Study Links Medical Costs and Personal Bankruptcy – BloombergBusinessWeek 06-04-09

Salient to Investors:

David Himmelstein and Steffie Woolhandler of Harvard Medical School, Elizabeth Warren of Harvard Law School, and Deborah Thorne at Ohio University found:

  • Medical problems caused 62% of all personal bankruptcies filed in the US in 2007, and of those, 78% had medical insurance at the start of their illness, including 60.3% who had private coverage, not Medicare or Medicaid.
  • Filers were mostly solidly middle class before medical disaster hit, with 2/3 home owners and 3/5 had attended college.
  • Medically bankrupt families with private insurance reported average out-of pocket medical bills of $17,749. The uninsured’s bills averaged $26,971. Families who started out with insurance but lost it during their illness, medical bills averaged $22,658.
  • More than 90% of medically related bankruptcies were caused by high medical bills directly or medical costs that were so high the family was forced to mortgage their home. The remaining 8% went bankrupt because a medical problem caused them to lose income.
  • Individuals with diabetes and neurological illnesses such as MS had the highest costs, an average of $26,971 and $34,167, respectively.
  • Hospital bills were the largest single expense for half of all medically bankrupt families.

Himmelstein said health insurance offers little protection for middle-class Americans as most have policies with so many loopholes, co-payments, and deductibles that illness can put you in the poorhouse – your family is just one serious illness away from bankruptcy.

Woolhandler said covering the uninsured is not enough, reform also needs to help families with insurance by upgrading their coverage and assuring that they never lose it.

In 1981, only 8% of families filing for bankruptcy cited a serious medical problem as the reason, and in a 2001 study of 5 states, the same researchers found that illness or medical bills contributed to 50% of all filings.

Read the full article at http://www.businessweek.com/bwdaily/dnflash/content/jun2009/db2009064_666715.htm#r=rss

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