The Sub-Headline Says It All

Health Hazards:
How mounting medical costs are plunging more families into debilitating debt and why insurance doesn’t always keep them out of bankruptcy.

MSNBC has this report on the state of healthcare in America:

Health-care debts typically play a role in about half of the approximately 1.5 million bankruptcies filed in the United States each year, according to Harvard researchers Elizabeth Warren and David U. Himmelstein. And, like the Jacksons, 75 percent of those who declare medical bankruptcy have health insurance at the onset of the illness that ultimately helped to push them over the financial edge, according to the Harvard research.
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Today, 46 million Americans are uninsured. And 53 percent of adults who were uninsured at any time during 2005 reported medical debt or bill problems, according to a Commonwealth Fund Health Insurance survey this spring. But medical debt is not limited to the uninsured. One-fifth of working-age adults, both insured and uninsured, currently have medical debt they're paying off over time; and three of five adults with medical bills or debt problems said they were insured at the time the debt was incurred, according to the Commonwealth survey.
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The solution: universal health insurance, says Warren. "Bankruptcy is a Band-Aid. It doesn't solve the underlying problem." Himmelstein, her Harvard colleague, agrees. "It needs to be coverage that continues whether or not you're sick, whether or not you're working," he says. "If you're in an auto accident today and can't work for six months, how many Americans could actually withstand that as a disaster in their lives?" Too many Americans lack a safety cushion for expensive medical costs. "There are just so many people who live so on the edge that medical emergencies can just spin them over that edge," says Brett Williams, author of "Debt for Sale: A Social History of the Credit Trap." "They skimp on things that are ultimately cheaper, like screenings. Or diabetics will skimp on insulin. Then amputations end up being so much more expensive."

The elderly are particularly hard hit because they often lack a significant income at the same time that they need more medical care and more medication. "They've got high fixed expenses, and they don't have lots of income," says Skeel. Medicare provides prescription drug coverage-but with a huge gap called the "donut hole," which forces seniors to pay 100 percent of the costs of their drugs between $2,250 and $5,100 in purchases in a year.

Kathryn Lopez, 67, and her husband, Conrad, 68, spend at least $150 a month on prescriptions, though they pay $260 for Medicare with a supplement. The couple now owes $47,000—despite starting their retirement with $135,000 in savings. They're in the hole largely because of large co-pays and uncovered expenses for a series of surgeries, including an operation to remove Kathryn's esophagus because of cancer and to replace Conrad's hips. He works as a restaurant manager, and she runs a bed-and-breakfast out of their home in Canyon City, Colo., but their income isn't enough to pay their medical bills.
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Often medical bankruptcies are the result of an illness or injury combined with the loss of a job. That's why even non-catastrophic medical problems often lead to catastrophic financial results. The median medical debt for the people in the Harvard survey: $11,000. One man in the study needed knee surgery. His insurance paid for it—but didn't cover his rehab, his drugs or his crutches. He wound up with $12,000 in out-of-pocket expenses—a problem "when you're making $40,000 and living pretty close to the edge," says Warren.

Of course, many people do not want to file for bankruptcy, even when faced with astronomical medical debts. "For every family that ends up with a medical bankruptcy, there are many more hanging on by their fingernails, selling the home, cashing out the pension, trying to make the payments for the medical care they received," says Warren. And while bankruptcy is designed to give people a fresh start, it's not much help when an expensive medical problem is ongoing. Warren recalls telling a couple whose hemophiliac child had contracted AIDS that they shouldn't file for bankruptcy until the child died.
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Thomas Mason, 67, says he hasn't filed "because of the cost." Mason, who had a heart attack when he was 51, says it's tough to land a job with insurance at his age and with his health history. So he works full-time as an assistant manager for a small grocery chain that doesn't offer insurance. Meanwhile, he suffers from an enlarged heart and enlarged prostate and needs surgery on both legs for blockages and varicose veins. His wife, Brenda, 52, is a type II diabetic and can't work because her health is so poor. So they squeak by on his income of $25,000 to $27,000 a year—hardly enough to pay their $12,000 to $15,000 annual expenses for doctors' visits and medicine, including insulin. Of their $12,000 in debt, $9,000 is owed to doctors. "I never lived lavishly," he says. "The things in our apartment have either been given to us, or we get at garage sales or Goodwill or Salvation Army." Unfortunately, they may be able to get free clothes—but not free medical care.