Most Bankruptcies Caused By Health Problems Suffered By People With Health Insurance
A recent Harvard study tells us that health problems cause more than half of America's bankruptcies, and that the vast majority of people seeking bankruptcy protection have health insurance. The study paints a hauntingly familiar picture: people get sick, insurance covers nothing, so they're forced to mortgage their homes to stay alive.
[Medically] bankrupt families with private insurance reported average out-of pocket medical bills of $17,749, while the uninsured's bills averaged $26,971. Of the families who started out with insurance but lost it during the course of their illness, medical bills averaged $22,658. "For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments, and deductibles that illness can put you in the poorhouse," said lead author Himmelstein. "Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy."
[...]
They found that a number of medical factors contributed to a family's financial disaster. 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. The authors were not able to track credit-card defaults caused by medical bills, but a 2007 study found that, of low- and middle-income households with credit-card debt, 29% used their plastic to pay off medical expenses.
So much for credit card companies trying to convince us that bankruptcies are caused by loose-willed spendthrifts with flat screens.
Study Links Medical Costs and Personal Bankruptcy [BusinessWeek]
(Photo: alvi2047)
Post a comment
Comments:
'the vast majority of people seeking bankruptcy protection have health insurance'
The uninsured's bills averaged $26,971. Families with insurance had medical bills averaging $17,749.
I don't get it. Shouldn't the uninsured be the ones seeking bankruptcy protection?
This demonstrates exactly why national healthcare isn't the way to fix what's wrong with the US healthcare system. Simply getting people insurance that will help cover some of their medical bills isn't going to fix the problem. The insurance company, even if it's the government, will always try to find a way out of paying. The real problem is the cost of healthcare. It's simply out of control. A large part of that cost is due to ridiculously high malpractice insurance for doctors and the insane lawsuits that medical device and pharmaceutical manufacturers have to pay out. These are not the only factors, but they are prevalent ones. The solution, or at least part if it, is Tort reform. Limit the amount of damages that can be awarded in malpractice/pharmaceutical cases and insurance will go down (or at least stop going up). Further, pharmaceutical manufacturers should be granted longer patents on their drugs so that they can recoup their R&D over a longer period of time, thus lowering the costs of the drugs. National healthcare won't fix the high cost of health care.
No doubt this report is part of the great march toward socialized medicine.
@Esquire99: Let me get this straight.
Extending patents, allowing drug cos to charge lots more for their drugs into the future, will decrease drug costs.
Gen-i-us.
@Esquire99: Um.. what?
This is an excellent illustration of the dire need for universal healthcare or even single-payer. Universal or single payer would allow a single authority to negotiate prices and likely allow greater leeway in undertaking tort reform.
These things are not mutually exclusive.
Meanwhile.. people die, and others are content to spout out phrases like "tort reform before universal access!"
My wife and I have about 20 thousand dollars of medical debt, incurred over a four year period where we didn't have health insurance. Not quite sure how we're going to pay it off. It's rough.
@theodicey:
It can cost over $1bil to bring a drug to market. Drug companies only get patent protection for 20 years from when they discover a viable compound. By the time they spend another 5-10 years testing and finalizing the drug, they've only got ~10-12 years of patent protection left. Thus, they have to recoup their $1bil, plus a reasonable profit, in that time. If that time frame were extended, their time for recoupment would be extended, allowing them to charge less for the drugs.
The local paper here constantly has blurbs about benefit dinners and such for people with cancer or some other awful illness. Most of these people have insurance. Insurance isn't enough. It's ridiculous how many people are one disaster away from bankruptcy.
@veg-o-matic:
If healthcare was affordable people could get by without insurance. Giving them insurance is like putting new floors over the old floors. Eventually you have to deal with the root of the problem, which is the insanely high cost of healthcare. Tort and drug patent reform is one step in the direction of lower costs.
@Esquire99: Is there any evidence that giving tax cuts and extra patent protections to pharma companies actually lowers the price that consumers pay for drugs? It certainly hasn't always worked that way in other industries.
