Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds

Illness and medical bills caused half of the 1,458,000 personal bankruptcies in 2001, according to a study published by the journal Health Affairs.

The study estimates that medical bankruptcies affect about 2 million Americans annually -- counting debtors and their dependents, including about 700,000 children.

Surprisingly, most of those bankrupted by illness had health insurance. More than three-quarters were insured at the start of the bankrupting illness. However, 38 percent had lost coverage at least temporarily by the time they filed for bankruptcy.

Most of the medical bankruptcy filers were middle class; 56 percent owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off from work -- losing income and job-based health insurance precisely when families needed it most.

Families in bankruptcy suffered many privations -- 30 percent had a utility cut off and 61 percent went without needed medical care.

The research, carried out jointly by researchers at Harvard Law School and Harvard Medical School, is the first in-depth study of medical causes of bankruptcy. With the cooperation of bankruptcy judges in five Federal districts (in California, Illinois, Pennsylvania, Tennessee and Texas) they administered questionnaires to bankruptcy filers and reviewed their court records.

Dr. David Himmelstein, the lead author of the study and an Associate Professor of Medicine at Harvard commented: "Unless you're Bill Gates you're just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick."

"When medical debts and lost income from illnesses leave families facing a mountain of bills, bankruptcy is their last chance to stop the collection calls and try to put their lives back on track.," noted Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard and a study co-author. Professor Warren, a leading expert on personal bankruptcy, went on: "Bankruptcy costs these families substantial assets and deep personal shame. A person may recover physically from a medical problem, but millions of Americans will never recover financially from their encounters with the health care system."

Health insurance offered little protection. Families with coverage faced unaffordable co-insurance, deductibles and bills for uncovered items like physical therapy, psychiatric care and prescription drugs. And even the best job-based health insurance often vanished when prolonged illness caused job loss - precisely when families needed it most. Too often, private health insurance is an umbrella that melts in the rain."

However with proper financial planning which provide comprehensive, lifelong coverage to all. It is able to end the cruelty of ruining families financially when they get sick.