, to propose a strategy to get all Americans covered.

It can't stand.

It's the wrong thing.

And from a perspective of productivity, social policy, and what is the right thing to do, we need to prioritize health care reform and we need to do it urgently.

>> NARRATOR: These days, the insurance industry is talking a lot about change.

They say if every American is required to buy insurance, they'll agree to cover everyone, and that then the cost of health insurance will come down.

Dale and Alison Abrams live in Great Barrington, Massachusetts, with their kids, Quinn and Eliza.

Like many Americans, they had long struggled to afford health insurance.

Both were self employed-- she as a grant administrator, he as a realtor.

Their combined annual income was just over $63,000.

Then in 2006, when they heard that the state of Massachusetts was launching a major new health care reform program, they were hopeful.

>> The prospect of having a state-run health care program definitely gave us hope and optimism that we would be able to get into a better situation because, previously, we'd been scrambling with multiple jobs where we were self-employed, and trying to make ends meet and paying all of it ourselves.

And so the prospect of getting help there was something we greatly hoped for.

>> NARRATOR: The new plan required insurers to provide health care policies to all Massachusetts residents.

And, in turn, everyone was mandated to buy approved comprehensive insurance, or pay a fine, about $1,000 this year.

Poor people were subsidized and cut-rate consumer plans were not allowed.

The plan has been in effect now for nearly three years.

>> It's going really well.

We now estimate that we cover about 97.4% of people in Massachusetts, so we clearly have the lowest rate of uninsureds in the United States.

And since health care reform, we estimate that about 400,000-plus people are newly insured.

>> NARRATOR: But it didn't solve the problem for families like the Abrams, because even though they were now guaranteed insurance, they say they still couldn't afford it.

>> Through the state, you could purchase private insurance, but the rates were still astronomical.

I mean, they were, you know, like any private insurance-- $800 for a family, up to $1,700.

And, you know, the plans we would... that we finally went with was about $1,100 to $1,200 a month, which was really, really difficult, because that was, you know, three times our food budget and almost half... twice our mortgage.

It was just crazy.

>> NARRATOR: Massachusetts has a sliding scale of subsidies for people earning up to three times the poverty level.

For a family of four in 2006, that was a little more than $60,000.

So, by that standard, the Abrams were just over the limit.

We asked Health Secretary Bigby if they had created an impossible situation for families like this.

>> Somebody earning over $63,000 a year would be deemed to have enough income to afford the lowest-priced product that is available through the Connector if they have to buy it on their own.

>> NARRATOR: But the state of Massachusetts' official health care web site, the Connector, says different.

It says a family earning $63,000 should have to spend no more than a $352 monthly premium.

But no such policy exists.

The cheapest policy for a family like the Abrams costs over $800 a month.

So, eventually, Alison was forced to find a job with employee benefits.

>> We definitely made decisions in the last couple of years to find a job that at least one of us had health care at least partially covered by the employer.

>> So you go to a family making $65,000 a year and you say, "You are mandated to buy health insurance.

"And, by the way, it's going to cost you $8,000 for your family."

Well, that... well, you just solved the guarantee issue problem, because now you've got everybody in the pool, except that you don't have everybody in the pool because, as Massachusetts found, they had to back off on the mandate, because you can't force a family to pay that.

>> NARRATOR: The Massachusetts experiment has revealed a basic truth: that changing health care is not just about covering everyone; it's also about controlling medical costs.

Massachusetts has among the highest medical costs in the country, and insurance premiums there have been rising at about 10% a year.

According to Dr. Tom Delbanco, professor of medicine and primary care at Harvard Medical School, a leader in patient-centered care, all the major stakeholders in the health care system are responsible for the runaway costs.

>> Some of the doctors, I think, make too much money; some of the institutions make too much money; some of the pharmaceutical companies bring in too many dollars.

Some of the insurance industry, for sure, makes too much money.

I think a lot of doctors are angry about them.

And in the end, it adds up to an awful lot of money.

>> NARRATOR: Other developed countries bar health insurance companies from making profits on basic care and cap their administrative costs.

>> Our payment system is so administratively complex-- every patient knows that, just the claims processing-- that we spend about 24% of every health care dollar goes to administration.

In other countries, like Canada, it would be less than half that.

And in Taiwan, for example, it's much, much less.

So, administration, because we seem to prefer this mishmash of private insurance plans that are simply unwieldy, eats a huge chunk.

If we could cut administrative costs in half, we would have more than enough money to cover all the uninsured.

>> If you really want to contain health care costs, well, what's a health care cost?

It's a doctor's fee, it's a hospital charge, it's just exactly how many services the consumer gets.

I mean, that's the heart of the cost of health care.

And, yeah, you can talk about we have... our administrative costs are too high, and they are, but fundamentally, where are our costs?