Further, some medical procedures and drugs are just expensive. Period. Even with tort reform, 1,000-year patents, tax breaks, etc, they would still be expensive. Healthcare will never be cheap enough that it will make sense for people to "get by without it." Fixing health insurance *is* getting to the root of the problem -- not finding ways to give more money to pharmas in the hopes that the money will trickle down to consumers.
@esd2020:
Giving people insurance to pay the high prices of the pharma companies and insurance (malpractice) perpetuates the problem. Finding a way to simply lower the cost is what's necessary.
@esd2020: esd2020; i want you to think about something then. If it is just plain expensive and will never be affordable, then how is giving people insurance going to solve it? The insurance still has to pay for it and demonstrate a profit. Are the insurers supposed to operate at a loss? If the procedures are just plain expensive, and the insurers lose money on them, then how is giving insurance going to help anything, since the insurers will do whatever they can to avoid covering things which they know are flat out unprofitable under all circumstances? And for that matter, why should they cover procedures which are uniformly cost-ineffective? Insurers do not exist for the sake of altruism, so for what reason should they take a loss on someone else's behalf?
What if you lower the costs and the insurance companies still won't pay? Even $100 can be a chunk for some people.
If I get that sick, I hope I die. Then my family can sell my house and pay the bill and I won't have to worry about it.
Living under that kind of debt, even if you are paying it off, is crushing and demoralizing. How are people supposed to get better with all that stress?
@I Love New Jersey: If the insurance companies did a reasonable job of insuring people, that march would stop immediately.
@Esquire99: Are you familiar with how much a company spends in R&D vs. how much is spent in marketing?
@Esquire99: "A large part of that cost is due to ridiculously high malpractice insurance for doctors and the insane lawsuits that medical device and pharmaceutical manufacturers have to pay out. These are not the only factors, but they are prevalent ones. The solution, or at least part if it, is Tort reform. Limit the amount of damages that can be awarded in malpractice/pharmaceutical cases and insurance will go down (or at least stop going up)."
FAIL. Study after study shows that despite the intuitive appeal of the malpractice-cost claims, malpractice lawsuits don't drive the cost of medicine -- and don't even particularly drive the cost of malpractice INSURANCE.
In fact, capping med mal payouts can lead, counterintuitively, to more med mal lawsuits, because it takes much longer to get rid of a bad doctor when the payouts are too low to make the cases worthwhile until they're extremely egregious.
@Esquire99: Drug companies pay more for Direct-to-Consumer advertising than they do for R&D. So I'm not sympathetic.
This happened to my family about three years ago. We had huge medical bills, combined with a layoff. Bankruptcy was the best decision we could have made.
@balthisar: The problem is that providers can be insanely ruthless in pursuing those medical bills. Some want it all and they want it now. You might get 5-7 years to pay of a $17g car or 30 to pay off a $150k house. Medical providers want all that money you owe them, usually within a year or so. They will garnish wages or other tactics to the point people don't have enough money left over to keep their other bills paid. Remember when someone racks up a big medical bill they are usually out of work at least for a while if not long term adding to the inability to pay off the bills.
Medical providers will pursue those with assets because there is something to take much harder than the poor.
The real problem is intentional risk- ie, we don't want to pay for insurance for someone who eats butter competitively or snowboards. Basic and preventative care should be nationalized, with people buying their own catastrophic coverage as needed... which is generally cheap unless you have behavioral risks.
@Esquire99: Lets face it, national single payer healthcare is the only sane solution IF your goal is to provide the best healthcare to the most people. Right now in the U.S. we pay more for healthcare than any other nation, but we don't get the best healthcare? Why is that?
Face it, not EVERYTHING needs to be a commodity. Free market healthcare will always be a loss for the consumer. On one side of the table you have the healthcare industry that has billions upon billions to spend to make the govt do what they want, on the other side of the table you have consumers, in NEED because of their health. Come on, how is that ever going to work out equitably?
@Esquire99: Actually it is both. Providers are charging too much but national insurance is a must.
