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​​Under ACA, Medical Bankruptcy Continues
 American Journal of Medicine Blog  

As recently as 1981, only 8 percent of families filing for bankruptcy cited medical reasons. By 2010, when the Affordable Care Act was passed, medical bankruptcy was all-to-common. A 2009 study by Himmelstein et al, published in The American Journal of Medicine, revealed that 62.1% of all bankruptcies had a medical cause.

Telephone interviews identified 639 patients whose illness contributed to bankruptcy: the debtor or spouse in 77.9% of cases; a child in 14.6%; and a parent, sibling or other adult in 7.5%. At illness onset, 77.9% were insured: 60.3% had private insurance as their primary coverage; 10.2% had Medicare; 5.4% had Medicaid; and 2% had Veterans Affairs/military coverage. Few of the uninsured lacked coverage because of a preexisting condition (2.8%) or belief that coverage was unnecessary (0.3%); nearly all cited economic reasons.

By the time of bankruptcy, the proportion of patients with private coverage had fallen to 54.1%, while the percentage with Medicare and Medicaid had increased to 16.4% and 9.9%, respectively. The proportion whose employers contributed to coverage decreased from 43.2% to 36.6%.

Out-of-pocket medical costs averaged $17,943 for all medically bankrupt families: $26,971 for uninsured patients, $17,749 for those with private insurance at the outset, $14,633 for those with Medicaid, $12,021 for those with Medicare, and $6545 for those with Veterans Affairs/military coverage. For patients who initially had private coverage but lost it, the family’s out-of-pocket expenses averaged $22,568.

Among common diagnoses, nonstroke neurologic illnesses such as multiple sclerosis were associated with the highest out-of-pocket expenditures (mean $34,167), followed by diabetes ($26,971), injuries ($25,096), stroke ($23,380), mental illnesses ($23,178), and heart disease ($21,955).

Hospital bills were the largest single out-of-pocket expense for 48.0% of patients, prescription drugs for 18.6%, doctors’ bills for 15.1%, and premiums for 4.1%. The remainder cited expenses such as medical equipment and nursing homes. While hospital costs loomed largest for all diagnostic groups, for about one third of patients with pulmonary, cardiac, or psychiatric illnesses, prescription drugs were the largest expense.

Our telephone interviews indicated the severity of job problems caused by illness. In 37.9% of patients’ families, someone had lost or quit a job because of the medical event; 24.4% had been fired, and 37.1% subsequently regained employment. In 19.9% of families suffering a job loss, the job loser was a caregiver.

Two years later, Himmelstein et al looked at medical bankruptcy in Massachusetts, which had “Romneycare”, the health insurance reform plan after which the ACA was modeled. Although Romneycare greatly expanded health insurance coverage to Massachusetts residents, it didn’t decrease medical bankruptcies significantly because underinsurance was widespread. People bought the insurance they could afford– not necessarily the insurance they needed. Himmelstein et al blamed increased health costs and high premiums for the continued high bankruptcy rates.

 What accounts for the seemingly paradoxical trends of increasing coverage yet stable, or even increasing (on a per capita basis), medical bankruptcy rates? Health costs in the state have increased sharply since reform was enacted.9 Even before the changes in health care laws, most medical bankruptcies in Massachusetts, as in other states, affected middle-class families with health insurance. High premium costs and gaps in coverage—copayments, deductibles, and uncovered services—often left insured families liable for substantial out-of-pocket costs. None of that changed. For example, under Massachusetts’ reform, the least expensive individual coverage available to a 56-year-old Bostonian carries a premium of $5256 and a deductible of $2000, and covers only 80% of the next $15,000 in costs for covered services.10 Thus, an insured couple with medical problems and an income greater than $44,000 (ie, >300% of poverty, the eligibility threshold for insurance subsidies) might pay $20,512 in annual medical expenses, a figure that far exceeds the financial capacities of the average American family. Uncovered services, such as physical therapy, drugs, or home care, might push out-of-pocket costs even higher.

Fast forward to today. Has Obamacare done better than Romneycare in terms of ending medical bankruptcy? Both plans dramatically expanded coverage to millions of people, but as with Romneycare, patients and their families are still struggling to pay their medical bills with Obamacare. The New York Times and the Kaiser Family Foundation recently did a survey and found:

… roughly 20 percent of people under 65 with health insurance nonetheless reported having problems paying their medical bills over the last year. By comparison 53 percent of people without health insurance said the same.

