Medical Problems Cause Half of Personal Bankruptcies

Illness and medical bills contributed to roughly half the personal bankruptcy filings in 2001, affecting as many as 2.2 million Americans, a new Harvard study says.

More than 75 percent of the filers had insurance, but many of them lost coverage during their illness, the research showed.

The study, which appears in the Feb. 2 issue of Health Affairs, provides a rare - and stark - glimpse into the medical causes of bankruptcy in the United States.

People who succumb to medical debt are mostly middle-class or working-class people who own their own homes and have at least some college education, the study found.

"I think the message that we take away is, really, nobody is safe in our country. Short of (Microsoft Chairman) Bill Gates, if you're sick enough long enough, you're likely to be financially ruined," cautioned study author Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School.

"We're all one serious illness away from bankruptcy," he added.

Carol Pryor, a senior policy analyst at The Access Project in Boston, has studied the issue of medical debt and its "ripple effect" on people's lives. It can ruin an individual's credit and make it difficult to obtain and pay for medical appointments, she said. And as more health-care costs get shifted to consumers in the form of higher premiums, deductibles and co-insurance, the problem is only likely to escalate, she added.

"The medical debt issue is interesting," Pryor said, "because it just points up so many fault lines in our system."

With the cooperation of bankruptcy judges in five federal districts, the study authors distributed questionnaires to debtors at their mandatory meetings with court-appointed trustees. A total of 1,250 questionnaires - 250 per district - were collected, providing data on demographics, housing and specific reasons for filing bankruptcy.

Additional information from 521 homeowners filing for bankruptcy boosted the total sample to 1,771. Follow-up telephone interviews were completed with 931 families.

More than a quarter of those surveyed cited illness or injury as the specific reason for bankruptcy. When investigators examined how frequently illness and medical bills contributed to bankruptcy, the percentages swelled.

Close to half met the researchers' definition of a "major medical bankruptcy," meaning they either cited illness or injury as a specific reason for bankruptcy, had more than $1,000 in uncovered medical bills in the past two years, lost at least two weeks of income from work due to illness or injury, or mortgaged a home to pay medical bills.

More than half met the criteria for "any medical bankruptcy." This group included people who had a major medical bankruptcy or anyone reporting addiction, uncontrolled gambling, birth of a child, or death of a family member as a cause of bankruptcy.