Private insurers dump a large portion of their bills back on them through co-insurance, deductibles and conveniently writing policies to not cover certain things. This is more common than flat denials to get out of paying valid claims. The ins. company might pick up 70% of a bill. If it was a 100k bill your still stuck with a 30k debt and providers breathing down your neck for it. This is why people end up in bankruptcy yet have insurance.
National insurance is supposed to do away with things like huge deductibles, co-insurance and some of the skeezy loopholes private insurance is using that are the core of the problem why people with insurance end up in heavy debt and bankruptcy.
Due to multiple chronic medical problems in our family we spend out of pocket enough to buy a fairly decent used car every year and we have good insurance. This is sans anyone having a major medical incident or injury. Just think what we could do with that kind of cash every year. It could go to driving the economy through spending, could go into our underfunded retirement or college funds for our kids. Instead we are subsidizing the insurance companies profit margin with it.
@lalaland13: For a while we were averaging one a month, these were just people we knew personally. Most were for cancers. People shouldn't have to hold benefits everytime someone gets ill.
@Esquire99: I'm sorry, but pharma companies are NOT hurting for money.
Maybe if they didn't spend so much cash advertising their drugs to people who have no idea what they're for, or have any business thinking they need to take them, they'd have more money to keep themselves afloat and wouldn't have to worry about shrinking profit margins as much.
Oh, and for every drug that costs $1bn to bring to market, there are generally 5 or 6 that are ancillary drugs that are found along the way to that one, that in essence are free. Or at least help to subsidize the big one.
Plus, it's not like they stop making money once their patent runs out, they just have to compete with other companies who make generic versions. There are enough people who will still buy the name brand, and enough doctors that prescribe the name brand to keep a drug profitable long after the patent has run out. Otherwise Bayer wouldn't still be making aspirin.
@HRHKingFridayXX: I actually think you may be onto something here. Basic preventative screenings/vaccinations/doctor's visits for all, but everyone is responsible for their own coverage to deal with major procedures. However, the major coverage should have stipulations to allow for denial of coverage relating to willful self-neglect. ie, if you opt not to make use of your provided vaccinations, then nobody is obligated to pay to treat you if you contract the disease the vaccination would prevent.
@bohemian:
I simply disagree. I don't believe that people have a right to health insurance, and I sure as hell don't want to be funding other people's insurance with my tax dollars. I do believe people have a right to healthcare and that the appropriate way to ensure they get access to it is by taking steps to lower the cost of medical care, not by simply creating a system to pay the high costs that are currently in place.
The more doctors I talk to the more I realize that the medical industry is super-pissed at the insurance industry. The insurance companies won't cover preventive care things that are cheap, and then they try to wriggle out of paying when that patient comes down with whatever disease could have been prevented.
Healthcare is so expensive because everything for the healthcare industry has to be bespoke and specialized. Everything from the computers to the hand tools have to either be sealed/cleanable or disposable/single use. Not to mention the machinery has to be made with the absolute highest tolerances. All of this is expensive. Things like MRIs, Xrays, CT scans, etc are all very expensive to administer. This is from an equipment, training and personnel standpoint.
Then there are the pushes for things like a universal network of record keeping. This would be awesome and would simplify things greatly, but what a logistical nightmare to implement. How do you make sure everyone has the same system without it being a monopoly? How do you ensure everyone's medical data is safe from hackers and thieves if it's all online?
Plus: Tort reform is not the key to lowering the cost of healthcare. How about training the doctors not to fuck up so they won't get sued? If a doctor wasn't paying attention and left a sponge inside me, or slipped and made me blind, I'd be suing for millions too. Not because I want a free ticket, but because I'm deformed and can't work a normal job anymore.
@I Love New Jersey: I'm sure people though the same of socialized fire protection. It's a much better idea to go back to the way it was where the homeowner with the fire got to negotiate with the different companies before they would attempt to put the fire out.
