By Elizabeth Warren
Wednesday, February 9, 2005

Nobody’s safe. That’s the warning from the first large-scale study of medical bankruptcy.

Health insurance? That didn’t protect 1 million Americans who were financially ruined by illness or medical bills last year.

A comfortable middle-class lifestyle? Good education? Decent job? No safeguards there. Most of the medically bankrupt were middle-class homeowners who had been to college and had responsible jobs — until illness struck.

As part of a research study at Harvard University, our researchers interviewed 1,771 Americans in bankruptcy courts across the country. To our surprise, half said that illness or medical bills drove them to bankruptcy. So each year, 2 million Americans — those who file and their dependents — face the double disaster of illness and bankruptcy.

But the bigger surprise was that three-quarters of the medically bankrupt had health insurance.

How did illness bankrupt middle-class Americans with health insurance? For some, high co-payments, deductibles, exclusions from coverage and other loopholes left them holding the bag for thousands of dollars in out-of-pocket costs when serious illness struck. But even families with Cadillac coverage were often bankrupted by medical problems.

Too sick to work, they suddenly lost their jobs. With the jobs went most of their income and their health insurance — a quarter of all employers cancel coverage the day you leave work because of a disabling illness; another quarter do so in less than a year. Many of the medically bankrupt qualified for some disability payments (eventually), and had the right under the COBRA law to continue their health coverage — if they paid for it themselves. But how many families can afford a $1,000 monthly premium for coverage under COBRA, especially after the breadwinner has lost his or her job?

Often, the medical bills arrived just as the insurance and the paycheck disappeared.

Bankrupt families lost more than just assets. One out of five went without food. A third had their utilities shut off, and nearly two-thirds skipped needed doctor or dentist visits. These families struggled to stay out of bankruptcy. They arrived at the bankruptcy courthouse exhausted and emotionally spent, brought low by a health care system that could offer physical cures but that left them financially devastated.

Many in Congress have a response to the problem of the growing number of medical bankruptcies: make it harder for families to file bankruptcy regardless of the reason for their financial troubles. Bankruptcy legislation — widely known as the credit industry wish list — has been introduced yet again to increase costs and decrease protection for every family that turns to the bankruptcy system for help. With the dramatic rise in medical bankruptcies now documented, this tired approach would be no different than a congressional demand to close hospitals in response to a flu epidemic. Making bankruptcy harder puts the fallout from a broken health care system back on families, leaving them with no escape.

The problem is not in the bankruptcy laws. The problem is in the health care finance system and in chronic debates about reforming it. The Harvard study shows:

• Health insurance isn’t an on-off switch, giving full protection to everyone who has it. There is real coverage and there is faux coverage. Policies that can be canceled when you need them most are often useless. So is bare-bones coverage like the Utah Medicaid program pioneered by new Health and Human Services Secretary Mike Leavitt; it pays for primary care visits but not specialists or hospital care. We need to talk about quality, durable coverage, not just about how to get more names listed on nearly-useless insurance policies.

• The link between jobs and health insurance is strained beyond the breaking point. A harsh fact of life in America is that illness leads to job loss, and that can mean a double kick when people lose their insurance. Promising them high-priced coverage through COBRA is meaningless if they can’t afford to pay. Comprehensive health insurance is the only real solution, not just for the poor but for middle-class Americans as well.

Without better coverage, millions more Americans will be hit by medical bankruptcy over the next decade. It will not be limited to the poorly educated, the barely employed or the uninsured. The people financially devastated by a serious illness are at the heart of the middle class.

Every 30 seconds in the United States, someone files for bankruptcy in the aftermath of a serious health problem. Time is running out. A broken health care system is bankrupting families across this country.

The writer is a law professor at Harvard University.

Friday, February 4th, 2005

A new study in the journal Health Affairs has found that half of all personal bankruptcies in the United States are now caused by soaring medical bills. We speak with the author of the report, Dr. Steffie Woolhandler. [includes rush transcript]

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In addition to focusing on restructuring Social Security, President Bush also spoke about the rising costs of healthcare in this country.

* President Bush, State of the Union address, February 3, 2005:
To make our economy stronger and more productive, we must make health care more affordable, and give families greater access to good coverage — (applause) — and more control over their health decisions. I ask Congress to move forward on a comprehensive health care agenda with tax credits to help low-income workers buy insurance, a community health center in every poor county, improved information technology to prevent medical error and needless costs, association health plans for small businesses and their employees — (applause) — expanded health savings accounts and medical liability reform that will reduce health care costs and make sure patients have the doctors and care they need.

