Medical bills make up half of bankruptcies

Medical bills make up half of bankruptcies
Study finds most bankruptcy filers had health
insurance

The Associated Press
Updated: 7:43 a.m. ET Feb. 2, 2005


BOSTON - Costly illnesses trigger about half of all
personal bankruptcies, and most of those who go
bankrupt because of medical problems have health
insurance, according to findings from a Harvard
University study to be released Wednesday.

Researchers from Harvard's law and medical schools
said the findings underscore the inadequacy of many
private insurance plans that offer worst-case
catastrophic coverage, but little financial security
for less severe illnesses.

"Unless you're Bill Gates, you're just one serious
illness away from bankruptcy," said Dr. David
Himmelstein, the study's lead author and an associate
professor of medicine. "Most of the medically bankrupt
were average Americans who happened to get sick."

The study, to be published online Wednesday by the
journal Health Affairs, distributed questionnaires to
1,771 bankruptcy filers in 2001 in California,
Illinois, Pennsylvania, Tennessee and Texas. That
year, there were 1.46 million personal bankruptcies in
the United States.

More than 900 of those questioned underwent more
detailed interviews about their financial and medical
circumstances for what the authors say is the first
in-depth study of medical causes of personal
bankruptcies, which have risen rapidly in recent
years.

Illness and medical bills were cited as the cause, at
least in part, for 46.2 percent of the personal
bankruptcies in the study. Himmelstein said the figure
rose to 54.5 percent when three other factors were
counted as medical-related triggers for bankruptcies:
births, deaths and pathological gambling addiction.

The study estimates medical-caused bankruptcies affect
about 2 million Americans each year, counting debtors
and their dependents, including 700,000 children.

Most were insured
Most of those seeking court protection from creditors
had health insurance, with more than three-quarters
reporting they had coverage at the start of the
illness that triggered bankruptcy. The study said 38
percent had lost coverage at least temporarily by the
time they filed for bankruptcy, with illness
frequently leading to the loss of both a job and
insurance.

Out-of-pocket medical expenses covering co-payments,
deductibles and uncovered health services averaged
$13,460 for bankruptcy filers who had private
insurance at the onset of illness, compared with
$10,893 for those without coverage. Those who
initially had private coverage but lost it during
their illness faced the highest cost, an average of
$18,005.

"We need to rethink health reform," said Dr. Steffie
Woolhandler, a study co-author and associate professor
of medicine at Cambridge-based Harvard. "Covering the
uninsured isn't enough. We also must upgrade and
guarantee continuous coverage for those who have
insurance."

Susan Pisano, a spokeswoman for America's Health
Insurance Plans, representing nearly 1,300 health
insurance providers, said the study did not adequately
explore the role that disability income protection
plans and personal savings can play in helping someone
with a medical problem avoid bankruptcy.

"It's very important to ask questions about what the
financial stressors are for American families, but we
don't think this study digs deeply enough," Pisano
said.

Middle-class hit hard
The findings indicate medical-related bankruptcies hit
middle-class families hard ?- 56 percent of the filers
owned a home, and the same number had attended
college.

"Families with coverage faced unaffordable
co-payments, deductibles and bills for uncovered items
like physical therapy, psychiatric care and
prescription drugs," Himmelstein said.

The study, funded by the Robert Wood Johnson
Foundation, did not examine how many bankruptcy filers
were from dual-income families where both partners had
insurance, Himmelstein said.

Jeff Morris, resident scholar at the American
Bankruptcy Institute, founded by Congress in 1982 to
analyze bankruptcy trends, said the Harvard findings
roughly mirror those of a 1996 ABI study in which 57
percent of bankruptcy filers cited medical problems as
a primary bankruptcy cause. Respondents in that study
were more likely to cite three other factors as
primary causes, including easy access to credit, job
loss and financial mismanagement.

Morris said he was aware of no data indicating that
the Harvard study, which was based on 2001 bankruptcy
filings, does not accurately reflect current trends in
medical-related bankruptcies.

"Medical coverage is becoming more for catastrophic
loss than for intermediate expenses," Morris said.

Link