Those two distressing facts, combined with higher deductibles for many who have health insurance, appear to be driving even more people into bankruptcy after a medical crisis.
A recent nationwide research effort looked at this issue, and one of its authors thinks these trends will continue. As the number of people in the United States without health insurance climbs past 45 million, Dr. David Himmelstein believes medically related bankruptcies will correspondingly rise. "They are likely to increase," he says, "as health care costs go up."
Earlier this year, Harvard-based Himmelstein, along with three associates, issued a widely publicized report on the relationship between bankruptcy with health care problems and medical debt. Using the results of surveys and interviews with hundreds of people from across the country who filed for bankruptcy, they concluded medical costs and physical illness or injury played a significant factor in half of all personal bankruptcies.
Extrapolating their findings, the researchers concluded: "Between 1.850 and 2.227 million Americans (filers plus dependents) experienced medical bankruptcy" during 2001.
These people, according to the report, were not primarily young scofflaws who ran up huge credit card debt in the pursuit of acquiring more and more stuff before experiencing medical problems. Instead, the survey found "the average debtor was a 41-year old woman with children, (who had) at least some college education. Most debtors owned homes."
Three-fourths of those surveyed had medical insurance at the beginning of their financial difficulties. But because of health problems, they often lost their jobs and their insurance coverage; then their savings were spent. At the same time, these people were dealing with an average of almost $12,000 in out-of-pocket medical bills.
"Typically, people got injured and didn't have a great job to begin with," Himmelstein says. "They lost their income, and eventually their insurance, before filing bankruptcy. It's all tied together."
Even before taking the legal step of filing for bankruptcy, many of those who did so were medically suffering. Himmelstein's research shows more than half of them had put off a needed doctor or dentist visit because of the cost, while greater than 40 percent didn't fill a prescription.
According to the report, "many of the insured debtors blamed high co-payments and deductibles for their financial ruin." In addition, while prescription and doctor bills each accounted for about 20 percent of medical debts, unpaid hospital costs were the major cause of the problem, being responsible for 42 percent of the total.
Kevin Burns, chief financial officer for University Medical Center, hopes people who use his hospital's services aren't being driven into bankruptcy.
"We ask patients to tell us their financial means," he says, "and have a sliding scale of fees which can go all the way down to free. If they will work with us (concerning their bill), we'll work with them."
Burns adds that while the hospital does use a collection agency for unpaid accounts, it doesn't report bill paying delinquencies to credit agencies. "If someone can't pay, but will work with us," he reiterates, "we'll work through it."
Despite that possibility, estimates by two local attorneys put the number of people in Tucson who file for bankruptcy because of medical expenses at a substantial total. With almost 2,000 Southern Arizona households having filed for either Chapter 7 or 13 personal bankruptcy in 2004, and more than 3,000 having done so already in the first six months of this year, the numbers affected by unpaid medical costs is significant.
"Everyone seems to have some" unpaid medical bills, says attorney Skip Wood of his bankruptcy clients. "I'd estimate 25 to 30 percent of their entire debt. For people with higher amounts, like those $60,000 in debt, it's more likely."
Attorney Cheryl Copperstone indicates gauging the percentage of her clients who file for bankruptcy because of medical bills is hard to judge. "They don't keep good track of what they charge on their credit cards," she says. Despite that, Copperstone estimates 15 percent of those she helps did file for bankruptcy primarily because of medical problems.
Copperstone also thinks the recently enacted congressional changes to the bankruptcy laws will just make things more difficult for these people. Himmelstein agrees with that assessment, saying: "The changes will make it harder for people to crawl out of a financial hole. They are closing the courthouse door to a lot of people."
So what should households that file for bankruptcy do? To protect their clients as much as possible, both Wood and Copperstone insist they obtain medical insurance before filing.
"They should file after they've hit bottom and are going back up," states Wood. For her part, Copperstone says about her clients purchasing health insurance: "They might be able to pay $5,000," for premiums and co-payments, "but can't pay $50,000" in medical bills.
From his perspective, Himmelstein, an acknowledged advocate of national health care, has a different proposed solution for people seeking to better protect themselves from medically-related bankruptcy. Since all taxpayers foot the bill for health care in most other industrialized countries, Himmelstein recommends to these Americans: "They should move to Europe or Canada."