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Medical Bills Driving Most Middle-Class Bankruptcies

Private insurance isn't covering costs as promised, report's authors say

THURSDAY, June 4 (HealthDay News) -- In 2007, medical problems and expenses contributed to nearly two-thirds of all bankruptcies in the United States, a jump of nearly 50 percent from 2001, new research has found.

Since the data used in the study were collected prior to the current economic downturn, it's likely that the current rate of medical-related bankruptcies is even higher, said the researchers at Harvard Law School, Harvard Medical School and Ohio University.

They randomly surveyed 2,314 bankruptcy filers in early 2007 and found that 77.9 percent of those bankrupted by medical problems had health insurance at the start of the bankrupting illness, including 60 percent who had private coverage.

Most of those bankrupted by medical problems were "solidly middle class" before they suffered financial disaster -- two-thirds were homeowners and three-fifths had gone to college. In many cases, these people were hit at the same time by high medical bills and loss of income as illness forced breadwinners to take time off work. It was common for illness to lead to job loss and the disappearance of work-based health insurance.

The study also found that well-insured families often had to cope with high out-of-pocket medical costs for co-payments, deductibles and uncovered services. Medical bills for medically bankrupt families with private insurance averaged $17,749, compared to $26,971 for the uninsured and $22,568 for those who initially had private coverage but lost it during their illness.

The highest average costs were incurred by people with diabetes ($26,971) and neurological disorders ($34,167), the researchers found.

Hospital bills were the largest single expense for about half of all medically bankrupt families, while prescription drugs were the largest expense for 18.6 percent, according to the study in the August issue of the American Journal of Medicine, which was published online June 4.

"Our findings are frightening. Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy," lead author Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School, said in a news release from the Physicians for a National Health Program.

"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 a prolonged illness causes job loss -- precisely when families need it most. Private health insurance is a defective product, akin to an umbrella that melts in the rain," Himmelstein said.

The findings show that, as a nation, "we need to rethink health reform," added study co-author Dr. Steffie Woolhandler, an associate professor of medicine at Harvard Medical School and a primary care physician.

"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. Only single-payer national health insurance can make universal, comprehensive coverage affordable by saving the hundreds of billions we now waste on insurance overhead and bureaucracy," Woolhandler said in the news release.

"Unfortunately, Washington politicians seem ready to cave in to insurance firms and keep them and their counterfeit coverage at the core of our system. Reforms that expand phony insurance -- stripped-down plans riddled with co-payments, deductibles and exclusions -- won't stem the rising tide of medical bankruptcy," Woolhandler concluded.

More information

The American Academy of Family Physicians has more about health insurance.

-- Robert Preidt

SOURCE: Physicians for a National Health Program, news release, June 4, 2009

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