Medical Expense Related Bankruptcy—We Lead the World

Our non-system of health care causes many distortions.   Health care costs in the U.S. are the highest in the world, almost double that of other industrialized nations.

Because of escalating costs, lack of job provided coverage, and pre-existing illness over 50 million of our citizens have no health insurance.   Limits in insurance coverage, high deductibles and co-pays make health care increasingly unaffordable.

These costs have driven individuals and families to bankruptcy in increasing numbers as noted in this article which documented that 62% of those going bankrupt in 2007  were driven to it by health bills.

The author’s abstract notes:

Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.

In 1981 only 8% of bankruptcies were related to medical expenses.   With the current lack of wage growth, the decreasing proportion of people with insurance and the exploding health care costs over the past 10 years (well over 100%) the findings in the article are not surprising. 

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. Others had private coverage but lost it when they became too sick to work.  Nationally, a quarter of firms cancel coverage immediately when an employee suffers a disabling illness; another quarter do so within a year.  Income loss due to illness also was common, but nearly always coupled with high medical bills.

And the U.S. is exceptional:

Medical impoverishment, although common in poor nations,  is almost unheard of in wealthy countries other than the US.  Most provide a stronger safety net of disability income support. All have some form of national health insurance.

Medicynical Note: It’s bad enough that we have adopted an approach that does not have universal coverage and  that our health care costs are rising at an unsustainable rate and that our health insurance provides inadequate coverage. 

It is absolutely obscene however, that when a person gets sick and can’t work, his insurance can be cancelled or made unaffordable by raising the rate.  This is further aggravated by allowing insurers to then deny new coverage because of pre-existing illness.

American health care is set up to provide security and protection to everyone involved except the patient.  Quite an accomplishment if you ask me.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s