Insurers' Study Tries to Whitewash Truth that Skimpy Coverage Causes Medical Bankruptcy

EMBARGOED UNTIL 12:01 AM EDT
February 28, 2006

Contacts: David Himmelstein, M.D.
Steffie Woolhandler, M.D.
(617) 665-1032
Elizabeth Warren, J.D.
(617) 495-3101

Researchers from Harvard’s Medical and Law Schools note that none of the data in their 2005 study showing that medical problems contribute to half of all bankruptcies have been questioned, despite an attack on their work commissioned by America Health Insurance Plans (AHIP), an insurance industry trade organization. Both the AHIP article and the Harvard response appeared today in the on line edition of Health Affairs.

The Harvard group labeled the AHIP article an effort to distract from “too many ineffective products sold by . . . the insurance industry,” and the industry’s efforts to cut back further on coverage under the guise of Consumer Directed Health Plans and Health Savings Accounts. Several health insurance firms have recently chartered banks and plan to issue credit cards as part of their HSA offerings.

The 2005 study of medical bankruptcies was among the most widely cited health policy stories of the year. Based on interviews with debtors in bankruptcy courts across the nation, the study found illness contributed to over 700,000 families’ bankruptcies annually. Most of those driven to financial ruin by illness were solidly middle class, and three quarters of the families had insurance when they first got sick, although many lost coverage when the illness caused job loss. Many who managed to keep their private insurance found that gaps in coverage – co-payments, deductibles and uncovered services – left them unprotected.

The insurance industry-funded critique claimed to reinterpret the Harvard data, alleging that few debtors were really bankrupted by illness and that most of these were not middle class based on their incomes. The Harvard researchers replied that the critique understates the number of medical debtors by misinterpreting certain survey questions and completely ignoring many others. The insurance industry critique claims that few debtors were middle class rests entirely on debtors・incomes just before filing for bankruptcy ・a time when many had lost jobs or small businesses because of illness. But most of those filing for medical bankruptcy had attended college, owned homes, and had once good jobs, clear indicators of their middle class status before financial disaster struck.

The Harvard group noted that the paper garnered public attention because it resonated with the abuse that Americans suffer at the hands of our health finance system, abuse shared by the uninsured and middle class.

Study author Dr. David Himmelstein, a Harvard Associate Professor of Medicine commented: health insurance companies charge outrageous premiums for defective policies. Their executives and shareholders pocket vast sums, raking off money that should go for care. In 2004, insurance companies spent $95 billion on overhead and profits. Bill McGuire, CEO of UnitedHealth pocketed $124.8 million. Now they and the White House – want to cut coverage, pushing families into so called Consumer Directed Plans with huge deductibles. The inevitable result will be bigger profits for insurers and more families bankrupted by illness. Americans need comprehensive national health insurance, not the ever skimpier coverage pushed by AHIP.

According to Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard and a study author: The insurance industry boosts profits by telling American families that all is well: just keep paying your premiums and you will be safe. The reality is far scarier.

Copies of the article will be available after 12:01 AM February 28 at:
http://content.healthaffairs.org/webexclusives/index.dtl?year=2006

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Physicians for a National Health Program is an organization of 14,000 physicians advocating for non-profit national health insurance. PNHP has chapters and spokespersons across the country. For contacts, call (312) 782-6006