Blog | Tuesday, March 8, 2011

QD: News Every Day--Health reform won't stop medical bankruptcies

Massachusetts' health care reform laws did little to change the state's rate of medical bankruptcies, say Harvard researchers who cited policies that offer bare minimum coverage as one reason why.

The researchers projected that national health care reform won't stop medical bankruptcies either, since the two models are similar. The researchers continued their long-standing call for single-payer coverage in the March issue of the American Journal of Medicine.

The popular citation by politicians is that "about half" of bankruptcies are medically related. That's partly true. Medical costs are cited as a reason in about half of all bankruptcies. But it's more accurate to say that job losses from illness or injury are as big a factor as the huge medical bills that result. Another research paper published by the same researchers in Health Affairs in 2005 showed that it takes a large definition of medical bankruptcy, one that includes behavioral health issues such as addictions, childbirth or death, to bring the tally to more than half.

Massachusetts' health law passed in 2006 and was fully implemented by early 2008. According to the U.S. Census Bureau, the share of state residents who were uninsured fell by 58% from 10.4% in 2006 to 4.4% in 2009, and remains the lowest rate of any state.

In 2009, the researchers identified bankruptcy filers through publically available court records and mailed, a self-reported questionnaire regarding medical reasons for declaring. They designated bankruptcies as "medical" based on debtors’ stated reasons for filing, income loss due to illness, and the magnitude of their medical debts.

Among the 199 respondents, between early 2007 and mid-2009, medically related bankruptcies in Massachusetts fell from 59.3% to 52.9%, a decrease of 6.4% (P=.44). The percentage rate doesn't reflect the recession that occurred in that time span. There was an overall increase in all bankruptcies, and medical bankruptcy filings in the state reflect that. They rose from 7,504 in 2007 to 10,093 in 2009. Nationally, Massachusetts' rate of 59.3% of medically related bankruptcies compares to compares to the national rate of 62.1% (P<.02).

Researchers wrote that the states' findings have national implications because national health care reform is largely patterned after the Massachusetts plan, including its individual mandate. One of the administration's arguments in support of the new federal law was that it would significantly reduce medical bankruptcies nationwide. The findings in Massachusetts cast doubt on that claim.

The authors continued that President Barack Obama's recent proposal to let states opt out of health reform "threatens to further weaken the inadequate standards for coverage that were included in the 2010 reform law. The result may well be the growth of skimpier plans nationwide, leading to even higher rates of medical bankruptcy than in Massachusetts."
In 2007, medical issues contributed to 62.1% of bankruptcies nationally, according to the same group of researchers. That study also found that 77.9% of bankruptcy filers were insured at the start of their illness, and that 60.3% had private coverage.

"Health costs in the state have risen sharply since reform was enacted," the authors wrote. "Even before the changes in health care laws, most medical bankruptcies in Massachusetts--as in other states--afflicted middle-class families with health insurance. High premium costs and gaps in coverage--co-payments, deductibles and uncovered services--often left insured families liable for substantial out-of-pocket costs. None of that changed."

Under Massachusetts' reform, the least expensive individual coverage available to a 56-year-old Bostonian carries a premium of $5,616, a deductible of $2,000, and covers only 80% of the next $15,000 in costs for covered services. This turns uninsured people into underinsured people, the authors write.