The Leading Cause of Personal Bankruptcy

Whenever I do a piece on our healthcare system, our foreign readers always send some aghast emails. To which I can only say, " I can't really explain to you the US Healthcare system." The fervor is to the point it's hard to fight the dogma.

So many jobs are in small businesses, but the price of insurance is too much to bear for a small business to provide this insurance. While specialized care is the best in the world, our life expentency is 3 years lower than those "socialists" to the north of us in Canada, even though they apparently have to wait "forever" just to get their broken arm fixed since they are "rationing" care. All I know is 40% are uninsured, and use the emergency room as their primary care physician as befitting any good 1st world country. I often say in America if you get sick at the wrong time (when you are uninsured) you go bankrupt... it looks like I will have to modify that statement. It appears even those who have insurance often go bankrupt. So to the foreign readers who live in those "socialist" countries like the United Kingdom... it's just hard to explain what is going on here, unless you live in the world of soundbites and political extremes.

Remember, we wrote last year as the recession hits Americans are cutting back on "Extras"... you know, like healthcare [Sep 24, 2008: As Economy Gets Tough, Americans Begin to Cut out "Extras" - Like Healthcare]

22% of 686 consumers said that economy-related woes were causing them to go to the doctor less often. About 11% said they've scaled back on prescription drugs to save money.

Health-care companies say the current economic slump's impact on demand for medical services has been surprisingly swift.

Speaking at an investor conference this month, Walgreen Co. Chief Executive Jeffrey Rein said the U.S. is experiencing the "tightest prescription market" in his 27-year career, as more cash-strapped patients skip their pills or take half doses.

"It's hard to get people to follow up when they're having to decide between the gas bill, the electric bill or deciding to come in and see the doctor," Dr. King says.

Ironically even with 4/10ths of Americans without insurance, the system will still eventually bankrupt the country. Cleary a very healthy system. Anyhow back to green shoots.

This is where I say 'richest country on Earth'*
*excluding debts

Via Reuters

• Medical bills are behind more than 60 percent of U.S. personal bankruptcies, U.S. researchers reported Thursday in a report they said demonstrates that healthcare reform is on the wrong track.
• More than 75 percent of these bankrupt families had health insurance but still were overwhelmed by their medical debts, the team at Harvard Law School, Harvard Medical School and Ohio University reported in the American Journal of Medicine.
• "Using a conservative definition, 62.1 percent of all bankruptcies in 2007 were medical; 92 percent of these medical debtors had medical debts over $5,000, or 10 percent of pretax family income," the researchers wrote.
• "Most medical debtors were well-educated, owned homes and had middle-class occupations."
• "Unless you're Warren Buffett, your family is just one serious illness away from bankruptcy," Harvard's Dr. David Himmelstein, an advocate for a single-payer health insurance program for the United States, said in a statement. "For middle-class Americans, health insurance offers little protection," he added.

We don't need no stinkin' middle class... the have and have-not system we are moving to is working like a charm. Reverse Robin Hood.

• The researchers, funded by the Robert Wood Johnson Foundation, said the share of bankruptcies that could be blamed on medical problems rose by 50 percent from 2001 to 2007. (while I'm not advocate of bankruptcy, please keep in mind the lobbyists for the financial firms made filing bankruptcy much more expensive and difficult mid decade. When oligarchs say jump, our feckless... err, fearless leaders jump)
• Patients with multiple sclerosis paid a mean of $34,167 out of pocket in 2007, diabetics paid $26,971, and those with injuries paid $25,096, the researchers found.

Solution?

• The researchers and some consumer advocates said the study showed the proposals under the most serious consideration are unlikely to help many Americans. They are pressing for a so-called single payer plan, in which one agency, usually the government, coordinates health coverage. (that would make us European.. or worse.... Canadian) Neither Congress nor Obama are considering the kind of single-payer plan advocated by Public Citizen, Himmelstein and his colleague Dr. Steffie Woolhandler. (no one wants to be called European - it's a dirty word in America)
• "Expanding private insurance and calling it health reform will fail to prevent financial catastrophe for hundreds of thousands of Americans every year," Dr. Sidney Wolfe of the Health Research Group at Public Citizen said in a statement.
• "Nationally, a quarter of firms cancel coverage immediately when an employee suffers a disabling illness; another quarter do so within a year," the report reads. (which last I checked, pretty much removes the whole point of healthcare insurance)

If anyone is from Australia and happens to catch this, please feel free to drop me a line on how your healthcare works. It's a Western style country and since Americans hate to be branded European (code word for socialistic), maybe we can adopt whatever Australia is doing. Australia does not have the same bad associations. Unless of course you have a single payer system... and then we will not want to be branded Australian either.