This study has been (correctly) criticized as being extremely flawed. Megan McArdle at The Atlantic makes several points about Elizabeth Warren's use of statistics. [meganmcardle.theatlantic.com] [meganmcardle.theatlantic.com]
In particular, Warren's surveys have well under a 50% response rate. With a sensitive issue such as bankruptcy, this is a huge problem. People with tragic stories who can blame someone else easily will probably be willing to talk about it. People who screwed their finances up through errors and overconsumption probably won't.
@Esquire99: Why are you okay with funding other people's healthcare via private, corporate, for-profit health insurance, but you're not okay with doing it via a government insurance that works exactly the same way?
You're ignoring the fact that single payer systems are proven to lower costs compared to what we're doing. We're wasting 1/3 of our healthcare dollars on things that don't have anything to do with providing healthcare.
@Shane Elliott: There is a growing movement in Canada to a similar effect. Since most healthcare comes out of our taxes, more and more people are wanting "willful self-neglect" not to be covered by the government, and the big issue at hand is smoking. If you are a smoker and come down with an illness related to being a smoker then you are on your own.
@bohemian:
As a medical student, I'm being tested on this tomorrow and its relevant: The average net worth of a white american man is over $100,000. Whereas, the average black man is has only about $16,000. Thus, one can see how many people can be bankrupted by excessive medical bills.
@johnva:
Private insurance doesn't come out of my tax dollars. Also, the government isn't good at running businesses. Look at the post office. It operates at a HUGE deficit. I simply don't think the government needs to be providing health insurance for everyone, it's not necessary.
@Eyebrows McGee (now with more baby!):
Not sympathetic either. I take niaspan which is an extended release niacin, the drug company didn't develop niacin, they just mixed it with fillers to make it "extended release". Wanna know what the cost of this vitamin is without insurance? $900 for 3 months!!!!!!!!!!!
My cousin's husband works as a pharmaceutical rep, he is good at what he does, they pay him 6 figures, lease him a BMW and he gets huge bonuses every year, along with a free trip for his family somewhere foreign. Somehow I think that he is grossly overcompensated.
This is exactly why I'm moving to another country...pathetic.
@Alpine75:
You can negotiate a lot of that debt way down. You can ask for discount or ask what hardship discounts they offer. They figure they're not going to get anything anyway. They may take as little as 25 percent.
It won't cost anything to ask. You'll be surprised at how much you can save. If the billing people aren't helpful, call the practitioner or institution directly. Best of luck.
@DeeJayQueue: A lot of medical malpractice isn't "doctors fucking up," it's a lot more grey area stuff - risky procedures that even when done correctly may not save the patient, for instance. And the payouts that some people get for these situations far outweighs the losses - not just covering the claimant's expenses and income, but adding on huge "punitive" damages just to punish the doctor. There does need to be some reform there.
There should a separate class of bankruptcy for medical bills. You shouldn't be punished for getting sick.
When we ran this story on Friday, there was an interview with a couple who recently had to file bankruptcy after their insurers refused to pay for more than 10% of their medical treatments. The problem was, the husband dared to have a triple bypass surgery at the same time his wife was diagnosed with breast cancer. Their insurer balked at having to pay for both at once. You know, because people can totally plan when to have cancer.
@Esquire99: Then I hope you, and every member of your family has to suffer threw some sort of extensive ICU visit.
My mother has had pulminary failure, 3 times, in ICU for a month at a time, every time, then off to specialized hospitals to help her get her lung functions back. Each time, she had to file bankruptcy. EVEN WITH HEALTH INSURANCE! She would have no income for 90-120 days while she was in the hospital, tons of past due bills. After the second bankruptcy, I had to put the home in my name as the doctors started putting leins against the house. You see, United Health care approved all the claims, and treatment, then changed their mind 6 months later, So the docts came back after my mother for the full amount, not the insurance discounted amount United Healthcare agreed to.
I'd like to see that median instead of the average. $17,749 hardly seems like enough money to go bankrupt for, consider how much debt people willingly incur.
(For lower income people, presumably they'd be uninsured, so what I'm presuming doesn't apply to them.)