Medical Bills As a Cause of Bankruptcy

A recent study published in the American Journal of Medicine has concluded that “illness and medical bills contribute to a large and increasing share of US bankruptcies.” In ”Medical Bankruptcy in the United States, 2007: Results of a National Study” (for an abstract of the article look here), the authors of the study observe that “as recently as 1981, only 8% of families filing for bankruptcy did so in the aftermath of a serious medical problem. By contrast, our 2001 study in 5 states found that illness or medical bills contributed to about half of bankruptcies. Since then, the number of un- and underinsured Americans has grown; health costs have increased; and Congress tightened the bankruptcy laws.”

Specifically, they conclude that “using a conservative definition, 62.1% of all bankruptcies in 2007 were medical [my emphasis]; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6% [again, my emphasis]. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.”

The authors of the study “surveyed a random national sample of 2314 bankruptcy filers in 2007, abstracted their court records, and interviewed 1032 of them.” They then “designated bankruptcies as ‘medical’ based on debtors’ stated reasons for filing, income loss due to illness, and the magnitude of their medical debts.”

For those who are interested in the details of their definitions and methods, they explain that “questionnaires were the basis for our 2001-2007 time trend analysis. For this analysis, we replicated the most conservative definition employed in the 2001 study, which designated as ‘medically bankrupt’ debtors citing illness or medical bills as a specific reason for bankruptcy; OR reporting uncovered medical bills >$1000 in the past 2 years; OR who lost at least 2 weeks of work-related income due to illness/injury; OR who mortgaged a home to pay medical bills. Debtors who gave no answers regarding reasons for their bankruptcy were excluded from analyses.

“For all other analyses (i.e., those not reporting time trends) we adopted a definition of medical bankruptcy that utilizes the more detailed 2007 data. We altered the 2001 criteria to include debtors who had been forced to quit work due to illness or injury. We also reconsidered the question of how large out-of-pocket medical expenses should be before those debts should be considered contributors to the family’s bankruptcy. Although we needed to use the threshold of $1000 in out-of-pocket medical bills for consistency in the time trend analyses, we adopted a more conservative threshold—$5000 or 10% of household income—for all other analyses. Adopting these more conservative criteria reduced the estimate of the proportion of bankruptcies due to illness or medical bills by 7 percentage points.”

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Published in: on July 7, 2009 at 1:27 pm  Leave a Comment  

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