... The financial vulnerabilities reflect the high cost of health care in the United States, the most expensive place in the world to get sick.

Originally published JANUARY 12, 2016


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Medical Bills Are the Biggest Cause of US Bankruptcies: Study
by Dan Mangan, CNBC.com

Bankruptcies resulting from unpaid medical bills will affect nearly 2 million people this year—making health care the No. 1 cause of such filings, and outpacing bankruptcies due to credit-card bills or unpaid mortgages, according to new data. And even having health insurance doesn't buffer consumers against financial hardship.

The findings are from NerdWallet Health, a division of the price-comparison website. It analyzed data from the U.S. Census, Centers for Disease Control, the federal court system and the Commonwealth Fund, a private foundation that promotes access, quality and efficiency in the health-care system.

"A lot of Americans are struggling with medical bills," said NerdWallet Health Vice President Christina LaMontagne.

NerdWallet estimates that households containing 1.7 million people will file for bankruptcy protection this year.

Even outside of bankruptcy, about 56 million adults—more than 20 percent of the population between the ages of 19 and 64—will still struggle with health-care-related bills this year, according to NerdWallet Health.

And if you think only Americans without health insurance face financial troubles, think again. NerdWallet estimates nearly 10 million adults with year-round health-insurance coverage will still accumulate medical bills that they can't pay off this year.

High-deductible insurance plans requiring consumers to pay more out-of-pocket costs are a challenge for many households.

"With an average American family bringing home $50,000 in income, a high medical bill and a high-deductible insurance plan can quickly become something they are unable to pay," LaMontagne said. "If you have an out-of-pocket maximum of $5,000 or $10,000, that's really tough," he said.

The analysis of rising health costs is the first of its kind for NerdWallet.

Medical Bankruptcy by Age, 2013  
Age Range     % of Total Bankruptcies      Est. US Medical-Related Bankruptcies      Est. Size of  Household            Est. No. of People in Households with Medical-Related Bankruptcy 
18-24                 2.3%                            14,618                            2.41                            35,229
25-34               18.7%                          120,708                            2.86                          344,622
35-44               28.9%                          186,812                            3.35                          624,888
45-54               26.4%                          170,875                            2.81                          480,159
55-64               15.8%                          102,080                            2.18                          222,534
65+                     8.0%                            51,719                            1.76                             90,767
                                         Total            647,812                                                            1,798,199
Source: NerdWallet Health Analysis  

Obamacare 'Not a Panacea'

With millions buried under medical bills, more insured under the Affordable Care Act will not completely solve that problem, LaMontagne said. While the ACA's reforms will indeed give more people coverage, NerdWallet's data shows that millions of people with year-round, full coverage are still overwhelmed by medical bills, she said.

"I don't think Obamacare is going to get rid of the situation," LaMontagne said. "The data suggests that already-insured Americans are struggling. With the expansion of insurance, it doesn't seem like that problem will go away entirely. It's not a panacea."

The number of medically related bankruptcies is slightly less than the rate of recent years. Despite the anticipated 2013 dip, such bankruptcies represent about three out of every five filings.

"A lot of Americans probably think about bankruptcy as coming from unpaid credit-card debt or mortgages," LaMontagne said. "But the root cause of all those troubles may well be medical bills."

Not surprisingly, more than 11 million people will take on additional credit-card debt to cover mounting medical bills, LaMontagne said. Because credit cards often charge high interest rates for unpaid balances, debt only mounts, creating a vicious cycle for consumers.

Meanwhile, NerdWallet found, 15 million people will deplete their savings to cover medical bills. Another 10 million will be unable to pay for necessities such as rent, food and utilities because of those bills.

Skipping Prescription Medications

When their savings are gone and their credit cards are maxed out, stretched consumers take the drastic step of cutting back on prescription medications.

More than 25 million people are skipping doses, taking less medication or delaying refilling prescriptions to save money, NerdWallet found.

"That statistic is actually quite troubling," LaMontagne said. Delaying needed medication is a short-term fix that only triggers more health problems in the long term, she said.

—By CNBC's Dan Mangan. Originally published Jun 25 2013.  Follow him on Twitter @danpostman



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