President Bush in his State of the Union address. His comments come as a new study has found that half of all personal bankruptcies in the United States are now caused by soaring medical bills. The Harvard University study – published in the online journal Health Affairs – estimated medical bankruptcies affect about 2 million Americans every year, including 700,000 children. Many of those filing for bankruptcy had insurance, at least at the start of their illness.

*Dr. Steffie Woolhandler, Associate Professor of Medicine at Harvard University and co-director of the Harvard Medical School General Internal Medicine Fellowship program. She is a co-founder of Physicians for a National Health Program. She co-authored the study on medical bankruptcies.
Read the report.
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RUSH TRANSCRIPT

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AMY GOODMAN: In addition to calling for tort reform, President Bush also speaks about the rising costs of health care in this country.

GEORGE W. BUSH: To make our economy stronger and more productive, we must make health care more affordable and give families greater access to good coverage, and more control over their health decisions. I ask Congress to move forward on a comprehensive health care agenda with tax credits to help low income workers buy insurance, a community health center in every poor county, improved information technology to prevent medical error and needless costs, association health plans for small businesses and their employees, expanded health savings accounts and medical liability reform that will reduce health care costs and make sure patients have the doctors and care they need.

AMY GOODMAN: And that was President Bush. Juan.

JUAN GONZALEZ: Yes, his comments come as a new study has found that half of all personal bankruptcies in the United States are now caused by soaring medical bills. The Harvard University study published in the online journal, Health Affairs, estimated medical bankruptcies affect about 2 million Americans every year, including some 700,000 children. Many of those filing for bankruptcy had insurance at least at the start of their illness.

AMY GOODMAN: Today we’re joined by Dr. Stephie Woolhandler, Associate Professor of Medicine at Harvard University, Co-Director of the Harvard Medical School General Internal Medicine Fellowship program and one of the co-founders of the Physicians for a National Health program. She joins us in the studio in Boston. Welcome, Dr. Stephie Woolhandler.

DR. STEPHIE WOOLHANDLER: Nice to be here.

AMY GOODMAN: Well, can you talk about the study that has just come out?

DR. STEPHIE WOOLHANDLER: Well, this is the first study to collect detailed financial and medical information from a large cross-section of people filing for bankruptcy in bankruptcy courts. As Juan indicated, we found that fully half of all bankruptcies in the United States are caused by medical illness and medical bills. We’re talking about three-quarters of a million American families pulled through the bankruptcy courts every year by medical illnesses and medical bills. When you count the debtors and their dependents and their children, we’re talking about 2 million Americans every year in bankruptcy due to medical illness and medical bills.

JUAN GONZALEZ: I think most of us would assume that these were folks that did not perhaps have insurance before, but your study found that most of them had insurance when they began, so what happened in the process? Did their insurance stop paying, or what were you able to tell from you study of those bankruptcy files?

DR. STEPHIE WOOLHANDLER: We most certainly were. Surprisingly, we found that 76%, more than three-quarters of all people in medical bankruptcy had health insurance at the onset of the illness that bankrupted their family. So, when the illness started, more than three-quarters of the people had health insurance. Many of them had private health insurance through their jobs. But about one-third of people with private health insurance lost their coverage during the course of the illness. Most often because a breadwinner became too sick to work, and when they couldn’t work, they lost their job-related health insurance. But another very common scenario was people hanging on — hung onto their health insurance throughout the illness, but over the course of two or three years of illness, they accumulated so much out of pocket payments, co-payments, deductibles, and especially excluded items like physical therapy, home care, drugs. Over a period of years, they accumulated so much in out of pocket expenses that they were bankrupted despite having health insurance throughout the illness.

AMY GOODMAN: Can you give us some examples, a particular personal example of someone who has gone bankrupt because of their soaring medical costs?

DR. STEPHIE WOOLHANDLER: Oh, absolutely. One woman was a school teacher. She suffered a major heart attack. She was out of work for many months, lost her health insurance because she was unable to work. She had a hospital bill of $20,000, which was not covered by any insurance. She went to the hospital, and talked to them, and got them to write off the hospital bill. But she was bankrupted nonetheless by doctors’ bills and by the costs of her medications. Eventually, she went back to work and was able to gain insurance again, but she had already been through bankruptcy because of the initial illness. That’s actually fairly typical story of how people ended up in bankruptcy.

JUAN GONZALEZ: But now, normally, wouldn’t someone — let’s say who is working and becomes sick and can no longer work, so they lose their private health insurance, wouldn’t they then fall into the category of a disabled worker who would not only get disability payments but possibly Medicaid coverage as well? In other words, what’s happening to the safety net that should be existing in these kinds of cases?

