Study links half of bankruptcies to illness

BOSTON — Costly illnesses trigger about half of all personal bankruptcies, and health insurance offers no protection against ending up penniless, according to findings from a Harvard University study.

Researchers from Harvard's law and medical schools said the findings underscore the inadequacy of many private insurance plans that offer "catastrophic" coverage but little financial security for less severe illnesses.

"Unless you're Bill Gates, you're just one serious illness away from bankruptcy," said Dr. David Himmelstein, the study's lead author and an associate professor of medicine. "Most of the medically bankrupt were average Americans who happened to get sick."

The study, to be published online today by the journal Health Affairs, distributed questionnaires to 1,771 bankruptcy filers in 2001 in California, Illinois, Pennsylvania, Tennessee and Texas. More than 900 of those questioned underwent more detailed interviews about their financial and medical circumstances.

Illness and medical bills were cited as the cause, at least in part, for 46.2 percent of the personal bankruptcies in the study.

Most seeking court protection from creditors had health insurance, with more than three-quarters reporting they had coverage at the start of the illness that triggered bankruptcy. The study said 38 percent had lost coverage at least temporarily by the time they filed for bankruptcy, with illness frequently leading to the loss of both a job and insurance.

Out-of-pocket medical expenses covering co-payments, deductibles and uncovered health services averaged $13,460 for bankruptcy filers who had private insurance at the onset of illness, compared with $10,893 for those without coverage. Those who initially had private coverage but lost it during their illness faced the highest cost, an average of $18,005.

The findings indicate medical-related bankruptcies hit middle-class families hard: 56 percent of the filers owned a home, and the same number had attended college.

"Families with coverage faced unaffordable co-payments, deductibles and bills for uncovered items like physical therapy, psychiatric care and prescription drugs," Himmelstein said.

The Robert Wood Johnson Foundation paid for the study.