EDIT 1:45 PM - since not everyone reads comments on the blog, I will copy and paste these comments from Alex (from Australia) My comment back was nothing was 'free' so how is this paid for... but I like the general idea.

Hey Mark,

Alex, from Australia here...

Basically, our system works like this:

We have what we call Medicare, (NOT like your medicare from what I can gather) which is available to everyone. It is a basic level of health insurance if you like, where you pay for the service at a doctors, and are reimbursed a percentage of that by going into a medicare office and claiming it, depending on what the service is the percentage changes I think.

Some doctors offer what we call bulk billing, where they will take care of getting the money off medicare, and you just go in and sign a thing saying you were there. Not sure if they are all like this, but the bulk billing doctor near me will bulk bill up to $75AUD I think.

The service we get for free is quite good, it encourages people to go and get things checked out, why not when it's free anyway right? We also get paid sick leave here, so that probably helps too. :) What a bunch of commies we are...

Ok, that's the basics...

HOWEVER, a lot of middle class and above also have private health insurance. This allows you to go to a private hospital, and choose your own doctor. http://www.iselect.com.au/ will give you an idea of the different types and costs of insurance available. Where this comes in handy is with things like sports injuries etc, where may want a doctor who is the best in say knee surgery for instance if you have torn a ligament there or something. Heart patients and that sort of thing might want to choose a certain specialist too.

Also the lower income earners can get what's called a healthcare card, where among other benefits they get more back from medicare (I think, I'm not 100% on this, as I've never been in that situation personally.)

My personal experience is that the healthcare here is pretty good. This said, I've never really needed anything serious done. Probably the most serious thing I've ever had here in Australia is a couple moles removed, which was free and done at a bulk billing doctors. I'm pretty happy with the job done. The doctor was competent and friendly.

Anything else just ask. :)

Oh yeah, I should add, that if we earn over a certain threshold, and don't have private health cover, then we pay what is called a medicare levy. Which is $500AUD for those earning over $50kAUD a year and are single, and goes up again after $100kAUD or something like that.

Comments

[drzarkov:]

The only problem I have with this article is the statement that 40% of Americans have no health insurance. The correct figure is 43 million out of 330 million (plus about 20 million "uninvited guests"), so the last time I looked, 43/330 = 12%, or 43/350 = 11%. The government could help by giving tax deductions for all medical expenses (including insurance premiums), allow companies to offer insurance in all states to promote competition, offer a means-tested premium payment, and a catastrophic illness insurance. Individuals should take advantage of tax-free medical savings accounts, and ask their doctor what the deduction for cash payment is (it can be as much as 60%).

Jun 05 11:19 AM

[TraderMark:]

On point #2 After being a saver for my entire adult life, I now have come to the conclusion after I see what the government does with my savings to support the economy. There is no reason to save in America. None. Bad behavior is bailed out and buying a large house with money I don't have so the govt can ride to the rescue to give me a 1% permanent mortgage so I get to the 31% income to payment ratio, when it is not using my money inside of GMAC so Chrysler can offer 5 year 0% loans, when it not using my money to make Goldman Sachs 100% whole on their AIG obligations, when it is not... well you get he picture.

Act like an American and you are rewarded. Act like an adult. Not so much. You will subsidize your fellow citizen.
>>>

So, if I'm one serious illness away from bankruptcy I might as well spend and spend and buy everything I want and not save any money or prepare for the future becasue "they'll" just take it in the end anyway! In other words, live life in the modern American way...


On Jun 05 09:07 AM GMC wrote:

> Very Good. A couple comments:
> 1. Australia can support their system becasue they make it nearly
> impossible to move there from out of country!! This country is so
> open we let everyone come on in and take what they haven't paid for
> over a lifetime...
> 2. So, if I'm one serious illness away from bankruptcy I might as
> well spend and spend and buy everything I want and not save any money
> or prepare for the future becasue "they'll" just take it in the end
> anyway! In other words, live life in the modern American way...

Jun 05 01:01 PM

[TraderMark:]

You make an excellent point. Since bankruptcy is no longer a shameful thing, and now its a very common thing there is no harm or foul - you get a ding in your credit report, and away you go. Why waste the money - the system is set up so the insured are not only paying for themselves but by higher premiums covering the 40% uninsured via 'emergency' visits.

