[Paleopsych] Reuters: Half of Bankruptcies in U.S. Due to Medical Bills

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Wed Feb 2 21:58:13 UTC 2005

Half of Bankruptcies in U.S. Due to Medical Bills
Wed Feb 2, 4:28 AM ET

[Thanks to James Hughes for this.]

By Maggie Fox, Health and Science Correspondent

WASHINGTON (Reuters) - 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

The study, published in the journal Health Affairs, estimated that
medical bankruptcies affect about 2 million Americans every year, if
both debtors and their dependents, including about 700,000 children, are

"Our study is frightening. Unless you're Bill Gates (news - web sites)
you're just one serious illness away from bankruptcy," said Dr. David
Himmelstein, an associate professor of medicine at Harvard Medical
School (news - web sites) who led the study.

"Most of the medically bankrupt were average Americans who happened to
get sick. Health insurance offered little protection."

The researchers got the permission of bankruptcy judges in California,
Illinois, Pennsylvania, Tennessee and Texas to survey 931 people who
filed for bankruptcy.

"About half cited medical causes, which indicates that 1.9 to 2.2
million Americans (filers plus dependents) experienced medical
bankruptcy," they 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 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

"Even middle-class insured families often fall prey to financial
catastrophe when sick," the researchers wrote.

Bankruptcy specialists said the numbers seemed sound.

"From 1982 to 1989, I reviewed every bankruptcy petition filed in South
Carolina, and during that period I came to the conclusion that there
were two major causes of bankruptcy: medical bills and divorce," said
George Cauthen, a lawyer at Columbia-based law firm Nelson Mullins Riley
& Scarborough LLP.

"Each accounted, roughly, for about a third of all individual filings in
South Carolina."

He said fewer than 1 percent of all bankruptcy filings were due to
credit card debt. "That truly is a myth," Cauthen said in a telephone

Cauthen said he was not surprised to hear that so many of the bankrupt
people in the study were middle-class.

"Usually people who have something to protect file bankruptcy," he said.
"The truly indigent -- people that we see on the street -- there is no
relief that we can give them."

Dr. Steffie Woolhandler, a Harvard associate professor and physician who
advocates for universal health coverage, said the study supported
demands for health reform.

"Covering the uninsured isn't enough. We must also upgrade and guarantee
continuous coverage for those who have insurance," Woolhandler said in a

She said many employers and politicians were pressing for what she
called "stripped-down plans so riddled with co-payments, deductibles and
exclusions that serious illness leads straight to bankruptcy."

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