By Julie Appleby
April 28, 2005
Think your health insurance has you covered? Think again.
Even insured workers can find themselves on the hook for thousands of dollars, often at a time when illness has decreased their income.Few workers realize the limits of their insurance until the bills start coming for: policies that don’t cover rehabilitation care or limit it to a few visits; expensive drugs that come with a 20% charge, rather than a $20 co-pay; separate deductibles for drugs and medical care; doctors at “in-network” hospitals that aren’t members of the insurer’s network, leaving patients vulnerable to thousands of dollars in bills; annual “out-of-pocket maximums” that aren’t always true ceilings on expenses.
Such costs can quickly add up. A drug co-payment of 20%, for example, could cost thousands a year for patients taking some cancer drugs. Avastin, a colon cancer drug, recently went on the market at a price of more than $4,000 a month. Erbitux, another colon cancer treatment, can cost $12,000 or more for a month’s treatment. Gleevec, for leukemia, is more than $2,000 a month.
That’s the reality for Rita Wirsch, a 55-year-old clerical worker in Hamilton, Ohio, who is struggling to pay off about $10,000 in medical bills that her insurance did not cover. The total added up over four years, bill by bill, in amounts from $25 to more than $400 a pop. Three months on disability pay this year after surgery put her further behind.
“I thank God every day that I have insurance,” says Wirsch. “But there’s a problem in the U.S. for hard-working people.”
And it isn’t likely to change.
More workers are facing larger medical bills as employers increase what they must pay for doctor visits, drugs and hospital care in an effort to control health care costs. Some employers are embracing high-deductible policies — requiring workers to pay $1,000 or more a year in expenses before insurance kicks in. Such policies are also common for the self-employed, who buy their own insurance, because premiums are generally lower.
Shifting more costs to the insured is having ripple effects. Hospitals are collecting more upfront from patients, after being left with bad debt by insured patients who failed to pay their deductibles. Insured patients are also attracting charity efforts: The Patient Advocate Foundation, for example, has a program aimed solely at helping insured patients make the co-payments on their prescription drugs. The group pays up to $2,500 annually toward drug co-payments for qualified patients with four conditions: the eye disease macular degeneration, and cancers of the breast, lung or prostate.
“The fully insured middle-class people who become ill with critical or life-threatening illnesses, it can completely ruin their financial health,” says Beth Darnley, chief program officer for the foundation.
Limits of insurance
Many Americans are not prepared. Whether struggling to meet mortgage costs, college tuition and other expenses — or simply buying all the latest gadgets — few are saving enough to weather unexpected bad times. The personal savings rate, the difference between what people earn and what they spend, fell for the second-straight year in 2004 to the lowest level since 1934.But it isn’t just catastrophic illness or accident that leads to financial stress. For some, ordinary medical problems can lead to seemingly insurmountable bills.
“Families are paying more and more for health insurance that covers them less and less,” says Elizabeth Warren, a Harvard professor and co-author of a recent study of bankruptcy filings in five states. The study concluded that medical bills contributed to half of all personal bankruptcies.
The bills, coupled with a low savings rate for most American families, tip about 1 million into bankruptcy each year, Warren says. The average out-of-pocket medical debt for those who filed is about $12,000, and 68% had health insurance at the time of their bankruptcy filing.
Things might soon get tougher for some families. Federal bankruptcy legislation that goes into effect in six months could require many people to repay all or part of their debts, including medical bills.
Some have questioned the bankruptcy study findings. Greg Scandlen a policy analyst with the Galen Institute, a free-market health care research group, says the definition of medical bankruptcy in the study was so broad that the results are not useful in determining whether medical bills were the main source of families’ financial troubles or a small part.
“I’m not denying at all that there’s a problem out there, but this study doesn’t tell us anything about the dimensions of that problem,” Scandlen said.
Several thousand dollars in charges might not sink a highly paid worker, but the middle class and those on the lower end of the pay scale can find themselves spending a significant share of their income on medical care.
A recent report by the Center for Studying Health System Change found that the proportion of low-income, chronically ill patients who were insured but still spent more than 5% of their income on health costs rose from 28% to 42% from 2001 to 2003. The study defined low income as being below 200% of the poverty line, or about $36,800 for a family of four in 2003.
“Bankruptcy is just the tip of the iceberg: 29 million Americans are in medical debt,” says Jennifer Edwards of the Commonwealth Fund, a private foundation that supports research on health and social issues.
A recent Commonwealth study defined those in medical debt as paying bills to health care providers or having large credit card debt or loans against their homes related to medical costs.
Of those, 70% were insured when they got the health care that put them in debt, and nearly half had used up all or most of their savings, Edwards said.
Stretching to pay bills
As do many families, Wirsch recently tapped her retirement fund to help pay the bills.
She has a good clerical job at a Fortune 500 company, earning nearly $13 an hour. And it comes with insurance: a policy with a $2,000 annual deductible for medical and hospital care. Starting this year, the plan added a separate $2,000 deductible for drugs.
This year, she had to take three months off, living on a reduced income from disability payments, while recovering from surgery.
The surgery bills are now added to what she owes from past medical treatments. Her share of the surgeon’s bill: $480. Bills for physical therapy: $155. Prescription refills: $25 to $40. She takes 14 pills a day for diabetes, fibromyalgia, which is a painful muscle condition, and intestinal problems. She asks for free samples from her doctor to help make ends meet.
She now has $5,800 in credit card debt that she says is all from medical bills. Wirsch says she’s making payments on the card, sometimes $10 a month: “That will take me till I’m 100 to pay off.”
Still, she appreciates her health insurance and knows her employer has paid far more than she has.
“Since I started working there 14 years ago, they’ve probably paid out over $80,000 in medical bills for me,” says Wirsch.
Warren says that many of the people in her study of bankruptcies were dealing with non-catastrophic medical problems.
In her study, one man, who was not named, filed for bankruptcy after hurting his knee in a fall. At first he wasn’t worried because he had insurance, which paid 80% of his hospital and surgeon’s bills. But his coverage left him responsible for physical therapy costs, crutches, braces and all drugs.
“His out-of-pocket expenses ran to $12,000,” says Warren. “It wasn’t medically catastrophic, but it was financially catastrophic.”
For Andrea Talaga, 42, of Bolingbrook, Ill., medical and financial troubles are becoming catastrophic. She filed for Chapter 7 bankruptcy protection in 1992 and says she might have to again.
Talaga, a lab technician at a hospital, says she spends $1,225 a month on her share of prescription drugs for her family. She’s diabetic. Her husband, a security officer at a hospital, has high blood pressure and high cholesterol. Both her sons are asthmatic, and one was just diagnosed with major depression. One son’s asthma medication isn’t covered by her insurance: It costs $225 for a 28-dose pack, and he usually uses two packs a month.
She says her husband’s $40,000 salary covers the mortgage and home expenses. Her $25,000 goes for food and medical costs.
“I can’t not take my insulin. My husband can’t go without his high blood pressure medicine,” she says. “My son definitely cannot go without any of his medicine.”
She recently learned her health plan limits mental-health counseling to 20 visits a year. Her son will soon exhaust those benefits.
“How can you cure someone in 20 days if they have mental health issues as severe as my son’s?”
She doesn’t have a solution.
“I wish my employer would back me up and look at people like us,” she says. “I know they still pay a lot for employees, but in the long run, they aren’t looking at the whole picture.”