It appears only if you are in a small select niche of US society, perhaps upper 2-5% should you bother with insurance because your assets below that level are not of a level that would cover even one 5-8 day stay in a hospital. Instead enjoy life with your money and let the 'savers' cover you if in the event something goes horrible.

Really the system has brainwashed us. With the fact that hospitals cannot turn people away in emergency, those who are not paying for insurance are in fact benefiting. The rest have become suckers (ex those with enormous amount of assets to protect via staying out of bankruptcy)


On Jun 05 10:34 AM viewfromnyc wrote:


>
> The problem with the American system is that an individual is better
> off not preparing for future or potential healthcare costs. The
> worst that can happen is that in the unlikely event you suffer a
> catastrophic illness is that you go bankrupct. If you never have
> a catastrophic illness, you get to consume more (cars, televisions,
> homes) than the people who protect the downside by purcashing insurance.
> The maximum benefit of purchasing insurance is limited to the amount
> of unprotected assets in bankruptcy. Since most Americans couldn't
> earn and save enough to self fund the costs of a catastrophic illness
> anyway it makes no economic sense to purchase insurance.

Jun 05 01:07 PM

[TraderMark:]

If you did not see the 60 Minutes piece on what happened the night of Medicare D passing you have no idea how the sausage is made in American politics.

Most of the sponsorers are long gone from their "low paying" Senate and Congressional jobs and now are working as multi millionaire lobbyists for... the healthcare biz.

We all win here

If you've never seen this video it is something to pass along to neighbors and friends so they understand how captive Washington is to big money.

www.cbsnews.com/storie...


On Jun 05 10:39 AM Joyful Alternative wrote:

> TeresaE, that was the notorious Republican Congress that got no Democratic
> votes and had to issue threats and bribes and extend the voting time
> beyond legality to get enough Republican votes to pass. We wound
> up with Medicare Part D, with huge rewards for big pharma (no volume
> buying like the VA!) and health insurers (free to change medicines
> provided and/or prices at any time after the insured signs up for
> a mandatory year!), billions in costs per year for taxpayers, and
> a doughnut hole for the insureds.
>
> Any reform of health care has to start with the billions we waste
> on Medicare Part D, yet no one mentions this topic.
>
> I buy health insurance, yet my knee replacement cost me $9,000 out-of-pocket.
> I carefully chose the hospital with the lowest infection rate, so
> I lucked out and had no complications that would have bankrupted
> me.
> I favor single-payer universal health insurance. It appears the Beltway
> Gang is too paid off to consider what makes sense for taxpayers and
> citizens. At a minimum, there must be a "public component" along
> the lines of Medicare for all.

Jun 05 01:12 PM

[TraderMark:]

Sorry, that was a brain fart

40 million is what I meant, not 40%
actually its up to 46 million per latest data I pulled


On Jun 05 11:19 AM drzarkov wrote:

> The only problem I have with this article is the statement that 40%
> of Americans have no health insurance. The correct figure is 43
> million out of 330 million (plus about 20 million "uninvited guests"),
> so the last time I looked, 43/330 = 12%, or 43/350 = 11%. The government
> could help by giving tax deductions for all medical expenses (including
> insurance premiums), allow companies to offer insurance in all states
> to promote competition, offer a means-tested premium payment, and
> a catastrophic illness insurance. Individuals should take advantage
> of tax-free medical savings accounts, and ask their doctor what the
> deduction for cash payment is (it can be as much as 60%).

Jun 05 01:15 PM

[Buckoux:]

Health insurance should adopt the "Utility Business Model", or the US will wind up with socialized medicine. At the beginning of the last century, telephone and electric service were luxuries only for the rich, now they are considered "necessities". It has been the genious of the American culture to avoid the "nationalization" of goods and services that were once considered to be only for the rich and distribute them, at fair prices, to the American public using the utility business model.

Jun 05 01:18 PM

[theblueamer...:]

I am a moderate Democrat. I believe in Universal Healthcare for all American citizens. Healthcare is not free. I as an individual have an obligation to take care of myself. The health care system in America is not geared to keep you healthy. Our system is reactive as opposed to proactive. I am a type 2 diabetic in California. I cannot get health care insurance unless I am part of a group policy. I hate it when I hear people who are opposed to government intervention when they say they don't want the government between me and my doctor. They think it is better for the CEO of an health insurance company to be in between me and my doctor. I'll take my chances with the government. Every American needs to be in the system. The way the health care system is run now it cannot get any worse if the government runs it. If Canada's system is so bad then why haven't Canadians changed it. I'm sure people can come up with examples as to why it doesn't work. They point to trees in the forest. I say look at the whole forest. Anyway the US Government is the largest provider of health care. Go look at VA. And don't tell me that the government will ration care. If you don't have insurance your care is already rationed.