And if you want to contain those costs, then you have to contain doctor costs and you have to contain hospital costs.

>> NARRATOR: Many governments in developed countries do this by setting prices for all doctor, lab and hospital fees, and requiring evidence of effectiveness before paying for new medical technologies.

>> The principal driver behind the rates of increase that we see in our country in health care costs are the advances in medical technology.

So, in some European countries, they've developed mechanisms to make judgments about which medical technologies actually bring new benefits for people, and which ones just would bring new profits for whoever made them.

We don't really have a way to do that in our country.

>> NARRATOR: President Obama has made reducing costs a centerpiece of his health care reform plan.

>> By a wide margin, the biggest threat to our nation's balance sheet is the skyrocketing costs of health care.

It's not even close.

That's why we cannot delay this discussion any longer.

>> NARRATOR: On March 6, he invited all the stakeholders to a health care summit at the White House.

>> So it's not going to be easy, and there are going to be false starts and setbacks and mistakes along the way.

But I'm confident, if we come together and work together, we will finally achieve what generations of Americans have fought for and fulfill the promise of health care in our time.

>> Speaking on behalf of over 100,000 family doctors, we're ready to do our part... >> NARRATOR: The doctors and hospitals were there.

>> We believe that we need to expand coverage in this country to everyone.

>> I'm honored to be here representing small business... >> NARRATOR: ...along with consumers and business groups... >> ...to have a key role in this debate.

>> We want to work with you.

We want to work with the members of Congress on a bipartisan basis here... >> NARRATOR: ...and of course, the insurance industry.

All said they are now committed to reform.

>> You have our commitment to play, to contribute, and to help pass health care reform this year.

>> Good.

Thank you, Karen, that's good news.

That's America's health insurance plans.

>> In part, I think everyone now understands it's not sustainable.

From an insurance perspective, it's not sustainable; from a business or economic perspective, it's not sustainable.

Obviously, from the consumers' perspective, it's not sustainable.

And I actually think the doctors and the hospitals understand that it's not sustainable.

So, I...

I think we're at a confluence of forces that people are really willing to work together to... for a solution.

>> Imagine the pride when we go back to our constituencies next year and say, "You know what?

We finally got something done on health care."

That's something that's worth fighting for and I hope all of you fight for it.

(applause) >> This is the next big opportunity for health reform since that great debate about the Clinton health reform plan in the early '90s.

And the question is again, pointedly, whether we will blow the opportunity again this time, or we will actually get it all done or get something significant done.

>> NARRATOR: Given the cast of characters, forging a deal won't be easy.

>> We have a $2.2 trillion health care system full of vested interests, stakeholders, and lobbyists.

And, you know, I have yet to meet a doctor who thinks he should take less.

Every doctor I meet says he's underpaid.

I've yet to meet a hospital executive who thinks he can operate... he or she can operate on less.

I have yet to meet a patient who is willing to sacrifice care.

Every patient I've ever met in the United States equates quality care with access to whatever they want.

I haven't met anybody that's... that's willing to take less.

And until we're willing to have that conversation, we're just sort of nibbling around the edges.

>> Other nations have said, "We are going to cover our citizenry "and we're going to work backwards from that.

We should make a moral decision that all our citizenry has health care and then, after that, we'll have to get downright dirty, roll up our sleeves, figure out how to do it.

But say that it's a given that we will do it.

Then, we may be able to come up with a system that's better than what we have now and is certainly much more equitable.

>> All right, so Rees is betting on 11... what did you say?

>> 11-nine.

>> 11-nine?

>> Our hope would be that by the time Rees is an adult and out in the world on his own, that he won't even have to choose a job based on the kind of health care he can receive; that our country will have finally kind of gotten it together and realized that this is a crisis, and that people need to be covered for health crises.

>> Our hope is that Rees and all the other children who are babies right now, when they're adults, the situation will have finally been resolved and that, you know, we'll have a health care system that works for everybody, and not just the people who are lucky enough to have a great job.

>> This report continues at our website, or you can watch the full program again online.

>> The first big opportunity for health reforms... >> Read the interviews with industry insiders and policy experts.

>> ...people are buying health security.

>> 25 million Americans may be underinsured.

>> Explore our consumer section on how to navigate the world of private health insurance and where to get help.

Examine the successes and shortcomings of one state's attempt at universal coverage.

And then join the discussion at pbs.org.

>> Next time on Frontline... >> You're talking about the center of legitimate power.

>> An invisible world... >> I spent tens of millions of dollars bribing government officials.

>> ...international bribery... >> What happens with black money is people steal it, because they can.

>> ...and international scandal.

>> So we're talking about billions?

>> Yes.

>> Lowell Bergman investigates... >> You're busy poking around.

It's got nothing to do with you.

You should mind your own business.

>> "Black Money."