A study published this month in the American Journal of Medicine looks at whether healthcare reform introduced in Mass. in 2006 (fully implemented by 2008) has had an impact on “medical bankruptcy” filings in the state. Mass. lawmakers made health insurance mandatory a few years before the PPACA took a similar position on a federal level, and it’s reasonable to look at results in the state as a possible indicator of how well reform will fare across the country once it takes effect in a few years.
The study looked at bankruptcy filings in 2007 and 2009. Overall filings were up significantly in 2009 across the country (including in Mass.), which is to be expected considering the toll taken by the recession in 2008 and 2009. The total number of medical bankruptcy filings increased in Mass. from 2007 to 2009 (this makes sense given the fact that all bankruptcy filings increased dramatically during that time), although the percentage of medical bankruptcies decreased from 59.3% of all bankruptcies in 2007 to 52.9% in 2009. Despite the decrease, this is still a large portion of bankruptcy filings that can be attributed to medical expenses, given the fact that so many people in the state have health insurance.
One of the major differences between Mass. and the rest of the country is that the vast majority of people filing for bankruptcy had health insurance at the time of filing. Although most people filing for bankruptcy across the country do have health insurance, the percentage is far higher in a state where health insurance is already mandatory (89% versus 69.7% nationwide). The study authors stress the point however, that just having health insurance in place is no guarantee that a family will not become overwhelmed by medical debts or the various financial strains that can accompany a major illness or injury.
As health insurance premiums have risen over the last decade, more and more individuals and businesses have opted to increase their deductibles and out of pocket maximums in order to keep their premiums affordable. The problem with this strategy is that it requires insureds to keep a somewhat significant reserve of money on hand to cover the out of pocket expenses in the event of a serious medical condition. That can be a challenge in the best of times, and the recession has forced many families to use savings for basic expenses. Families that might have been able to weather a large medical bill five years ago are much less able to do so now. Although news stories often focus on people who are facing hundreds of thousands of dollars in medical bills, it doesn’t take anywhere near that amount to push a family into bankruptcy: the average filer (with health insurance) bankrupted by illness in 2007 had just under $18,000 in medical bills. Those without health insurance had an average medical debt of just under $27,000.
The study’s authors note that implementing mandatory health insurance rules is not likely to result in a significant decline in the number of medical bankruptcies nationwide unless we also focus on improving the level of coverage that people have (to reduce out of pocket exposure), and on expanding access to disability insurance that can help provide income to people who are unable to work because of a major illness or injury. Of course the problem with that comes back to cost… the reason deductibles and out of pocket expenses have increased is because policies with lower exposure have become too expensive for most people to afford. Definitely a conundrum, and one that is not likely to be easily solved (especially if we continue to focus so much on health insurance reform rather than the underlying issue of healthcare costs).
