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Health Insurance to Go Broke With

posted by Bob Lawless

An article in today;s New York Times chronicles how medical debt can financially ruin U.S. citizens even with health insurance. Policies with limits, often hidden from the consumer, quickly run out and leave the insured with mounds of debt. This story comes on the heels of an academic study by Credit Slips bloggers Debb Thorne and Elizabeth Warren and their co-authors, David Himmelstein and Steffie Woolhandler, showing an increase between 2001 and 2007 in the number percentage of medically related bankruptcies. I sometimes wonder how persons reading from outside the U.S. react to these sorts of stories.


As it happens, I just returned to the St. Petersburg Russia apartment where I'm staying for the next month. I spent the evening with a group of young Russians who wanted to practice their English with a native speaker. They were quite well informed about our country and were indeed somewhat contemptuous of a society that can leave a third of its citizens uninsured and many of the rest under-provided with access to health care. They know that their own country has problems in this area, since doctors that work in the free clinics get paid less than those in private practice and so the best doctors leave the free clinics. But no one in Russian has to resort of an emergency room when the baby runs a fever or the child falls off a tree.

Not to be too flip, but one statement in your post seems to be misleading. I am also wondering how people will react. You state that the study showed an increase in the "number" of medically related bankruptcies, while what the study actually showed is an increase in the "percentage" of medically related bankruptcies. Total bankruptcy filings dropped significantly in 2006 and 2007 (less than 1/3 the level of 2001?). The press release and links that you provded were extremely careful in using the term percentage instead of number. Given that the term for the study started in a high bankruptcy and unemployement period (the dot-com bust) and ended in a period of extremely low unemployment and bankruptcies (after big changes in bankruptcy law), I find it hard to draw conclusions about absolute numbers given only the percentages. If you're trying to get an honest reaction, you should be more accurate. I don't have the exact numbers in front of me, but medical bankruptcies probably decreased in number, didn't they?

Nick, you're not being flip. You're right. I should have written "percentage" and not "number." I corrected the post.

I am curious what you mean by "how medical debt can financially ruin U.S. citizens even with health insurance" in relation to this article. I looked up the couple's chap 7 petition and schedules on the court website [txwb.uscourts.gov]. As I read the filings, they listed $97,674 of personal property and no real property, and claimed $96,672.67 as exempt. It's possible my math is off slightly but not materially. The characterization seems to have gone unchallenged and I assume it was correct. So they hold essentially the same assets before and after filing bankruptcy. That does not strike me as financial ruin. Or, if it is, it's the same financial ruin as they would have in any other health care payment system. The health care was free at the end of the day. The creditors certainly lost money of course.

In general, though stories like this, however poorly reported, raise a question to what extent people with health bills should be expected to use up their assets to pay their medical bills before seeking public funding. Certainly Medicare requires that before nursing home care is provided at Medicare's expense. If Medicare is the preferred model for a public option, then logically the same rule should apply for a public plan and an individual would wind up in the same place as the couple profiled in the story even under such a plan.

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