Half of Bankruptcy Due to Medical Bills

There is something very, very wrong here.

WASHINGTON (Reuters) – Half of all U.S. bankruptcies are caused by soaring medical bills and most people sent into debt by illness are middle-class workers with health insurance, researchers said on Wednesday.

The study, published in the journal Health Affairs, estimated that medical bankruptcies affect about 2 million Americans every year, if both debtors and their dependents, including about 700,000 children, are counted.

“Our study is frightening. Unless you’re Bill Gates (newsweb sites) you’re just one serious illness away from bankruptcy,” said Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School (newsweb sites) who led the study.

“Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection.”

The researchers got the permission of bankruptcy judges in California, Illinois, Pennsylvania, Tennessee and Texas to survey 931 people who filed for bankruptcy.

“About half cited medical causes, which indicates that 1.9 to 2.2 million Americans (filers plus dependents) experienced medical bankruptcy,” they wrote.

“Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness.”

The average bankrupt person surveyed had spent $13,460 on co-payments, deductibles and uncovered services if they had private insurance. People with no insurance spent an average of $10,893 for such out-of-pocket expenses.

“Even middle-class insured families often fall prey to financial catastrophe when sick,” the researchers wrote.

Bankruptcy specialists said the numbers seemed sound.

“From 1982 to 1989, I reviewed every bankruptcy petition filed in South Carolina, and during that period I came to the conclusion that there were two major causes of bankruptcy: medical bills and divorce,” said George Cauthen, a lawyer at Columbia-based law firm Nelson Mullins Riley & Scarborough LLP.

“Each accounted, roughly, for about a third of all individual filings in South Carolina.”

He said fewer than 1 percent of all bankruptcy filings were due to credit card debt. “That truly is a myth,” Cauthen said in a telephone interview.

Cauthen said he was not surprised to hear that so many of the bankrupt people in the study were middle-class.

“Usually people who have something to protect file bankruptcy,” he said. “The truly indigent — people that we see on the street — there is no relief that we can give them.”

There is no excuse for this. There are too many resources that can and should be called upon to try and make things better. It doesn’t have to be a universal healthcare plan, but whatever is done should be something that helps to provide more protection and more affordable healthcare.

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  1. Jack's Shack February 3, 2005 at 8:43 pm

    My BIL is a doc, so I am somewhat familiar with the other side, but this just doesn’t add up. Something is very very wrong.

  2. PsychoToddler February 3, 2005 at 8:15 pm

    I wish I could tell you where all the money is going. My guess is expensive drugs and expensive procedures. I don’t think the insurance companies are making any money–one surgery will wipe out most premiums.

    All I know is that I pay more than $14000 a year on health insurance and I still have to pay most costs out of pocket due to copays, deductibles, and exceptions.

    Something’s gotta give.

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