Bankruptcy & Medical Costs

ABC News reports

Half of all U.S. bankruptcies are caused by soaring medical bills and most people sent into debt by illness are middle-class workers with health insurance, researchers said on Wednesday.

Typically, bankruptcy is viewed as the result of credit card debt, but South Carolina lawyer George Cauthen has found that credit cards account for less than 1 percent of bankruptcies in his state. In contrast, medical bills account for about one third. ABC quotes Dr. David Himmelstein saying, "Our study is frightening. Unless you're Bill Gates you're just one serious illness away from bankruptcy."

Even with health insurance, the cost of co-pays and deductibles, along with uncovered procedures can quickly add up. Researchers for the study wrote, "Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness." The report goes on to say, "The average bankrupt person surveyed had spent $13,460 on co-payments, deductibles and uncovered services if they had private insurance. People with no insurance spent an average of $10,893 for such out-of-pocket expenses." And as the total cost of health care increases year after year, health insurance for middle-class workers is covering less and less, so this problem will only get worse.

Previously, I have argued that major healthcare reform should be one of the top three priorities of President Bush's newly begun second term. Insurance cost increases are out of control, which is becoming an economic issue. Shortly before the 2004 election, Linda Johnson wrote, "Businesses have identified soaring health insurance costs as the most critical issue facing them today." Eileen Simon continues in the same article,

Medical costs also have emerged as an important policy issue for automakers. Detroit's Big Three contend the massive amounts they spend on health care for workers and retirees $8.5 billion combined in 2003 is the biggest obstacle for competing with foreign automakers. Before the election, General Motors Corp. and Ford Motor Co. said it was vitally important for whomever wins the White House to work across party lines to solve the nation's health care crisis.

Already overburdened employers are being forced to shift more and more of the cost of insurance to their employees, and that insurance is covering less and less, resulting in additional out of pocket expenses. These increasing expenses lead to the high bills and bankruptcies ABC is reporting. This problem actually feeds back on itself. The cost of unpaid health service bills, either by the uninsured or those forced into bankruptcy, forces providers to increase the cost of those services, resulting in higher insurance premiums for employer and employee and higher out of pocket expenses, which in turn result in more bankruptcies, triggering higher costs, and so on. The economy cannot long hold up under this burden. The crisis of skyrocketing health care costs is a ticking time bomb in this country.

Yet, where does this crisis fit in President Bush's agenda for his second term? Not very highly. The president devoted just one paragraph of his State of the Union speech to the subject:

To make our economy stronger and more productive, we must make health care more affordable, and give families greater access to good coverage, and more control over their health decisions. I ask Congress to move forward on a comprehensive health-care agenda -- with tax credits to help low-income workers buy insurance, a community health center in every poor county, improved information technology to prevent medical errors and needless costs, association health plans for small businesses and their employees, expanded health savings accounts, and medical liability reform that will reduce health-care costs, and make sure patients have the doctors and care they need.

The focus, as during the campaign, is primarily on providing insurance. I have argued previously that controlling the cost of health care must involve more than just insurance. The findings that ABC report add support to that argument. Insurance alone merely reduces the cost. But, even with insurance, costs can rapidly get out of control for middle-class families. A comprehensive solution is required, and soon.

Addressing the looming disaster of health care costs must be a much higher priority for this administration than it appears to be at this point.