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Over 60% of all U.S. bankruptcies attributable to medical problems

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June 6, 2009

June 6, 2009 An article in the latest issue of The American Journal of Medicine makes chilling reading, and presents compelling evidence that the US health care system is broken. In 2007, before the current economic downturn even began, an American family filed for bankruptcy in the aftermath of illness every 90 seconds; three-quarters of them were insured. Over 60% of all bankruptcies in the United States in 2007 were driven by medical incidents. Summarising the results of the first-ever national U.S. random-sample survey of bankruptcy filers, the article shows the share of bankruptcies attributable to medical problems rose by 50% between 2001 and 2007. Medical bankruptcy is a unique American phenomenon, which does not occur in countries that have national health insurance.

Following up on a 2001 study in five states, where medical problems contributed to at least 46.2% of all bankruptcies, researchers from Cambridge Hospital/Harvard Medical School, Harvard Law School and Ohio University surveyed a random national sample of 2,314 bankruptcy filers in 2007, abstracted their court records, and interviewed 1,032 of them. They designated bankruptcies as “medical” based on debtors’ stated reasons for filing, income loss due to illness and the magnitude of their medical debts.

Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. The odds that a bankruptcy had a medical cause were 2.38 fold higher in 2007 than in 2001.

According to the study, a number of circumstances propelled many middle-class, insured Americans into bankruptcy. For 92% of the medically bankrupt, high medical bills directly contributed to their bankruptcy. Many families with continuous coverage found themselves under-insured, responsible for thousands of dollars in out-of-pocket costs. Out-of-pocket medical costs averaged USD$17,943 for all medically bankrupt families: USD $26,971 for uninsured patients; USD $17,749 for those with private insurance at the outset; USD $14,633 for those with Medicaid; USD $12,021 for those with Medicare; and USD $6,545 for those with VA/military coverage. For patients who initially had private coverage but lost it, the family’s out-of-pocket expenses averaged USD $22,568.

Because almost all insurance is linked to employment, a medical event can trigger loss of coverage. Nationally, a quarter of firms cancel coverage immediately when an employee suffers a disabling illness; another quarter does so within a year. Income loss due to illness was also common, but nearly always coupled with high medical bills.

Writing in the article, David U. Himmelstein, M.D., states, “The US health care financing system is broken, and not only for the poor and uninsured. Middle class families frequently collapse under the strain of a health care system that treats physical wounds, but often inflicts fiscal ones.”

“This study provides further evidence that the US health care system is broken,” according to James E. Dalen, M.D., M.P.H., University of Arizona College of Medicine, Tucson. “Medical bankruptcy is almost a unique American phenomenon, which does not occur in countries that have national health insurance. These long-time advocates of a single payer system give us another compelling reason to work toward this goal as a nation.”

The article is “Medical Bankruptcy in the United States, 2007: Results of a National Study” by David U. Himmelstein, M.D., Deborah Thorne, Ph.D., Elizabeth Warren, J.D., and Steffie Woolhandler, M.D., M.P.H. It appears in The American Journal of Medicine, Volume 122, Issue 8 (August 2009) published by Elsevier.

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About the Author
Mike Hanlon Mike grew up thinking he would become a mathematician, accidentally started motorcycle racing, got a job writing road tests for a motorcycle magazine while at university, and became a writer. As a travelling photojournalist during his early career, his work was published in a dozen languages across 20+ countries. He went on to edit or manage over 50 print publications, with target audiences ranging from pensioners to plumbers, many different sports, many car and motorcycle magazines, with many more in the fields of communication - narrow subject magazines on topics such as advertising, marketing, visual communications, design, presentation and direct marketing. Then came the internet and Mike managed internet projects for Australia's largest multimedia company, Telstra.com.au (Australia's largest Telco), Seek.com.au (Australia's largest employment site), top100.com.au, hitwise.com, and a dozen other internet start-ups before founding Gizmag in 2002. Now he writes and thinks. All articles by Mike Hanlon
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1 Comment

I would be interested to know if the research that was done to compile the data described in this article also indicated the cause and circumstances that prompted the medical conditions and resulting hospitalization. For example, what are the percentages of those conditions that were due to preventable lifestyle related decisions on the patients part versus the percentages related to unavoidable, accidental, genetic, or other uncontrollable factors. I agree that there is much room for improvement within the US health care system, but I am not in favor of contributing to the medical expenses of a person who has decided to smoke cigarettes for an extended period of their life, who has developed poor eating habits, or who has not made little-to-no effort to remain in adequate physical health. I would propose that rather than jumping to the conclusion that the only resolution to this problem is "fixing" the US health care system, that we also analyze the root cause of the medical conditions of the persons impacted and look at what we can do within the US to better prevent, wherever possible, the hospitlization/treatment from being required in the first place.

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