Tuesday, June 9, 2009

Health Care and Bankruptcy

Going broke is no fun, especially if you have to declare bankruptcy because you've been sick. Americans are increasingly at risk of financial ruin due to illness and medical expenses, according to a new study released in June by the American Journal of Medicine. The researchers, according to Consumer Reports, found that illness or medical bills contributed to nearly two thirds, or 62%, of all bankruptcies in 2007—before the major impact of the housing collapse and current economic downturn. That’s a 50% increase over a similar survey in 2001 by the same researchers. Most of the debtors are middle aged, middle class and have a college level education; unaffordable bills directly contributed to 92% of medical bankruptcies, and loss of income due to illness caused 40 percent. Many people lose their heath insurance after suffering an illness or injury. A quarter of businesses that offer health insurance cancel coverage immediately when an employee suffers a disabling illness, and 25% more cancel coverage within a year, according to the study.

It’s not just the uninsured at risk for medical bankruptcy, according to Suite101.com. The underinsured and fully insured are also vulnerable, and three-quarters of the medically bankrupt had health insurance. As a result of high premiums, deductibles, and co-pays - as well as uncovered services and policy loopholes - out-of-pocket expenses become insurmountable. Even families with superior coverage find themselves filing for bankruptcy.

According to Consumer Reports, at the moment, the best defense against medical debt is to know your coverage, and try to negotiate your bills if they are too high. (And check for billing errors.) Also, be aware that lenders have begun pushing risky credit plans for medical care. Try not to pay medical bills on your credit card—it can weaken your negotiating power with the provider, while potentially racking up tremendous interest and fees. Families are more at risk when the primary wage earner is injured or becomes ill. The family suffers not only because of the increased medical costs, but also because the wage earner might no longer be able to work. As a result, the family loses both income and health coverage, either immediately or soon after. In certain circumstances, individuals might qualify for COBRA coverage, but the premiums can be quite expensive, much too expensive for someone with no job and mounting medical bills.

The report seems to be a little flawed, though, according to ABC News. Also, suspect is the fact that data over 2 years old is being used to sustain an agenda in the forefront now for national health care paid for by U.S. taxpayers. Health care is not a right as some politicians and the mainstream news media would like you to believe. Fact-check.org has noted that even using Harvard’s numbers, it’s more like a bankruptcy every minute; indeed if you add up all bankrputcies in a year you barely get one every 30 seconds. Even using their own numbers, the accurate rate is really closer to 17%. But more to the point is that the Harvard data are clearly inflated, or at best, mischaracterized. A good part of the problem is definitional. The Harvard report claims to measure the extent to which medical costs are “the cause” of bankruptcies. In reality its survey asked if these costs were “a reason” – potentially one of many – for such bankruptcies. Beyond those who gave medical costs as “a reason,” the Harvard researchers chose to add in any bankruptcy filers who had at least $1,000 in unreimbursed medical expenses in the previous two years. Given deductibles and copays, that’s a lot of people. Moreover, Harvard’s definition of “medical” expenses includes situations that aren’t necessarily medical in common parlance, e.g., a gambling problem, or the death of a family member. If your main wage-earning spouse gets hit by a bus and dies, and you have to file, that’s included as a “medical bankruptcy.” A last problem was sampling: The Harvard researchers surveyed bankruptcy filers in five federal court districts accounting for 14 percent of bankruptcies nationally; projecting this to the other 86 percent is sketchy.

The case for national health care is a primary example of overspending and will lead to bankruptcy for the nation. Consider the latest numbers released for the looming national debt in the untold trillions of dollars. There are other options, including HSAs, according to the National Center for Policy Analysis. Health savings accounts (HSAs) are special purpose savings accounts where contributions are tax-deductible for the individual. The amount saved, plus interest earned, is useable for any qualified health care expense. This makes it an ideal alternative to insurance for the self-employed, freelancers, part-time job holders and others not provided with insurance as an employee benefit or who cannot get conventional health insurance. According to an extensive study conducted by Blue Cross Blue Shield Association, those with HSAs are more cost-conscious and proactively, responsibly engaged in their health decisions than those with traditional insurance. For example:
--72 percent of those with HSAs track their health expenses, compared to 42 percent covered by insurance.
--24 percent discuss health expenses with providers and may shop and negotiate, vs. 18 percent covered by insurance.
When it comes to preventive care, HSA account holders win too:
--69 percent have regular check-ups vs. 62 percent covered by insurance.
--25 percent of HSAers exercise regularly vs. 14 percent of those insured.
Those paying for health care with their own money are much more involved and responsible in taking care of themselves and controlling costs than those receiving insurance as an employee benefit or otherwise covered by insurance.

According to ABC News, worth keeping in mind is the fact that no one (apparently) disagrees about the pain medical expenses can cause to uninsured Americans. There is general agreement: Being uninsured and getting sick in the United States is really a bad thing. However, when the data is flawed and then used to support a socialist agenda for nationalized healthcare, there are greater, more important issues at stake than personal debt.

Until next time. Let me know what you think.

1 comment:

Tony Raz said...

Great post and informative. Finding the right abogado is very important when you need to deal with a law situation.