More Americans Become Bankrupt Due To Medical Bills

By Margarita Nahapetyan

Medical bills are responsible for more than 60 per cent of personal bankruptcies in the Unites States, reports a new study by Harvard Medical School. And what is interesting, 75 per cent of the bankruptcy filers had health insurance.

The study data is more likely to understate the full range of the problem because the information was gathered before the current financial crisis. Bankruptcies due to medical bills rose by about 50 per cent between 2001 and 2007, from 46 per cent in 2001 to 62.1 per cent in 2007, and most of the individuals who filed for bankruptcy were middle-class, well-educated homeowners.

"Unless you are a Warren Buffett or Bill Gates, you are one illness away from financial ruin in this country," says a principal author of the study, Dr. Steffie Woolhandler, M.D., of the Harvard Medical School, in Cambridge, Massachusetts. "If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that is the major finding in our study."

Following up on a 2001 study in 5 states, where medical problems were a factor for at least 46.2 per cent of all bankruptcies, the investigators from Cambridge Hospital/Harvard Medical School, Harvard Law School and Ohio University surveyed a random national sample of 2,314 bankruptcy filers during early 2007. Researchers obtained the court records of all the filers and after that and interviewed 1,032 of them by telephone. The experts referred to bankruptcies as "medical" based on debtors' stated reasons for filing, income loss due to illness and the magnitude of their medical debts.

According to the results, there were a number of circumstances that led many middle-class and insured Americans into bankruptcy. For 92 per cent of the medically bankrupt, high medical bills were the major contributors to their bankruptcy. Many families with continuous coverage appeared to be under-insured, responsible for thousands of dollars in out-of-pocket costs.

Among families who were bankrupted due to illness, those with private insurance reported average medical bills of $17,749, compared to those who did not have any insurance, who faced an average of $26,971 in medical costs. Those who initially had private health insurance but lost it in the course of their illness, reported average medical bills of $22,568. Hospital costs accounted for about half the expenses (48 per cent), followed by prescription drugs (18.6 per cent), bills from a doctor (15.1 per cent) and insurance premiums (4.1 per cent). Medical equipment and nursing home care rounded out the list.

The health-related issues that left patients with the highest medical expenses were ranked as follows:

Neurological: $34,167

Diabetes: $26,971

Injuries: 25,096

Stroke: $23,380

Mental condition: $23,178

Heart problems: $21,955

Because almost all health coverage is linked to employment, a medical condition can lead to loss of insurance. In the United States, 25 per cent of firms cancel coverage right away if an employee has a disabling illness. Another 25 per cent of companies do so throughout a 12-months period. Loss of income because of medical condition is also common, but almost always coupled with high out-of-pocket expenses.

America is starting an overhaul of its healthcare system, now a number of public programs such as Medicare for the elderly and disabled and health insurance sponsored by an employer, that leaves 15 per cent of the population with no health coverage. The investigators and some consumer advocates said that the new study demonstrated that it is unlikely that the proposals under the most serious consideration will be helping most of individuals in the United States. They are pushing for a so-called single payer plan, in which one agency, often the government, coordinates health coverage.

The study was published online on June 4, in The American Journal of Medicine.