Under #ACA, Medical Bankruptcy Continues
As recently as 1981, only 8 percent of families filing for bankruptcy cited medical reasons. By 2010, when the Affordable Care Act was passed, medical bankruptcy was all-to-common. A 2009 study by Himmelstein et al, published in The American Journal of Medicine, revealed that 62.1% of all bankruptcies had a medical cause.
Telephone interviews identified 639 patients whose illness contributed to bankruptcy: the debtor or spouse in 77.9% of cases; a child in 14.6%; and a parent, sibling or other adult in 7.5%. At illness onset, 77.9% were insured: 60.3% had private insurance as their primary coverage; 10.2% had Medicare; 5.4% had Medicaid; and 2% had Veterans Affairs/military coverage. Few of the uninsured lacked coverage because of a preexisting condition (2.8%) or belief that coverage was unnecessary (0.3%); nearly all cited economic reasons.
By the time of bankruptcy, the proportion of patients with private coverage had fallen to 54.1%, while the percentage with Medicare and Medicaid had increased to 16.4% and 9.9%, respectively. The proportion whose employers contributed to coverage decreased from 43.2% to 36.6%.
Out-of-pocket medical costs averaged $17,943 for all medically bankrupt families: $26,971 for uninsured patients, $17,749 for those with private insurance at the outset, $14,633 for those with Medicaid, $12,021 for those with Medicare, and $6545 for those with Veterans Affairs/military coverage. For patients who initially had private coverage but lost it, the family’s out-of-pocket expenses averaged $22,568.
Among common diagnoses, nonstroke neurologic illnesses such as multiple sclerosis were associated with the highest out-of-pocket expenditures (mean $34,167), followed by diabetes ($26,971), injuries ($25,096), stroke ($23,380), mental illnesses ($23,178), and heart disease ($21,955).
Hospital bills were the largest single out-of-pocket expense for 48.0% of patients, prescription drugs for 18.6%, doctors’ bills for 15.1%, and premiums for 4.1%. The remainder cited expenses such as medical equipment and nursing homes. While hospital costs loomed largest for all diagnostic groups, for about one third of patients with pulmonary, cardiac, or psychiatric illnesses, prescription drugs were the largest expense.
Our telephone interviews indicated the severity of job problems caused by illness. In 37.9% of patients’ families, someone had lost or quit a job because of the medical event; 24.4% had been fired, and 37.1% subsequently regained employment. In 19.9% of families suffering a job loss, the job loser was a caregiver.
Two years later, Himmelstein et al looked at medical bankruptcy in Massachusetts, which had “Romneycare”, the health insurance reform plan after which the ACA was modeled. Although Romneycare greatly expanded health insurance coverage to Massachusetts residents, it didn’t decrease medical bankruptcies significantly because underinsurance was widespread. People bought the insurance they could afford– not necessarily the insurance they needed. Himmelstein et al blamed increased health costs and high premiums for the continued high bankruptcy rates.
What accounts for the seemingly paradoxical trends of increasing coverage yet stable, or even increasing (on a per capita basis), medical bankruptcy rates? Health costs in the state have increased sharply since reform was enacted.9 Even before the changes in health care laws, most medical bankruptcies in Massachusetts, as in other states, affected middle-class families with health insurance. High premium costs and gaps in coverage—copayments, deductibles, and uncovered services—often left insured families liable for substantial out-of-pocket costs. None of that changed. For example, under Massachusetts’ reform, the least expensive individual coverage available to a 56-year-old Bostonian carries a premium of $5256 and a deductible of $2000, and covers only 80% of the next $15,000 in costs for covered services.10 Thus, an insured couple with medical problems and an income greater than $44,000 (ie, >300% of poverty, the eligibility threshold for insurance subsidies) might pay $20,512 in annual medical expenses, a figure that far exceeds the financial capacities of the average American family.11Uncovered services, such as physical therapy, drugs, or home care, might push out-of-pocket costs even higher.
Fast forward to today. Has Obamacare done better than Romneycare in terms of ending medical bankruptcy? Both plans dramatically expanded coverage to millions of people, but as with Romneycare, patients and their families are still struggling to pay their medical bills with Obamacare. The New York Times and the Kaiser Family Foundation recently did a survey and found:
… roughly 20 percent of people under 65 with health insurance nonetheless reported having problems paying their medical bills over the last year. By comparison 53 percent of people without health insurance said the same.
The financial vulnerabilities reflect the high cost of health care in the United States, the most expensive place in the world to get sick.
What’s next for the ACA? Is it time for ACA 2.0?