|  Candace Talmadge Read Candace's bio and previous columns
June 4, 2009
Health Insurance and
Bankruptcies: Partners in Fiscal Crime
Question: What costs a
small fortune every year yet does little to stave off the catastrophic costs
of major illness?
Easy answer: Health
insurance.
A second version of a
groundbreaking study published today in the American Journal of Medicine
finds that illness and medical bills accounted for at least 62.1 percent of
all personal bankruptcies during 2007. Of those bankrupted by medical costs,
77.9 percent had health insurance at the outset of the illness that
devastated their finances, and 60.3 percent had private health insurance.
“Medical impoverishment,
although common in poor nations, is almost unheard of in wealthy countries
other than the U.S.,” write study authors David U. Himmelstein, M.D.;
Deborah Thorne, Ph.D.; Elizabeth Warren, J.D.; and Steffie Woolhandler,
M.D., M.P.H. They examined in detail 2,314 medical bankruptcies nationwide
that occurred two years ago. “Most provide a stronger safety net of
disability income support. All have some form of national health insurance.
“The U.S. health care
financing system is broken, and not only for the poor and uninsured,” the
researchers continue. “Middle-class families frequently collapse under the
strain of a health care system that treats physical wounds, but often
inflicts fiscal ones.”
The pocketbook injury
starts with the yearly cost of health insurance. During 2007, the year on
which this study is based, the national average premium for a family of four
in a PPO was $14,500, according to historical estimates from actuarial
consultants Milliman, Inc. Employers paid $8,909 of this amount, employees
shelled out $5,591, and it did not include out-of-pocket expenses for annual
deductibles and co-pays.
“For 92 percent of the
medically bankrupt, high medical bills directly contributed to their
bankruptcy,” the authors note. “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.”
In other words, high-cost
health insurance failed when the rubber met the road. Many influential
members of the U.S. Congress, however, favor mandating private health
insurance purchase as a key element so-called health care reform. Can anyone
answer why? For a second time, this research demonstrates exactly how little
good health insurance has done for the majority of those who buy it
voluntarily. Forcing everyone to pay for it will do nothing except fatten
the already bloated wallets of the health insurance industry.
Since the first
groundbreaking study of the correlation between major illness and bankruptcy
eight years ago, the situation has only deteriorated. The researchers found
that the share of bankruptcies attributable to medical problems rose 49.6
percent between 2001 and 2007. They note that intervening changes in federal
bankruptcy laws were unlikely to have been a contributing factor to the
increase, since the new legal restraints on bankruptcy filings do not
differentiate between medical and non-medical related causes.
While pondering the
disturbing findings of this study, keep this in mind. The results are based
on bankruptcies prior to the 2008 economic collapse, and no doubt vastly
understate the problem as it is today, during a quasi-depression that has
cost millions their jobs and thus access to any employment-related health
insurance they might have had.
Let us hope these findings
help quash the quaint, deluded notion that simply requiring all Americans to
buy health insurance will vanquish our health care woes. Health insurance
plays a starring role in the health care funding problem, not the solution.
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