Medical costs spur half of bankruptcies

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Thu, 3 Feb 2005 12:14:50 -0800 (PST)

 

Medical costs spur half of bankruptcies

 

 

 

Medical costs spur half of bankruptcies

 

February 02, 2005

 

The ASSOCIATED PRESS

 

BOSTON - Costly illnesses trigger about half of all personal

bankruptcies, and health insurance offers no protection against ending

up penniless, according to findings from a Harvard University study to

be released today.

 

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 today 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 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.

 

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.