When Donald Vanhaneghem moved back from California a year ago to be with his family "for the time I have left," he figured it would be impossible to get health insurance, because he has AIDS.
But to his astonishment, Vanhaneghem became eligible for a health maintenance organization plan offered by Blue Cross-Blue Shield of Rochester simply by paying $50 to join an insurance purchasing group sponsored by the local Chamber of Commerce.
The premium is only $348 every three months, exactly the same as a large company would pay to cover a single employee in perfect health.
"The benefits started within a few weeks," said Vanhaneghem. None of his bills was excluded because he had AIDS when he signed up.
Rochester's program to offer virtually universal health-insurance coverage--and the city's experiment in capping hospital costs--demonstrate some of the major themes in President-elect Bill Clinton's health-care prescription. Clinton has repeatedly cited Rochester as an example of some of his concepts.
Kevin Moley, deputy secretary of the Department of Health and Human Services, said he has no problem with letting every community adopt its own system, based on "decisions made locally by local people."
However, he said, "Clinton is talking about a board in Washington imposing solutions for the whole country from the top down and a national budget cap governing everything from aspirins to Band-Aids. It's unworkable."
Anyone residing in Rochester or its principal suburbs is eligible to buy a policy from Blue Cross-Blue Shield, the dominant health insurer. "You can walk in off the street and buy a policy," said Raymond A. Savage, Blue Cross senior vice president.
As a result, only 6% of the Rochester population lacks health coverage, compared to 14% of the population nationwide.
Some of the policies do exclude certain payments for up to a year for any illness a person had at the time he or she signed up. But the Blue Cross-Blue Shield health-maintenance plan that Vanhaneghem joined had no such limitations.
The second important concept in Rochester's program is known as "community rating." Instead of charging anyone who is a poor health risk huge premiums, the major private insurers in Rochester charge everyone the same amount for a given policy--regardless of age, sex, medical history or place of employment.
The community-rating concept is increasingly rare, because many insurers try to avoid high-risk groups and focus on offering cheap policies to businesses with a low-risk work force, a practice sometimes called "cherry-picking."
How can Blue Cross-Blue Shield ward off "cherry-pickers" while offering open enrollment and community rating? By keeping its costs low and attracting the largest possible number of participants, Blue Cross President Howard Berman said.
In 1991, according to Berman, the average cost for each household insured by his organization in Rochester was $2,378, compared to $4,361 for New York State and $3,573 for the nation. But Berman said that his group can still make a profit per household charging $3,684 a year for a family with children. (The charge is less for single persons and childless couples.)
One reason for that is that Blue Cross has sharply curbed its administrative costs. Berman said these paperwork and overhead costs come to only 7% of his firm's total costs--a third of the share typical among commercial insurers.
In addition, community rating lowers premium costs for some people who would not otherwise buy insurance, he noted. Without insurance, many of these people would get free care. Blue Cross would end up paying for it, because doctors providing free care would make up their losses by charging patients insured by Blue Cross more than they otherwise would.
Also curbing costs, said Berman, are New York laws that require the state to approve proposed capital expenditures by hospitals, to make sure they don't simply duplicate facilities that already are available in the community, which can lead to considerable waste and higher hospital charges.
In addition, Berman said, with its large HMO enrollment, Blue Cross-Blue Shield can keep down costs by overseeing the care of patients very carefully to avoid unjustified treatments and hospitalizations. Blue Cross negotiates with doctors on fees and doesn't simply pay them whatever they wish to charge.
New York State, which sets hospital rates, rewards community-rating insurers by allowing them to pay hospitals 13% less than commercial insurers do.
Big business is supportive. "Community rating helps focus our collective attention on controlling health-care costs, instead of encouraging individual businesses to negotiate their own deals, often at the expense of the community," said David E. Edwards, director of benefits for Eastman Kodak Co., which buys its insurance through the Blue Cross organization.
Blue Cross is able to take advantage of economies of scale, because it has more than 70% of the Rochester metropolitan area's private market and because more than half of that coverage is through HMO-type arrangements in which all needed health services are provided by a group of doctors working together. Preferred Care, an HMO, has about 15% of the market.
Derace Schaffer, chairman of the radiology department at Genesee Teaching Hospital here, said the Rochester health-care picture is far from perfect.
While dedicated physicians provide quality care, he said, the system involves "a very subtle form of health-care rationing."
He said some hospitals do not have enough beds, and Blue Cross-Blue Shield is always pressing doctors to avoid what it thinks is over-utilization--taking three X-rays where one might do, for example.
He said that some hospitals do not have enough high-tech machinery, and community needs are met only because doctors have acquired such equipment on their own. Schaffer said managed care and tight budgets impose many impediments on the way doctors care for patients.
Savage disagrees: "Rationing? Absolutely not."