Jun 05 01:51 PM

[Pax Americana:]

Imho, as a , dare i say it European, the American Health care system is economically and socially divisive, and punishs hard working Americans, along with the Socio-economically Disenfranchised poor.

Jun 05 02:05 PM

[Sober Realist:]

Yes the for-profit healthcare system never made sense to me. Do you really want the first priority concerning your health to be the size of your wallet? We're thinking of moving to Brazil due to the health insurance issue here in the states. One family member of mine had to be transferred via helicoptor to another hospital for an open bed. The cost for that 30 minute flight --- $14,000.00. My insurance($600 monthly premiums) paid $2,500 of it.
America's health insurance plan is this: Don't Get Sick.

Jun 05 02:23 PM

[Sober Realist:]

I guess the next step will be to start a "Logan's Run" to weed out the unhealthy and infirm.

Jun 05 02:30 PM

[notsosmart:]

just die & be done with it. no health care costs & social security will be happy too.its a sad situation but,sorry,as i LOL cause the same bought people get reelected.this is democratic capitalism at work.where does it say you are entitled to health care?good or bad.in the constitution?

Jun 05 05:13 PM

[snagglesnarf:]

40% of Americans uninsured? Where did you get that number, from Michael Moore? About 17% of the population has no health care and this number includes millions of illegals. About 1/3 of the 17% are men and women between the ages of 18 and 30 whose policy costs average a miniscule $150 a month. We are not Canada or the United Kingdom. The reality is that a majority of Americans prefer the health coverage they have and in the U.S. the majority rules.

Jun 05 05:21 PM

[Leftfield:]

As a self-employed who always bought catastrophic care and is now bankrupt after an accident, I can attest to the disgrace of the present system. Those companies intend never to pay, period. And, after the taxes I pay for government workers' Blue Cross, all I could ever afford was an ever-spiraling catastrophic "plan."
But the dichotomy between the Fox rants and Hillarycare are as idiotic as our bailout of Wall St. There are so many good ideas out there between those braindead alternatives.
Is the American way to find solutions only among the absolute stupidest possibilities now?

Jun 05 05:49 PM

[Sober Realist:]

I won't discuss at this time what I think would be the best healthcare system for our country, but I do know 2 things:
1.) a healthcare system run purely by the government won't be efficient or fair.
2.) a healthcare system run for profit is economically unsustainable for middle class citizens.

Jun 05 08:17 PM

[MikeOz:]

I agree with comments by Alex from Australia. Basic health cover in Australia is either free or available at low cost, the cost being funded from taxes. If you want more you can buy additional cover or services via personal insurance or pay direct.

(I don't think of myself as socialist, but I have no problem paying higher income taxes to ensure that basic Health care is available to all. Maybe in the US that makes me socialist by definition ?)

I'm not sure that GMC's comment that Australia makes "it nearly impossible to move there from out of country" is relevant. About 30% of Australia's population were born outside Australia. The majority of these immigrants arrive in Australia with little or no capital. They pay their taxes (or so we hope) and they get their Government services.

Traditionally I think the US has relied on employers to pay for something which other first world countries regard as the responsibility of Government. Either way - someone pays for it some how for about 80 or 85% of US citizens.

Another point - the US health system, on a per procedure basis, is much more expensive than in comparable countries - I would think because of the lack of Government involvement.

My wife is a physician here in Australia, and her sister-in-law is a physician in the US. In the past they have compared the costs of identical procedures in the US with Australia, the US cost often being 2 to 3 times higher.

It appears that higher physician income in the US is primarily responsible for this disparity, but also higher insurance, drugs and other costs, including - surprise surprise - unrecoverable fees because the customer is bankrupt. (On a macro view - the 80% or 85% who have health cover in the US are going to subsidise those that don't one way or another).

In Australia, per procedure costs are in effect partly regulated by government in as much as a benchmark fee is set for each procedure and that is all the government will pay. If the physician wants to charge more they have to negotiate with the patient or insurance company.

The end result is that Australia as a nation spends a much lower percentage of its GDP on health expenditure than does the US, and gets universal free or near free coverage included.

