Medical Bankruptcy: Could an Illness Send You to Bankruptcy Court?
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Medical Bankruptcy: Could an Illness or Injury Send You to Bankruptcy Court?

According to a new study by doctors at Harvard Medical School, medical bills are the driving force behind more than 60% of U.S. bankruptcies.

In a article, the results of the study are summarized and what those results have to say won’t surprise anyone who’s struggled to make costly choices regarding their health care.

Just One Medical Emergency Away from Financial Disaster

Bankruptcies due to medical costs have risen by almost 50% over much of the decade, and most bankruptcy filers fell into the demographic of middle-class homeowners with significant education.

“Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country,” said Steffie Woolhandler, the lead author of the study, which will be published in the August issue of the American Journal of Medicine.

"If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy,” continued Woolhandler.

The study surveys 2,314 random people who filed for bankruptcy in 2007. It concluded that 62.1% of the surveyed bankruptcies occurred because individuals either had more than $5,000 (or 10% of their pretax income) in medical costs or because an individual lost significant income due to their illness.

Many Winding Up in Bankruptcy Court Even Though They Had Health Insurance

The average family that went bankrupt due to medical costs had $17,943 in out-of-pocket expenses.

For those who never had insurance, that number is higher, with those families having on average $26,971 in medical expenses. Those families who had insurance at some point still ended up with $17,749 in medical debt.

Three quarters of people with a medically-related bankruptcy had health insurance, according to the study.

“Seventy-eight percent of them had health insurance, but many were bankrupted anyway because there were gaps in coverage like co-payments and deductibles and uncovered services,” Woolhandler told CNN.

But not everyone is convinced by the findings.

Peter Cunningham, Ph.D. is a senior fellow at the Center for Studying Health System Change, a nonpartisan policy research organization. He believes it is difficult to tell which bankruptcy cases are specifically caused by medical costs and which are caused by the overall economic climate.

Cunningham agrees that medical bills are a growing problem.

“I think medical bills are something that a lot of families are having a lot of difficulty with and whether it’s the direct cause of bankruptcy or whether it helps to push them over the edge because they already were in a precarious financial situation, it’s a big concern and hopefully that’s what medical reform will try to address.”

Cunningham thinks the study may overestimate the number of bankruptcies caused by medical bills while underestimating the burden health care places on American families, because most people struggle along but do not declare bankruptcy.

“Bankruptcy is the most extreme or final step for people who are having problems paying medical bills,” Cunningham told CNN.

A study by his group found that one in five families is unduly stressed by their medical costs.

Unfortunately, the increasing cost of health care is a problem that has likely gotten worse as the economic woes of the country worsened.

“The recession didn’t happen until a year after our study,” said Woolhandler. “We’re quite sure that the problem of bankruptcy overall is worse.”

As interesting and disturbing as the study’s conclusions are, unfortunately many American families live that research every single day.

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