Most Americans are just one illness away from bankruptcy – even those with healthcare insurance. Unfortunately, there are millions of other Americans who don’t have the cash to cover their medical bills. Hospitals expect quick payment and offer insured patients little flexibility if they have difficulty paying bills. Those unpaid bills are sent to collection agencies, and damage the individual’s credit history for years. The crisis in American healthcare is not restricted to emergency rooms where uninsured people wait – often for long periods of time — for care.
In fact, a study has estimated that as many as 62.1 percent of all bankruptcies are due – at least in part – to medical expenses that the person simply cannot afford to pay. And, according to the study’s authors, that might well be a conservative estimate.
“Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country,” said Steffie Woolhandler, M.D., of the Harvard Medical School. “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that’s the major finding in our study.”
Yet, 75 percent of the people with a medically-related bankruptcy had health insurance. “That was actually the predominant problem in patients in our study — 78 percent of them had health insurance, but many of them were bankrupted anyway because there were gaps in their coverage like co-payments and deductibles and uncovered services,” Woolhandler said. “Other people had private insurance but got so sick that they lost their job and lost their insurance.”
Even patients who have coverage “may not be protected from high out-of-pocket costs when they are diagnosed with cancer,” according to a report by the Kaiser Family Foundation and the American Cancer Society. In addition to high insurance premiums, those costs may force patients to amass debt as they attempt to pay for the care they need — or postpone or skip lifesaving treatment. “Having insurance increases people’s ability to access care,” said Mark Rukavina, an expert on medical debt and the executive director of The Access Project, a Boston-based healthcare advocacy group. “The good news is that they get the care, but the bad news is it’s unaffordable.”
The days of Cadillac health plans are pretty much over,” said Peter Cunningham of the Center for Studying Health System Change in Washington, which found that 20 percent of American families have problems paying medical bills. More than 44 million Americans currently are paying off medical debt, the Commonwealth Fund said, an increase over the 37 million in 2005. Two years ago, Congress reported that 30 million Americans of working age had been contacted by a collection agency for unpaid medical bills. One survey asks how people have been affected by their unpaid medical bills. “Two-thirds of people say … they’ve had problems paying for some of the basic necessities — food, rent, mortgage, clothes, basic stuff,” Cunningham said. “They’ve put off major purchases. They’ve taken money out of savings or borrowed money. An increasing number consider filing for bankruptcy.”
Although it’s not yet known how the Patient Protection and Affordable Care Act (ACA) will impact medical bankruptcies, a study from Massachusetts since its healthcare reform became effective in 2006 offers scant good news. The study, which was published in the American Journal of Medicine, determined that between early 2007 and mid-2009, the share of all Massachusetts bankruptcies with medical grounds fell from 59.3 percent to 52.9 percent, a 6.4 percent decrease. Because there was a sudden rise in total bankruptcies during that period, medical bankruptcy filings in the state rose from 7,504 in 2007 to 10,093 in 2009.
According to the study’s authors, “Even before the changes in healthcare laws, most medical bankruptcies in Massachusetts – as in other states – afflicted middle-class families with health insurance. High premium costs and gaps in coverage – co-payments, deductibles and uncovered services – often left insured families liable for substantial out-of-pocket costs.”
“Despite a marked decline in the un-insurance rate in Massachusetts since the implementation of health reform, the proportion of bankruptcies that occurred in the wake of medical problems has not decreased significantly, and the absolute number of medical bankruptcies has actually increased by one third,” said David U. Himmelstein, M.D., from City University of New York School of Public Health, and the study’s lead author.