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Despite Health Insurance Medical Costs Lead To Bankruptcy

Kathleen Blanchard's picture

According to the August issue of the American Journal of Medicine, the cost of obtaining medical care resulted in sixty-two percent of bankruptcies in 2007 – an increase of 49.7 percent from 2001. Most interestingly, patients who filed bankruptcy as the result of health care costs had health insurance.

In addition, the information that bankruptcy has caused two-thirds of bankruptcies was gathered prior to the current economic decline. The data reveals that just over sixty percent of people who declared bankruptcy had private health insurance, that most were college educated and homeowners.

Medical bills for the people without health insurance coverage averaged $26,971, and for those with insurance, medical costs leading to bankruptcy averaged $17,749 due to high deductibles and out of pocket expenses associated with co-payments and procedures not covered by insurance.

Among people declaring bankruptcy, 77.9 percent had health insurance, and middle-class incomes. Catastrophic illness, such as multiple sclerosis, complicated diabetes, and neurological disorders accounted for high medical costs for hospitalization and pharmacy bills in half and 18.6 percent of all families declaring bankruptcy due to medical bills respectively.

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The research, a collaborative effort of Harvard Law School, Harvard Medical School and Ohio University is the first to study people who file bankruptcy, currently estimated at 1.5 million annual filers.

“Our findings are frightening”, says Dr. David Himmelstein, lead author of the study “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy. For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments and deductibles that illness can put you in the poorhouse. And even the best job-based health insurance often vanishes when prolonged illness causes job loss - precisely when families need it most.” He calls private health insurance defective.

A study co-author Leo Gottlieb Professor of Law at Harvard says declaring bankruptcy is a “deeply shameful experience” for many families, leading to physical and emotional exhaustion. The study authors suggest that health care reform needs a different approach to eliminate lost health insurance policies and ensure that medical costs will be paid for, helping to reduce bankruptcy filings resulting from high medical bills.

Dr. Steffie Woolhandler, an associate professor of medicine at Harvard and primary care physician in Cambridge, Mass says, “Covering the uninsured isn’t enough. Reform also needs to help families who already have health insurance by upgrading their coverage and assuring that they never lose it”. She adds, “Reforms that expand phony insurance - stripped-down plans riddled with co-payments, deductibles and exclusions - won’t stem the rising tide of medical bankruptcy.”

Financial stability is becoming a challenge. A combination of unscrupulous lending from banks and a sick healthcare system are causing hard working middle-class families to file for bankruptcy because of medical costs. Dr. Deborah Thorne, associate professor of sociology at Ohio University says medical costs leading to bankruptcy affect families “who have played by the rules of our economic system, and they deserve nothing less than affordable health care.”