I don't know of any country that has a perfect health system, but as I get older and more prone to illness I'm happy to stick with what I've got here.

Jun 06 06:52 AM

[Northstar10000:]

The problem with health care in this country is political. No one wants to say we have more poor people who do not pay anything and get free quality care than any place on the planet. The problem won't be solved until the poor pay their fair share. Chew on that for some straight talk. Take it directly out of their monthly checks or food stamps or rent subsidies or all the other benefits and watch the price of care come tumbling down. I mean really charge them. They don't even make co pays at the drug stores like we fools who foot the bill.
Yes I know it says they make co pays but I have seen them say they can't afford it and the drug stores have to make up the difference thru higher prices. I saw it happen myself just his week.

Jun 06 09:23 AM

[tamarak:]

The best way to save costs in health care and make it universally available is through a free market where enterprises (public and private) compete to provide the best health outcomes. A reader comment from another blog: "Why would any educated society rely on a health care system that has a stated fiduciary responsibility to extract as much money from its customers while giving them as little care as possible?" (Harry Mangalam, krugman.blogs.nytimes....). My father-in-law, a small builder, had private health insurance from a large company (with slick tv commercials) that dropped him after he suffered a disabling hip injury. He had to personally pay for each subsequent medical procedure, then sue the insurance company, who always lost... eventually. But hey, lawyers are cheaper than medicine. The insurer even hired one of his lawyers!

The battle of annecdotal stories in the media has begun, although there are serious health policy studies that could provide more meaningful guidance on such an important issue. But perceptions are based on experiences with the health care system. In the past 5 years I had two late night health emergencies that required visits to hospitals, one in Canada and one in the US. Care in both emergency rooms was excellent (both top university hospitals). Another annecdote: a Canadian friend who is a single mom with a high school age daughter. Her daughter was suddenly stricken with cancer in her senior year. She was hospitalized immediately and received the best care available. A year of chemotherapy mostly in the hospital and rehab after that. And my friend did not face bankruptcy.

The idea of insurance is to join a large risk pool. A universal government sponsored pool, (i.e., a single payer) would be the largest possible. A "health care company" could enroll as many individuals as possible but not exclude 'pre existing conditions". The companies that keep people healthiest would get to keep more of their premiums. People would flock to the ones with the best health outcomes. Probably even pay a little more for the best ones.

The current health care system in the US is unsustainable should be scrapped. People from the insurance industry should be retasked to more productive careers (like people in the financial industry). Bureaucracies will always have problems but can be minmized and should evolve to work better. Our system has gone the other way.

Jun 06 09:34 AM

[Joyful Alte...:]

I did better than watch "60 Minutes." I saw it on C-SPAN live on my computer monitor.

So when will Medicare Part D be revised? Before I hit age 65 I hope.


On Jun 05 01:12 PM TraderMark wrote:

> If you did not see the 60 Minutes piece on what happened the night
> of Medicare D passing you have no idea how the sausage is made in
> American politics.
>
> Most of the sponsorers are long gone from their "low paying" Senate
> and Congressional jobs and now are working as multi millionaire lobbyists
> for... the healthcare biz.
>
> We all win here
>
> If you've never seen this video it is something to pass along to
> neighbors and friends so they understand how captive Washington is
> to big money.
>
> www.cbsnews.com/storie...
>

Jun 06 01:03 PM

[Sober Realist:]

I'm a strong free-market thinker, but healthcare simply does not fit in with the current for-profit system. Any social value (i.e. quality health care) that an HMO creates is purely coincidental and secondary to the overpowering goal of profit. Quality healthcare is a productive goal that a society should work towards collectively, paid for with the wealth generated from an otherwise free-market economy.

Jun 06 05:50 PM

[Wisdom vs. ...:]

if you trust Harvard, you get what they push: euro-style fascism. 75%of illness is caused by lifestyle CHOICES, eat that fact Harvard. we americans demand much more health care, thus buy more; but per service, europeans pay more taxes than we pay in fees; furthermore, and more important, the US is where most procedural, drug and equipment innovation originate--which begs the question, what would the state of health care in the fascist, er social democracies, be without the US? this is an excellent example of: "if you torture statistics, you can get them to say anything."

if harvard were honest, they would note that americans with health insurance are IN FACT less healthy than americans without; that is because many americans are big fat pre-diabetic pigs who expect to live forever on the gov't dime, and deserve no sympathy

Jun 06 09:06 PM