New research in the journal Health Affairs indicates that medical problems contributed to half of all bankruptcies in the U.S., involving 700,000 households. About 700,000 children lived in families that declared bankruptcy in the aftermath of serious medical problems. Another 600,000 spouses, elderly parents and other dependents brought the total number of people directly affected by medical bankruptcies to more than 2,000,000 annually.
Surprisingly, over 75 percent of those bankrupted by medical problems were insured at the start of the bankrupting illness. Among those with private insurance, however, one-third had lost coverage – usually due to job loss – at least temporarily by the time they filed for bankruptcy. Out-of-pocket medical costs (for uncovered services) averaged $13,460 for those with private insurance at the onset of their illness, vs. $10,893 for the uninsured. The highest costs – averaging $18,005 – were incurred by those who initially had private coverage but lost it in the course of their illness. Many families were bankrupted by medical expenses well below the catastrophic thresholds of high deductible plans that are increasingly popular with employers.
“When medical debts and lost income from illnesses leave families facing a mountain of bills, bankruptcy is their last chance to stop the collection calls and try to put their lives back on track,” noted Elizabeth Warren, a study co-author at Harvard. “Bankruptcy costs these families substantial assets and deep personal shame. A person may recover physically from a medical problem, but millions of Americans will never recover financially from their encounters with the health care system.”