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July 15th, 2009

Health Care and Bankruptcy Go Hand in Hand

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Until recently, health care and bankruptcy never seemingly went hand in hand. Nearly 30 years ago, only 8% of families who filed bankruptcy cited serious medical problems as the reason. The findings from a 2007 study found that number has risen to 62%. What may be more shocking is that the study claims 78% of those filers had medical insurance at the start of their illness:

This newest, nationwide study, conducted before the start of the current recession by Drs. David Himmelstein and Steffie Woolhandler of Harvard Medical School, Elizabeth Warren of Harvard Law School, and Deborah Thorne, a sociology professor at Ohio University, found that the filers were for the most part solidly middle class before medical disaster hit. Two-thirds owned their home and three-fifths had gone to college.

Again today President Obama reiterated his call for health care reform, calling out his opposition and praising his supporters. Last month the president addressed a letter to Democratic Senate leaders which stated that “Soaring health-care costs make our current course unsustainable. It is unsustainable for our families, whose spiraling premiums and out-of-pocket expenses are pushing them into bankruptcy and forcing them to go without the checkups and prescriptions they need.”

But are soaring health care costs the only cause of our “unsustainable” health care system? Are “spiraling premiums” behind the increased bankruptcies? The study says not entirely (emphasis added):

[The study] found that a number of medical factors contributed to a family’s financial disaster. More than 90% of medically related bankruptcies were caused by high medical bills directly or medical costs that were so high the family was forced to mortgage their home. The remaining 8% went bankrupt because a medical problem caused them to lose income.

Dr. Woolhandler, an advocate of a single-payer health-care system, said lawmakers in Washington should reconsider health-care reform in light of the study. “Covering the uninsured isn’t enough,” she said. “Reform also needs to help families who already have insurance by upgrading their coverage and assuring that they never lose it.

There are several issues regarding President Obama’s health care reform that begged to be discussed in this blog, but for today we’ll settle on just one: if the president’s health care reform merely focuses on providing health care to the 50 million uninsured Americans, he will have missed his opportunity to fix an equally debilitating problem.

The study says that of the families which had insurance but lost it during their illness, their medical bills averaged $22,658:

“For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments, and deductibles that illness can put you in the poorhouse,” said lead author Himmelstein. “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy.”

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6 Responses to “Health Care and Bankruptcy Go Hand in Hand”

  1. Alessandro Machi Says: July 19th, 2009 at 8:34 pm

    Do you know what else goes hand in hand? Credit Card companies garnishing wages in states that they are allowed to do so, and those states experiencing higher bankruptcy rates which in turn bring the state closer to bankruptcy themselves.

    It seems to me that the credit card companies are profiting more by defaulting their credit card customers and rejecting home mortgage loans as these two actions lead to a depressed economy which devalues the price of businesses desperate for assistance.

    Chase bank is able to make more money in other non consumer divisions the more they starve out their consumer divisions. This should be grounds for treason against citizens of the United States.

    http://www.daily-protest.com
    http://www.bloggersagainstchasebank.com

  2. Nina Says: July 24th, 2009 at 9:31 pm

    We might not have seen all the consequences the lack of health care has had on the population at this point. Unresolved health issues for people living without health care might create an even worse condition later. Since stress is a main factor for illnesses, the stress with foreclosure, unpaid credit card debt, and not being able to help a sick family member becomes a delayed impact on the population’s health later.

  3. Tim Manni Says: August 3rd, 2009 at 11:12 am

    Nina,

    Thanks for the comment. That’s certainly a point I never considered. I wonder if years down the road anyone will make a similar connection?

    Thanks,
    Tim

  4. “Today’s bankrupt families a… | TheMoneyPile.com Says: August 10th, 2009 at 10:21 pm

    [...] Health Care and Bankruptcy Go Hand in Hand (hsh.com) Related Posts:Building a Budget One Penny at a Time"Most people get ahead during …"How am I going to live today …"But the thing is, [debt] is w…Simply BlessedIf you enjoyed this post, make sure you subscribe to my RSS feed! [...]

  5. Ross Mayo Says: February 25th, 2010 at 2:59 pm

    Bankruptcy should be used only when your debt is so high that you can never possibly repay all of your debt and still eat. Remember bankruptcy stays on your credit report for 10 years (7 years is the minimum, however creditors have the say here, and they always opt for 10 years).

  6. Tim Manni Says: February 26th, 2010 at 2:14 pm

    Thanks for commenting Ross!

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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