Over 60% of US bankruptcies due to medical problems
15 June 2009
The share of bankruptcies in the US attributable to medical problems
rose by 50% between 2001 and 2007. The first-ever national random-sample
survey of bankruptcy filers shows that illnesses and medical bills
contribute to a large and increasing share of bankruptcies. The study is
published in the August 2009 issue of The American Journal of
Medicine [1].
In 2007, before the current economic downturn, an American family
filed for bankruptcy in the aftermath of illness every 90 seconds;
three-quarters of them were insured. Over 60% of all bankruptcies in the
United States in 2007 were driven by medical incidents.
Following up on a 2001 study in five states, where medical problems
contributed to at least 46.2% of all bankruptcies, researchers from
Cambridge Hospital/Harvard Medical School, Harvard Law School and Ohio
University surveyed a random national sample of 2,314 bankruptcy filers
in 2007, abstracted their court records, and interviewed 1,032 of them.
They designated bankruptcies as “medical” based on debtors’ stated
reasons for filing, income loss due to illness and the magnitude of
their medical debts.
Using identical definitions in 2001 and 2007, the share of
bankruptcies attributable to medical problems rose by 49.6%. The odds
that a bankruptcy had a medical cause were 2.38 fold higher in 2007 than
in 2001.
According to the study, a number of circumstances propelled many
middle-class, insured Americans into bankruptcy. For 92% of the
medically bankrupt, high medical bills directly contributed to their
bankruptcy. Many families with continuous coverage found themselves
under-insured, responsible for thousands of dollars in out-of-pocket
costs.
Out-of-pocket medical costs averaged $17,943 for all medically
bankrupt families: $26,971 for uninsured patients; $17,749 for those
with private insurance at the outset; $14,633 for those with Medicaid;
$12,021 for those with Medicare; and $6,545 for those with VA/military
coverage. For patients who initially had private coverage but lost it,
the family’s out-of-pocket expenses averaged $22,568.
Because almost all insurance is linked to employment, a medical event
can trigger loss of coverage. Nationally, a quarter of firms cancel
coverage immediately when an employee suffers a disabling illness;
another quarter does so within a year. Income loss due to illness was
also common, but nearly always coupled with high medical bills.
Writing in the article, David Himmelstein, MD, states, “The US
healthcare financing system is broken, and not only for the poor and
uninsured. Middle class families frequently collapse under the strain of
a healthcare system that treats physical wounds, but often inflicts
fiscal ones.”
“This study provides further evidence that the US health care system
is broken,” according to James Dalen, MD, MPH, University of Arizona
College of Medicine, Tucson. “Medical bankruptcy is almost a unique
American phenomenon, which does not occur in countries that have
national health insurance. These long-time advocates of a single payer
system give us another compelling reason to work toward this goal as a
nation.”
Reference
1. David U. Himmelstein, Deborah Thorne, Elizabeth Warren and Steffie
Woolhandler. Medical Bankruptcy in the United States, 2007: Results of a
National Study. The American Journal of Medicine, Volume 122,
Issue 8 (August 2009) published by Elsevier.
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