Medical Debt and Personal Bankruptcy: Time for Reform

Written By: Meg Brown on September 27, 2009 No Comment

by Meg Brown

[I:http://insurance.bafree.net/wp-content/uploads/2009/09/MegBrown18.jpg]Republican, Democrat, Left, Right, Centrist… No matter how citizens in this nation may choose to politically identify ourselves, we are all pretty much in agreement about one thing: This country needs health care reform. Our suggestions as to what shape that reform should come in may not be identical but there is no denying that we are currently on the fast track to bankruptcy if meaningful reform is delayed much longer.

Many individual Americans have in fact already tasted from the bitter cup of personal bankruptcy brought on by devastating brushes with the health care system as it exists now. The American Journal of Medicine released study findings this summer that uncovered the extent of medically related causes that lay behind personal bankruptcy filings in 2007. The AJM study authors implemented conservative controls on their work, ensuring a random sample of bankruptcy filers nationwide and followed up with in depth interviews with a significant cross section of participants. This study, a first ever of its kind due to its broad sampling and well defined parameters, revealed that nearly a whopping 62% of these filers indicated medically related expenses as major contributing factors to their debt disaster.

CNN interviewed an author of the study, Steffie Woolhandler, M.D. who made this concluding comment: “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that’s the major finding in our study.” A comment coming from the D.C. based nonpartisan Center for Studying Health System Change in response to the American Journal of Medicine’s study held some skepticism about what actually precipitated the bankruptcy filings but did own that medical expenses were a key player, considering that 1 in 5 American families are “unduly strained” by medical bills.

In 1981, only 8% of families filing for bankruptcy claimed to have done so in the wake of a major medical crisis. (The accuracy of that figure is somewhat debatable since court records do not indicate the origin of debt that is handled by collection agencies, possibly obscuring debt generated by doctor or hospital bills.) In 2001, a major study concluded that over 46% of personal bankruptcies were medically related. The American Journal of Medicine study’s most recent conclusions of 61% used data from 2007, indicating an alarming trend and numbers which interestingly predate the fallout of our economy’s current recession.

The stigma that hangs over personal bankruptcy in our country is in part due to the public’s common misunderstanding of what the average filer looks like; many people have a mental image of a hapless slouch. The American Journal of Medicine’s study reveals this misapprehension for the untruth that it is. Most of the debtors surveyed were middle class, middle aged and college educated. 75% of the debtors had health insurance coverage at the onset of their financial and health problems. Typically this insurance left them with the commonplace gaps of high premiums, copayments, hefty deductibles and a range of uncovered medical services. It is important to note that policy rescission is a normative practice among medical insurance companies with 25% cancelling an individual’s policy immediately upon a disability diagnosis and another 25% of companies cancelling within one year of the diagnosis.

This nation’s long held axiom of “what is good for the middle-class is good for the country” could serve as a helpful guideline in healthcare reform. Every day there is an increasing number of middle class families struggling under the burden of medically related expenses through spiraling insurance premiums and large coverage gaps. Businesses struggle to maintain insurance plans for their employees, insurance that may turn out to be a misnomer as benefits and guaranteed coverage are downgraded in accordance with affordability. It is projected that in 2009, the U.S. will spend 17.6% of its gross domestic product on health care. And this is without taking into consideration all the hidden economic and societal costs of medically related bankruptcies.

Do a quick online search for this American Journal of Medicine study and review it in its entirety for yourself (www.amjmed.com, Vol. 122, Issue 8 pp. 741 to 746). As a citizen, you owe this brief time investment to both you and your country. Inform yourself and do not leave decision making of this kind solely and silently in the hands of your elected officials. It doesn’t hurt to remember that your representatives have plump health insurance packages that the average Joe is barred from participating in.

About the Author:

Writer Meg Brown,concerned with evolving bankruptcy and usury legislation, keeps her ear to the ground through watchdog blogs and the valuable experience of her favorite Charleston SC bankruptcy attorney. To learn more about the important social safety valves of bankruptcy and creditor negotiation, Meg invites you to read Wisdom and Experience by a Charleston SC Bankruptcy Lawyer.