Medical Bills and Bankruptcy

The Physicians for a National Health Program (PNHP) highlights a 2007 Harvard study of bankruptcies as a need for national health insurance.  The study, published June 4 by the American Journal of Medicine, found that “half of U.S. bankruptcies, affecting 2 million people annually, were attributable to illness or medical bills.”  About 78% of those bankrupted by illness were insured when they became sick, but became bankrupt due to gaps in coverage (co-payments, deductibles, uncovered service.)  And 60% of those with insurance had private coverage, not Medicare or Medicaid.

PNHP says there are two main causes for medical bill bankruptcy among the insured.  Larger co-payments and deductibles by employers cut back on coverage.  Second, although the COBRA law allows people who have lost their jobs to keep their coverage, their premiums are often unaffordable.

A 2009 CNN article on the same study says that 60 percent of personal bankruptcies are a result of medical bills.  Steffie Woolhandler, M.D., of Harvard Medical School says “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy.”  The study deemed the bankruptcies “medically related” if the individuals had greater than $5,000 in medical bills, mortgaged their home to pay medical bills, or loss a significant amount of income because of illness.

This study is significant because medically related bankruptcies have been rising steadily, up from 8% in 1981.  The middle class is seeing most of this occurrence, as “two-thirds owned their home and three-fifths had gone to college” (Businessweek).

Peter Cunningham, Ph.D., a senior fellow at the Center for Studying Health System Chang, says “Medical bills and medical costs are an issue that can very easily and in pretty short order overwhelm a lot of families who are on otherwise solid financial ground, including those with private insurance.”

The PNHP says “while politicians acknowledge the need to cover the insured, they have ignored the worsening plight of those with coverage.”  Dr. Woolhandler says “Covering the uninsured isn’t enough.  Reform also needs to help families who already have insurance by upgrading their coverage and assuring that they never lose it.”