DR. STEPHIE WOOLHANDLER: Well, most of these people were — had too much money to qualify for Medicaid, but not enough money to pay for private health insurance, if they weren’t working. The average income of these families in the year they filed for bankruptcy was about $25,000 a year. So, they would not qualify for Medicaid, nonetheless, they’re not in a position to be paying $10,000 a year, which is the average cost of family coverage in this country, if you have to pay for it yourself.

AMY GOODMAN: In the piece, the study that came out, illness and injury, as contributors to bankruptcy, you say even universal coverage could leave many Americans vulnerable to bankruptcy unless such coverage is more comprehensive than many current policies. Talk about what you mean.

DR. STEPHIE WOOLHANDLER: Well, many people think they have good insurance. They think they have good insurance, until they get one of these major illnesses that goes on for months or years at a time. And then those co-payments and deductibles and uncovered services start to add up. In our study, the typical person who went into bankruptcy had accumulated about $4,000 a year in out of pocket expenses over a period of two or three years. So that they had about $12,000 in out of pocket medical expenses by the time they went into bankruptcy. But $4,000 in medical costs out of pocket is very easy to accumulate, even with the very best private policy. I happen to know because my own insurance policy through Harvard Medical School is absolutely the Cadillac plan. We get the best plan with the best coverage for our family, and when my daughter had a series of serious orthopedic injuries, two sports injuries in a row one year after another, we accumulated $5,000 in out of pocket costs between the co-payments, deductibles and particularly physical therapy, which her plan only covered two months of, and she needed seven months. We were $5,000 out of pocket a couple years in a row. Now, both her father and I were able to work. We weren’t disabled. It didn’t bankrupt us, but in the situation where a breadwinner is sick, and income falls, $4,000 or $5,000 a year in medical expenses will bankrupt you, and in fact that is what happened to the people in our study, and that’s with the Cadillac plan. That’s with the best of the private health insurance plans. So, what we really need is the kind of national health insurance that they have in much of Western Europe and in Canada where it’s not only universal, that is everyone has it, but it’s comprehensive. Anything that’s medically necessary is covered. Without limits, and artificial limitations that the insurance companies put on the care that people need.

JUAN GONZALEZ: But given the enormous problems that individuals are having with soaring medical costs and even health insurance costs at the same time that many, many large companies and certainly small businesses are also being tremendously squeezed by rising health costs, how is it that the public movement for national health insurance has not solidified in a more systematic or vocal way?

DR. STEPHIE WOOLHANDLER: Well, we do have a lack of political leadership out of both parties, an unwillingness to talk about national health insurance that we were very pleased to hear that Senator Kennedy recently made a major speech advocating what he calls Medicare for all, which would be a form of national health insurance. That would certainly be a good step on the road to covering everyone and giving them comprehensive coverage. I think many Americans are fooled, and they have that private insurance policy, and they think they’re covered. But for so many Americans, private insurance policy is like an umbrella made out of tissue paper. You know, it may look good. It may even help you out in the sprinkle, but it’s totally useless in a downpour. People have umbrellas that literally melt in the rain. When they get so sick that they can’t work, their private health insurance is gone or fails them.

AMY GOODMAN: We’re talking to Dr. Stephie Woolhandler, one of the people who did the study showing that more than half of the personal bankruptcies in the country are due to soaring medical costs. Also one of the leaders of the universal health care movement. What do you think it would take right now, Dr. Woolhandler, for this national movement to solidify? I mean, businesses, as you say, have an interest in this because they’re crushed by the cost. Certainly individuals who have no health insurance, those who have partial health insurance. The sense is that this would cost the country a tremendous amount. The Canadian system has been vilified. What do you think it would take?

DR. STEPHIE WOOLHANDLER: Well, first of all, people need to know that national health insurance would not cost a tremendous amount. For the money we’re now spending we could provide universal coverage, that is cover everyone. We could provide comprehensive coverage, that is, improve the coverage that middle class and insured people now have. Part of why you can do that is by going to national health insurance you generate tremendous savings on administration and paperwork. We have estimated that if the United States health care system were as administratively simple as Canada, we could save $300 billion a year just in paperwork and bureaucracy costs. That $300 billion is plenty of money to cover all of our 45 million uninsured and close the loopholes in the policies of people who now have insurance to make sure that everyone is insured for all medically necessary care and that no one would ever again have to go into bankruptcy because of medical bills.

JUAN GONZALEZ: And in terms of the Bush administration now, in the President’s words this week in his state of the union, what are going to be the initiatives over the next year or two by the Bush administration as you understand them in this arena, and what should people be looking for?

