Wednesday, August 13, 2008
"For better or worse, for richer or poorer, in sickness and in health . . . "
It's a sign of the times. As HLS Prof. Elizabeth Warren has written, "Every 30 seconds in the United States, someone files for bankruptcy in the aftermath of a serious health problem." (See also her SSRN article on this topic.) Insurance coverage is no guarantee that a person won't financially devastated by illness:
Considering the overwhelming impact medical debt can have on other aspects of domestic life, is it any wonder that domestic life is occasionally getting bent in ways that are intended (regardless of the prospect for success) to keep the wolf from the door.
Nobody's safe. That's the warning from the first large-scale study of medical bankruptcy.
Health insurance? That didn't protect 1 million Americans who were financially ruined by illness or medical bills last year.
A comfortable middle-class lifestyle? Good education? Decent job? No safeguards there. Most of the medically bankrupt were middle-class homeowners who had been to college and had responsible jobs -- until illness struck.
As part of a research study at Harvard University, our researchers interviewed 1,771 Americans in bankruptcy courts across the country. To our surprise, half said that illness or medical bills drove them to bankruptcy. So each year, 2 million Americans -- those who file and their dependents -- face the double disaster of illness and bankruptcy.
But the bigger surprise was that three-quarters of the medically bankrupt had health insurance.
How did illness bankrupt middle-class Americans with health insurance? For some, high co-payments, deductibles, exclusions from coverage and other loopholes left them holding the bag for thousands of dollars in out-of-pocket costs when serious illness struck. But even families with Cadillac coverage were often bankrupted by medical problems.
Too sick to work, they suddenly lost their jobs. With the jobs went most of their income and their health insurance -- a quarter of all employers cancel coverage the day you leave work because of a disabling illness; another quarter do so in less than a year. Many of the medically bankrupt qualified for some disability payments (eventually), and had the right under the COBRA law to continue their health coverage -- if they paid for it themselves. But how many families can afford a $1,000 monthly premium for coverage under COBRA, especially after the breadwinner has lost his or her job?
Often, the medical bills arrived just as the insurance and the paycheck disappeared.
Bankrupt families lost more than just assets. One out of five went without food. A third had their utilities shut off, and nearly two-thirds skipped needed doctor or dentist visits. These families struggled to stay out of bankruptcy. They arrived at the bankruptcy courthouse exhausted and emotionally spent, brought low by a health care system that could offer physical cures but that left them financially devastated.
As the article points out, divorce is also an option that couples will consider in order to qualify one or the other of them for state-provided benefits. (This is an old Medicaid-planning device.) The example that is in the article is compelling:
Good question. What happened to our country?
Other couples, like Michelle and Marion Moulton, are forced to consider divorce so that an ailing spouse can qualify for affordable insurance.
Ms. Moulton, 46, a homemaker who lives near Seattle with her husband and two children, learned three years ago that she had serious liver damage, a side effect, she believes, of drugs she was once prescribed. She is trying to get on a transplant list, but the clock is ticking; her once slender body has ballooned, and her doctors say her liver could give out at any time.
Mr. Moulton, a self-employed painting contractor, maintains a catastrophic coverage plan for his family, but its high deductibles and unpredictable reimbursements have left them $50,000 in debt. Without better coverage, a transplant could add unthinkable sums.
Two years ago, Ms. Moulton looked into buying more comprehensive coverage through the Washington State Health Insurance Pool, a state-financed program for high-risk patients. She found the premiums unaffordable, but noticed that the state offered subsidies to those with low incomes. As their debts and desperation multiplied, it occurred to Ms. Moulton that divorcing her husband of 17 years would make her eligible for the subsidized coverage.
“I felt like I had done this to us,” she said. “We had worked hard our entire lives, and if this was all the insurance we had, we could become homeless. I just said, ‘You know, we really need to sit down and talk about divorce.’ ”
Mr. Moulton would not consider it — at first. “From a male point of view, you want to be able to fix things, you want to be able to provide,” he said.
“Then you start looking at what things cost and what someone with no assets can get in terms of funding, and you have to start thinking about it.”
The conversations ebbed and flowed with the family’s financial pressures. They talked about the effect on their children and where they might live. They weighed the legal and financial risks against the prospects of bankruptcy.
The debate continued until this summer, when Mr. Moulton’s father offered financial help. “I know we don’t take charity from anyone,” Mr. Moulton told his wife, “but I’m not going to divorce you and I’m not going to let you die.”
Though grateful for the lifeline, the couple remains unsettled by how close they came.
“Nobody should have to make a choice like that,” Ms. Moulton said. “What happened to our country? I don’t remember growing up like this.”