Tag Archives: bankruptcy

Bankruptcy: Health insurance for the desperate

About Andrew Van Dam

Andrew Van Dam of The Wall Street Journal previously worked at the AHCJ offices while earning his master’s degree at the Missouri School of Journalism.

In The New York Times, reporter Kevin Sack visits Nashville, Tenn. to tell stories from the front lines of health bankruptcy, stories which he folds into larger discussions about health care reform. Apart from compelling anecdotes, Sack’s most interesting angle was that bankruptcy is equivalent to a painful insurance safety net for many Americans.

nashville
The old Davidson County courthouse in Nashville, Tenn. Photo by Brent and MariLynn via Flickr.

“This has really become the insurance system for the country,” said Susan R. Limor, a bankruptcy trustee who calculated that 13 of the 48 Chapter 7 liquidation cases on her docket one recent afternoon included medical debts of more than $1,000.
Under Chapter 7, a debtor’s assets are liquidated and the proceeds are used to pay creditors; any remaining debts are discharged, and filers are left with a 10-year stain on their credit ratings.
“You can’t believe how many people discharge medical debts,” Ms. Limor said. “It’s a kind of trailing indicator of who’s suffering in this economy.”

Sack writes that proposed health care reform bills in both houses seek to solve the medical bankruptcy epidemic by expanding Medicaid eligibility, subsidizing health insurance and capping annual out-of-pocket medical costs.

AHCJ Immediate Past President Trudy Lieberman adds another anecdote to the mix in a post on CJR.org, this one based on an engineer from rural Illinois. Despite a relatively good health plan from his employer and the relatively good health of his wife and children, he was forced to declare medical bankruptcy earlier this decade and now the bills are mounting again. Lieberman carefully chronicles the man’s expenses, teasing apart premiums, deductibles and everything else, then comes to the conclusion that proposed health care reforms won’t do him much good.

Health costs lurk behind middle-class bankruptcies

About Scott Hensley

Scott Hensley runs NPR's online health channel, Shots. Previously he was the founding editor of The Wall Street Journal's Health Blog and covered the drug industry and the Human Genome Project for the Journal. Hensley serves on AHCJ's board of directors. You can follow him at @ScottHensley.

Medical bills and gaps in health coverage are wreaking havoc on the finances of the middle class, say researchers who analyzed the bankruptcies of thousands of Americans.

nearly-empty
Photo by pheaber via Flickr

Health issues were a factor in 62.1 percent of personal bankruptcies in 2007, finds a study just published online by the American Journal of Medicine.

But what criteria led authors Drs. David Himmelstein and Steffie Woolhandler, outspoken advocates for a single-payer health care in this country, and their colleagues to classify someone’s bankruptcy as a medical one?

Well, it’s a long list and one to think about when evaluating or citing the results. So (deep breath), here goes:

  • The person had to say that “illness, injury or medical bills” was the specific reason for bankruptcy; or,
  • Uncovered medical bills exceeded $5,000 or 10 percent of family income; or,
  • The filer or spouse lost two or more weeks of work-related income due to injury or illness; or,
  • The person tapped home equity to pay medical bills.

Whew!

What to do? The authors stop short of calling for a federal takeover of health coverage in the paper, but say, pointedly, that “medical impoverishment” is “almost unheard of” in other rich countries. A key difference, they write, is that those other places have some sort of national health insurance.

Speaking of money, the Robert Wood Johnson Foundation funded the work.