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Many Families Are Not Prepared For the Financial Burden of Medical Crises

Two-thirds of Americans who file for bankruptcy do so after they’re hit medical crises. And the problem isn’t getting better.

Few things in your physical mailbox inspire more fear than the windowpane envelope return addressed to a doctor’s office or insurance provider. The bottom line in those bills often leads to discomfort, but for many Americans it can lead to crisis: According to a new study, more than half a million families declare bankruptcy each year due to medical expenses, and the proportion of Americans filing for bankruptcy due to unaffordable medical care has not declined since the passage of the Affordable Care Act (ACA).

High deductibles and copays, as well as inadequate disability coverage, are a major reason why 66.5 percent of all bankruptcies are filed due to medical problems, says Dr. David Himmelstein, a professor of urban public health at Hunter College, and a co-author of the study that was published by the Consumer Bankruptcy Project (CBP) in the American Journal of Public Health last month.

“I think American families are in deep trouble,” Himmelstein says. “There are enormous numbers of families that are in very precarious financial condition, and basically just one illness away from financial ruin.”

The families feeling this pain most intensely are middle class, not poor families, Himmelstein says, because families with limited income typically don’t have the credit required to run up debts high enough to claim bankruptcy, nor the resources to obtain the requisite legal assistance.

“For middle-class people, the vast majority have insurance,” Himmelstein says. “But increasingly they have insurance that has so many deductibles, copayments, uncovered services, surprise bills — all those things, that it doesn’t really protect them. And often the bills arrive at the same time that income is going down, because they’re out of work because of illness. So, there’s sort of a double whammy of combined medical bills and loss of income.”

Obamacare was supposed to ease the financial pain of health insurance, but Himmelstein’s group surveyed a random sample of 910 Americans who filed for bankruptcy between 2013 and 2016 for their report and found that the results were virtually unchanged from when they studied the same issue from 2001 to 2007, prior to the implementation of the ACA.

“It may have done something, but the underlying issues were getting worse at the same time. So, health costs were continuing to go up since our earlier study, so, basically, Obamacare may have just been bailing a leaking ship,” he says. That’s due in part to the fact that among the signature accomplishments of Obamacare was expanding Medicaid coverage — something that benefits poor people, not middle-class families, and so would not lead to fewer bankruptcies. Plus, many of the plans offered under the ACA had high deductibles and copays, Himmelstein says.

“A lot of the plans that were sold on the exchanges came with $5,000 deductibles, and for a large swath of Americans, a $5,000 medical bill that comes before you have insurance, that’s tantamount to bankruptcy, particularly if you’re losing income [due to being out of work] at the same time,” he adds.

So, if any of this is relatable to you, what can you do to protect yourself? Himmelstein does not have good news for you.

“I don’t think there’s much you can do, other than to try and have savings. That’s nice to say, but if people don’t have enough income to put away savings, that’s sort of nice advice, but no one can follow it,” he says. “I don’t think there’s really an individual solution to this. I think we need to have society-wide solutions.”

A single-payer system, a la the Medicare-for-all solutions touted by many of the Democratic presidential candidates, would be the best start to a solution, Himmelstein says.

“I don’t think there’s any other option that could work for the medical bills part of it,” he says. “In addition to single-payer, we also need better disability coverage.

Given the current political climate and the fierce opposition to government-funded health care, Himmelstein isn’t optimistic this problem will get better any time soon, meaning last month’s report may not be the last of its kind from Himmelstein and his CBP co-authors.

“Well, we have been doing it for years, and I hope we don’t have to do it in the future,” he says. “But we may well have to.”