Get sick, go bankrupt: an American tale

A story that appeared earlier this week deserves much more attention, and discussion, than it has received so far. The healthcare-policy journal Health Affairs published a study based on a survey of bankruptcy filings in five Federal court districts.

Abstract (emphasis added):

In 2001, 1.458 million American families filed for bankruptcy. To investigate medical contributors to bankruptcy, we surveyed 1,771 personal bankruptcy filers in five federal courts and subsequently completed in-depth interviews with 931 of them. About half cited medical causes, which indicates that 1.9–2.2 million Americans (filers plus dependents) experienced medical bankruptcy. Among those whose illnesses led to bankruptcy, out-of-pocket costs averaged $11,854 since the start of illness; 75.7 percent had insurance at the onset of illness. Medical debtors were 42 percent more likely than other debtors to experience lapses in coverage. Even middle-class insured families often fall prey to financial catastrophe when sick.

(See also the Letters posted so far in response to this article.)

Since the vast majority of insured Americans get their medical coverage through their jobs, it can (and does) disappear if you become too sick to work and your COBRA coverage (assuming you can afford it in the first place if you're not working) runs out.

And even with insurance coverage, a serious illness can leave you thousands of dollars in the hole, from co-payments, deductibles, and non-covered expenses.

When my wife got sick several years ago (thank God, she's doing just fine now) we had several thousand dollars in bills for medically necessary treatment that the insurance companies--and we had very good insurance at the time--simply refused to cover.

My parents, God bless them, have been dealing with chronic illnesses and insurance companies for years, and I have learned a little something by watching them operate. I have never been one to take a refusal from some pissant low-level insurance company clerk as a definitive answer, and was ultimately able to cajole and browbeat the insurer into covering a not-insubstantial fraction of the unpaid amounts, but for the most part we just had to grit our teeth and cut some checks. It took some time, but everybody got paid. And we were damned lucky to be able to do that.

Even more charming was what happened to us about a year later; my wife was freelancing, and I was between staff jobs, doing some freelancing myself; we were both getting insurance coverage through a COBRA policy from my former employer, which would easily tide us over, we thought, until one of us slid into the next employer-provided insurance policy.

Until the day we found out that my sleazy former employer had (quite illegally) stopped sending in COBRA payments to the insurance company. Carrie went to the pharmacy to pick up some prescriptions, and discovered, at the cash register at Duane Reade, that we were utterly without insurance coverage.

Let me tell you, that's a scary feeling. And there wasn't a damned thing we could do about it, other than scramble to find some kind of ruinously expensive individual insurance policy that would provide two people with somewhat checkered health histories a little dab of catastrophic health coverage. (We finally got a group policy through a freelancer's association that might have actually paid a pittance towards our care had one of us been hit by a bus or something.)

Lesson learned: Even with COBRA, health insurance "portability" and the like, the way we obtain and maintain health insurance in America is deeply broken. You can play by the rules, do the right thing, work hard at a good job with decent insurance, and still wind up getting badly burned if you get sick enough. Health coverage, as a practical matter, is precarious at best.

Strategies for partial mitigation and self-protection:

• If you don't have access to employer-provided health care, join a fraternal or professional organization to get access to insurance at group rates.
  
• If your employer or affinity group offers you additional disability coverage (short or long-term), bite the bullet and sign up now. Disability coverage by its nature is much harder to take away from you when you need it most.
  
• Ditto long-term care/nursing home insurance, the premiums for which will be very affordable if you're young and in decent health.