Medical bills trigger more bankruptcies

The news: In September, President Barack Obama clarified his positions on controversial health care reform proposals in a televised speech.

Behind the news: An examination of 2,314 personal bankruptcy cases found that medical expenses caused an estimated 62 percent of the bankruptcies filed nationwide in 2007, according to an August study published in the American Journal of Medicine. In the same year, more than 40,000 nonbusiness bankruptcy cases were filed in Illinois, according to the American Bankruptcy Institute.

The study’s result, compared with findings from a similar 2001 study, shows that the share of bankruptcies caused by illness and medical bills increased by almost 50 percent between 2001 and 2007.

Of the medical bankruptcies studied in 2007, three quarters of the filers had health insurance when they became sick. “For most people, the issue is that they have insurance but it’s nearly worthless,” said Dr. David Himmelstein, associate professor of medicine at Harvard University and one of the study’s authors. “You have this insurance card, but it still leaves you with bills.”

The study also found that, at the time of bankruptcy, out-of-pocket expenses among those insured were highest for those with private insurance coverage. They paid an average of $17,749 out of pocket, while those filers with Medicaid and Medicare paid $14,633 and $12,021, respectively. “It’s striking that our two public programs, though far from perfect and in need of improvements, are actually better than private insurance,” Himmelstein said.

Dr. Steffie Woolhandler, professor of medicine at Harvard University and another of the study’s authors, said the results have been misused in the national health care debate; the current federal proposals will not prevent most medical bankruptcies. “That’s why [politicans] have not chosen to speak about the problem of underinsurance as much. They’re not planning to fix it,” she said.

Woolhandler said current proposals will not prevent gaps in coverage capable of forcing insured people into bankruptcy. “The reality is going to hit home very quickly if these bills pass; people with private insurance are going to say, –˜Nothing has improved for me,'” she said.

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