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'Our findings are frightening. Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy.' - Harvard's Dr. David Himmelstein.
Washington (5 June 2009) - Medical bills cause 62.1% of U.S. personal bankruptcies, up from 46.2% in the space of just six years and nearly eight times the level recorded in 1981, U.S. researchers reported Thursday.
More than 75% of bankrupt families had some form of health insurance but were still overwhelmed by medical debts, according to a team of experts from Harvard Law School, Harvard Medical School and Ohio University.
The findings are reported in the American Journal of Medicine.
"Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5,000 or 10% of pretax family income," the study concluded. "Most medical debtors were well-educated, owned homes and had middle-class occupations."
The researchers, whose work was paid for by the Robert Wood Johnson Foundation, said the level of bankruptcy was up substantially over 2001 when the last study was conducted. The level of medically-caused bankruptcies that year stood at 46.2%.
Just 8% in 1981
As recently as 1981 - the year Ronald Reagan became president and launched a new era of government deregulation and free-market profiteering in health care - the level of medically-caused bankruptcies among U.S. families was just 8%.
"Our findings are frightening. Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy," Harvard's Dr. David Himmelstein, the lead author of the study and an advocate for a single-payer health insurance program for the U.S.
"For middle-class Americans, (private) health insurance offers little protection. Since then, the number of un- and under-insured Americans has grown; health care costs have increased and Congress (has) tightened the bankruptcy laws," the study notes.
The figures for the current study were collected prior to the current economic downturn "and hence likely understate the current burden of financial suffering," the researchers note.
Under the new administration of President Barack Obama, the U.S. has embarked on an important overhaul of its health care system.
The goal is the reform the existing health care system which includes some public programs such as Medicare but is made up primarily of private employer-sponsored health insurance plans that leave 15% of the entire population - 46 million people - with no health coverage at all.
Private coverage failing
The vast majority of Americans - 170 million people - rely on private health care provided by employers but many have been clamping down on coverage for years and the trend has accelerated during the current recession. Many companies have gone bankrupt themselves and others are either cutting or dropping medical insurance for workers altogether.
"Nationally, a quarter of firms cancel coverage immediately when an employee suffers a disabling illness; another quarter do so within a year," the report reads.
Other facts reported in the survey include the following:
- In May 2009 alone, more than 5,000 families filed for bankruptcy every business day. For all of 2009, the total is expected to reach about 1.4 million. The average personal bankruptcy involves 2.71 debtors and dependents. An estimated 3.8 million Americans will be involved in personal bankruptcy filings this year.
- Based on the current filing rate, medical bankruptcies will total 866,000 in 2009 and involve 2.346 million Americans – about one person every 15 seconds.
- Most medically bankrupt families identified in the study were middle class before their financial setbacks; 60.3% had attended college, 66.4% had owned a home and 20% of the families affected included a military veteran or active duty soldier.
- Most had some private health insurance but it was not enough to protect them. Only 0.3% of Americans without medical coverage of any kind were in that situation voluntarily.
- Hospital bills caused 48% of medical bankruptcies compared to drug costs (19%), doctors' bills (15%) and insurance premiums (4%). In 38% of cases, lost income due to illness was a factor.
- Out-of-pocket medical costs from the onset of bankrupting illness averaged $17,943.
"For middle-class Americans, (private) health insurance offers little protection," says Himmelstein.
"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. Private health insurance is a defective product, akin to an umbrella that melts in the rain."
NUPGE
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE
More information:
Medical Bankruptcy in the United States, 2007: Results of a National Study - pdf
Medical Bankruptcy Q & A and Fact Sheet