Back-breaking bills/Uncovered medical expenses are leading to bankruptcies
By Victoria Colliver, Chronicle Staff Writer
Jeannie Brewer is a physician married to a surgical resident. She and her family have health insurance. She’s not the kind of person you’d expect to be pushed to the verge of financial collapse by medical expenses. Yet Brewer is considering filing for bankruptcy, and part of the reason is the $16,500 in health care costs her family incurs each year that are not paid for by insurance.
“I have got creditors all over me. I am at the point where I don’t know what else to do,” said Brewer, 44, of Alameda. Brewer is one of a growing number of Americans who are discovering that health insurance doesn’t protect them from financial troubles caused by medical expenses. There are several reasons for the trend. Employers have been offering skimpier health care benefits and requiring their workers to pay more for coverage. Policies with high deductibles have become increasingly popular as a way for employers to manage unaffordable premiums.
Between copayments, requirements to pay certain percentages of medical bills and services that just aren’t covered, large numbers of people with insurance are facing burdensome out-of-pocket expenses. Many of them wind up in debt. And a significant percentage of those turn to bankruptcy Court for relief.
“There is a trend toward insurance being viewed as sort of catastrophic protection,” said Jeff Morris, resident scholar at the American Bankruptcy Institute. “The problem, of course, is it doesn’t take a lot of hours at a hospital to generate a bill that is very difficult to pay.”
In Brewer’s case, financial problems stem in part from her daughter’s diabetic condition. Three-year-old Lara must be constantly monitored and tested at least eight times a day. That has prevented Brewer from working normal hours for her employer, Alta Bates Summit Medical Center in Oakland, and held her income to just $35,000 last year.
Her credit card debt has spiraled to about $140,000, including some medical bills, but mostly daily expenses. She and her husband, who earns a modest salary as a resident, also have a combined $360,000 in medical school debt.
Brewer said that if she files for bankruptcy, she will do so as an individual to preserve her husband’s credit rating.
Loopholes in insurance
A Harvard University study of medical bankruptcy released earlier this month found that financial hardship caused by medical bills is not a problem that affects only the uninsured. Most people who file for personal bankruptcy because of health care expenses, like Brewer, actually have health insurance, the study found.
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“Even the best policies in this country have so many loopholes, it’s easy to build up thousands of dollars in expenses,” said Dr.Steffie Woolhandler, a Harvard associate medical professor and one of the study’s authors.
The study looked at 1,771 bankruptcies filed in 2001 in five states,including California. Almost half of those filers — 46.2 percent — cited illness and medical bills as a major cause of bankruptcy. More than three-quarters had insurance at the onset of illness.
The problem seems to be largely a middle-class phenomenon. Typical medical bankruptcy filers are in their early 40s and have children. Most have at least some college education and own their homes.
Even if people have health insurance to begin with, many lose coverage because they are unable to keep their jobs because of medical problems.
Need for disability insurance
The health insurance industry says the lack of proper disability income protection could be the primary reason for medical-related financial problems.
Disability insurance “doesn’t pay your doctor, but gives you income for food,” said Susan Pisano, spokeswoman for America’s Health Insurance Plans, a trade group for the health insurance industry.
Pisano said it’s difficult to separate medical debt from other financial pressures associated with a health problem, especially loss of income due to an individual’s inability to work full time or to keep a job at all.
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Even if bankruptcy is averted, the financial strain of an illness can set finances back for years. Berkeley resident Connie Taylor found herself $38,000 in debt when her daughter had to be hospitalized for a psychiatric condition. She didn’t realize that the treating physician was not among her health insurance company’s covered network of doctors.
Extra expenses
“I thought if you had insurance, you had insurance. You would be OK,” said Taylor, 53, a hospital housekeeper. She said she did not know there was such a thing as an out-of-network provider under her policy and was not informed that her daughter’s doctor would cost extra.
The hospital, through its collection agency, placed a lien on her home. Although the episode occurred in 1993, Taylor did not pay off the bill until 2001, with the help of her church and her ex-husband.
For San Francisco resident Anna Chavez, the event that prompted her financial woes was a happy one: the birth of her first child in 2000. While she was glad to get pregnant, it was unplanned. She and her husband had just opened a restaurant in San Mateo and had bare-bones insurance through Blue Cross that didn’t cover childbirth. Unable to change her policy after becoming pregnant, Chavez figured that the couple would be responsible for about $4,000 in out-of-pocket insurance expenses and $1,000 in physician fees.
The couple balked when the hospital charged them $2,300 more than they had estimated. Chavez said she asked the hospital to arrange a payment plan. Instead, she said, the hospital filed a lawsuit, which the couple lost by default. She estimates that after the attorney’s fees and court expenses, the birth of their child cost the couple $10,000.
Understand the terms
A Blue Cross spokeswoman declined to comment on Chavez’s situation, citing privacy concerns. She said customers should work carefully with their brokers to understand the terms of their policies.
Chavez, 35, who is currently uninsured, has since qualified for the state’s Healthy Families program, which covers low- to moderate-income children. She had her second child essentially for free under another state program. That makes her uncomfortable. “I just feel like I was rewarded for not having insurance, and I was not rewarded for trying to do the right thing,” Chavez said.
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Jeannie Brewer, MD is a CaPA member
E-mail Victoria Colliver at vcolliver@sfchronicle.com.
