Thursday, June 4, 2009

Is this why we buy health insurance?

Medical bills underlie 60 percent of U.S. bankruptcies

Harvard researchers surveyed some 2000 people who filed for bankruptcy in 2007. Their findings:

While only 29 percent directly blamed medical bills for their bankruptcy, 62 percent had medical bills that totaled more than 10 percent of family income, said an illness was responsible, had lost income due to illness or some other medical factor.

Even more shocking is the fact that 78% of these - or almost half of all bankruptcy filings - involved people who had health insurance. These were, in the main, middle class Americans with decent jobs and health insurance, yet a severe illness still throws them into economic distress. Part of the problem, as the report notes, is that too often you're only allowed to buy health insurance if you don't ask for health care:

"Nationally, a quarter of firms cancel coverage immediately when an employee suffers a disabling illness; another quarter do so within a year," the report reads.

And once you've lost it, good luck trying to ever get insurance again with a preexisting condition. So what good is health insurance? Hard to tell from the newspaper accounts of this study and, from the description of the method, I'm not sure this study adequately addresses the question. The key stat would be the proportion of insured families declaring bankruptcy v. the uninsured and I don't think the statistics are here to determine that. I don't find the study available yet at the American Journal of Medicine, but it will be worth taking a closer look at.

Edit: I neglected to point out that this data is from 2007, before the current economic troubles. This situation must be far worse right now.


Cranberry Necklace said...

No longer being insured by a post-employment COBRA plan, I looked for individual health insurance last February. I got quotes from 2 major insurers, both for about $360/month. I decided to go with the slightly cheaper insurer who offered slightly more. But acceptance was contingent upon their actuaries stating I was an acceptable risk after reviewing my medical questionnaire. I was found to be an unacceptable risk and was offered the same insurance at $735/month. I decided to cancel the insurance (through Anthem) and go with the other company (Medical Mutual). But the salesman at Anthem told me write a letter of complaint. Skeptically, I wrote the letter. Within a week Anthem offered me the same insurance at $275/month!

How can I be so much better a risk based only upon my written complaint which stated nothing about my medical history? Does my writing competency and persuasiveness make me a better medical risk?

However, I still don't have the contract in writing. And I am afraid to use the insurance, knowing they will either jack up my rates or terminate it if I use the insurance.

Having been to the hospital without insurance, though, I can tell you that the uninsured are treated like dogs, as well as being charge perhaps 4 times as much as an insured customer.

Uninsured patients are not really customers. A customer can compare prices. In the medical world, it is impossible to compare prices. You are charged whatever. I know. I've tried to compare prices. It was futile. Even after a half hour of trying to get a quote from a hospital on one CBC (complete blood count - draw blood and test it on a machine), the quote I was given was not what was charged. I've since learned that the same institution can have as many as 1,200 different prices for the same procedure - depending upon who does the procedure, where, when, the insurance the patient carries, and the age and condition of the patient.

And ask a doctor what something costs - he'll refer you to his billing agent. Ask the billing agent, and she'll say, ask the doctor. It's happened to me.

The medical system is geared for 3rd party payers - which is why I have medical insurance. I can only hope I don't have to use it.

Scott Hanley said...

And all that complexity adds a ton of administrative costs to health care delivery. After one bout in the hospital, my sister was getting bills for months and months afterward. Separate bills for every test and procedure, separate bills from every person involved in her case. She really had no way of ever knowing if she had seen the last one or whether a new one would show up in the mail next week. The inefficiency was mind-boggling.

anna said...

And just a small thing I know: I have a good friend who works in medical billing at our own huge UM. I had suggested to him that some of the unnecessary mail to patients (the many annoying letters that say "this is not a bill--no payment necessary at this time")--to save $$$ in stamps/ administrative costs. He ran my suggestion past his supervisor. No can do, because "some patients like to receive these." Huh? Who?

James Hanley said...

Megan McArdle critiques the study on her blog. As she explains it, the data don't seem to support the facts, and the author's work seems to be agenda-driven rather than data-driven.

Scott Hanley said...

I wasn't able to find the study published yet at AJM, but here is a preprint.

In critique of Warren:

What Warren calls a "conservative" definition of medical bankruptcy is arguably not all that conservative. Having $5000 in medical bills over 2 years isn't necessarily a disaster, although it's a pretty harsh bite. And missing two weeks of work - it's not stated whether this is consecutive or cumulative during a year - is really not all that uncommon. Those two criteria, by far, account for most of the "medical bankruptcies" identified, which makes me suspicious that the numbers are unreasonably inflated.

In defense of Warren:

I'm not so taken with McArdle's critique, though. She emphasized that the absolute numbers of medical bankruptcies has fallen dramatically since the rules were tightened in 2005. Well, yeah, that was the point. But it only refutes Warren if you agree that all those people who have now been blocked from filing for bankruptcy really don't need to. There's an assertion I would take with a grain of salt.