DR. STEPHIE WOOLHANDLER: Okay. Well, Bush left a lot unsaid, including a lot unsaid about what his big initiatives are going to be in health policy. One thing that he is pushing for is what we call nanoinsurance. Insurance policies that are so tiny you cannot see them. Insurance policies that amount to your name on a piece of paper and little else. His new Secretary of Health and Human Services, Mike Leavitt pioneered nanoinsurance when he was Governor of Utah, when he offered Medicaid enrollees an insurance policy that covered $1,000 in primary care, but had no coverage for specialty care, no coverage for hospitalization. He claimed that was insurance. That’s why we call it nanocoverage. Now Secretary Leavitt is saying we’re going to allow any state that wants to do whatever they want and call it health insurance. So, we’re going to be seeing much more of these state policies to shrink down Medicaid, to give people these tiny little policies that are really not protective, and certainly here within our own state, our Governor Romney has been saying, Oh we need to have affordable policies, by which he means these skimpy, nanocoverage policies. Unfortunately, many employers are going the same route. They use a different terminology. They call it consumer driven health care. But what they’re really talking about is saying to workers, You have to have skimpy coverage, stripped down coverage with huge deductibles, and we forget to tell you the fact that in fact if you get sick, you’re going to be bankrupted because the coverage is so skimpy. Similarly with the health savings accounts, the health savings accounts are typically, say, $1,000 in your health savings account, but coupled with a high deductible policy with a $5,000 or $10,000 deductible, meaning that a family could easily accumulate $4,000 to $9,000 in health insurance expenses if someone got seriously ill. What we found from our study is that $4,000 to $9,000 of health expenses particularly if you have it several years in a row, particularly if the breadwinner cannot work, is enough to bankrupt American families.

JUAN GONZALEZ: You mentioned also the states in this — and initiatives to get new state programs to reduce the Medicaid load, now, isn’t it a reality that states themselves should be another constituency in this battle because all of the states are being hit by soaring Medicaid costs. A big part of many state budgets now are just being able to pay for Medicaid, so you would think that they would be another constituent group that should seek some sort of a national comprehensive solution.

DR. STEPHIE WOOLHANDLER: Well, unfortunately many state governments are in the hands of conservative allies of the Bush administration. Even though the Bush cuts in Medicaid will be disastrous for their states, they are not being very vocal and speaking out about that. I mean the real constituency for national health insurance is the American people. Its not just poor people, its not just the 45 million uninsured people, but it’s solidly middle class American families who think they have good insurance until they get sick. The families bankrupted in our study were middle class. 56% of people in bankruptcy had gone to college. 56% owned their home. When we looked at their occupational status, they were in the middle range of occupations, secretaries, schoolteachers, nurses. These were not the poorest of the poor. These were families literally ripped out of the heart of the American middle class when they had the double disasters of getting sick, and often losing their jobs.

AMY GOODMAN: Finally, Dr. Woolhandler, we have a Democratic Party — you mentioned that Kennedy was talking about universal health care, but overall, the Democratic Party has not called for universal health care. Hillary Clinton in the ascendancy, she did not propose it when she had the ability to propose it, in fact was taken down in a very big way, even preserving the insurance companies. So, who will represent this alternative, this block for universal health care?

DR. STEPHIE WOOLHANDLER: Well, what we need to do is organize a movement to hold the politicians’ feet to the fire and say to them, Unless you support universal health care you will not get re-elected. That was something that was going on in the early nineties and late eighties, congressmen and senators who were being elected at least partially because they said they supported universal health care. So thats what its going to take. Its going to take a movement to raise the issue, to pressure our politicians to listen to their constituents rather than listening to the drug industry and insurance industry that now just about the only people benefiting from the current health care finance system.

AMY GOODMAN: Dr. Stephie Woolhandler, thank you very much for being with us, one of the people that did the study on the personal bankruptcies.

JUAN GONZALEZ: If people want to copy of the study —

AMY GOODMAN: If people want to get a copy, where can they go on the web?

DR. STEPHIE WOOLHANDLER: It’s on the website on healthaffairs. Its called a web exclusive but the journals name is Health Affairs. You can find them on the web. It will be on the web for a couple of weeks, and probably for a couple of months.

AMY GOODMAN: We’ll also link to it at democracynow.org.

DR. STEPHIE WOOLHANDLER: Thank you.

AMY GOODMAN: Dr. Stephie Woolhandler, Associate Professor of Medicine at Harvard University, Co-Director of the Harvard Medical School General Internal Medicine Fellowship and one of the co-founders of the Physicians for a National Health program.
http://www.democracynow.org/article.pl?sid=05/02/04/1537243
www.democracynow.org