Bankruptcies: Most Caused By Medical Bills

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Wed, Jun 10 - 2:58 pm EDT | 5 years ago by
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This is the time of the year that I go on a rampage against the health care industry. Mainly because it’s the time of year that my health insurance is 77160402JR002_PRESIDENT_BUSrenewed — and my premium usually goes up, in spite of the fact that we rarely use our health insurance. (This year, I was lucky enough to be able to reduce my health insurance premium. But it took a bit of work, and more than 45 minutes on the phone with a representative from my health insurance program.)

So when I saw that 60% of bankruptcies are caused by medical bills, I took immediate interest. But here’s the real kicker, reports Reuters:

More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts, the team at Harvard Law School, Harvard Medical School and Ohio University reported in the American Journal of Medicine.

That’s right. Having health insurance probably won’t protect you from bankruptcy in the case of a serious illness. It can help you reduce costs for some things, and can protect you from financial catastrophe on some level (like in the case of my father’s heart attack earlier this year — but it still has taken 6 months for my parents to pay back their portion of the bill), but if you have a serious illness or some other large medical need, your health insurance policy provides flimsy protection. Especially since it will probably be cancelled as soon as the issue is resolved. And, since you have had this illness, getting new coverage may be impossible. Or at the very least, prohibitively expensive.

Recent polls suggest that Americans at least want a public option that they can turn to when the private insurance companies fail them. The Kaiser Health Tracking poll from April showed that 67% of Americans support a public option for health care. This public option is not universal health care by any stretch. Premiums would still have to be paid. But they would be lower than what current insurance companies are charging.

How would it be if insurance companies had to compete with the government? It might mean that $50 – $150 million executive salaries would have to be reduced in order to cut costs so that private companies could be competitive. Or maybe pharma companies would spend less money on marketing (which takes up more than 60% of their profits — research accounts for less than 20%) so that their drugs could be less expensive, also reducing insurance costs. Even better idea: What if health insurance companies, to be more competitive, started offering premium credits to people who were improving their health?

In any case, it is clear that most of our bankruptcies are in actuality caused by health care costs — not by outrageous credit card spending (although that plays its roll, I’m sure). Could reforming health care be a help to our ailing economy? Bottom line: Something needs to be done in order to help alleviate health care costs. It’s one of the major things impeding many people’s personal finances.

image source: Daylife

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  • http://www.lifeinasuit.com Steve

    It’s not just the patient that feels the financial sting of healthcare costs. Hospitals are next in line to inherit the pain and ultimately affect thousands of lives all at once. We’ll know personal bankruptcies have hit critical mass with respect to healthcare costs when hospitals start going to drastic lengths.

    The author’s completely right – it has to start with the insurance companies. I’ve worked for several hospitals across the country and have witness an inordinate amount of shady practices on the payer side. Some have hired lawyers to skew definitions of what is inpatient and what is outpatient in order to pay less. Others have denied entire heart procedures simply because of a simple missing code on the bill. Unbelievable.

    Thank goodness for the proliferation of useful healthcare information on the Internet.

  • http://www.fiscalfizzle.com Wojciech @ Fiscal Fizzle

    A bit hopeless and depressing that the very thing you rely on to protect you will be the same thing that abandons you in your time of need (or immediately thereafter). Isn’t that the whole point of insurance?

    Seems a little bit unfair, but hey, that’s life.

    Meanwhile, I’m working on my own insurance policy – it’s called a large savings account. :)

  • http://casualkitchen.blogspot.com/ Daniel

    I saw this item too, and I thought I’d refer you to a wildly different take on this story from an excellent healthcare/psychiatry blog that I follow. It pretty much eviscerates the thrust of the original article. Never hurts to hear the other side of the argument.

    Dan
    Casual Kitchen

  • Pingback: Money Blog Review for June 12th 2009

  • Jim

    To really screw something up, all you need to do is get the government involved. Just look at their track record at anything other than fighting wars…. pathetic. But the idea of providing monetary incentives for improving an individuals health is worth pursuing. What the government is trying to push through now will cost the taxpayers dearly.

  • Pingback: Medical Bills Cause Most Bankruptcies « Credit Cards, Credit Reports, and Debt Topics

  • Miranda Marquit

    That’s the crappy thing about how insurance companies are for-profit (they used to not be, back in the day). It’s all about the bottom line. The best way to get your money’s worth for insurance is to own stock in the company…But yeah, it is depressing that you pay for insurance and then they try to weasel out of the agreement. We’re working on savings as well. And thinking about the HSA. In the end, you’re the only one you can truly rely on.

  • Miranda Marquit

    You bring up a good point, Steve. I think there are all sorts of people affected by this. Thanks for sharing your insight as well.

  • Miranda Marquit

    Thanks for your alternative view. It’s always good to get as much information as possible. Of course, that doesn’t mean that everyone will always agree…