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New Research Finds Medical Bills at Play in Majority of Bankruptcies

Medical bills contributed to more than 60% of U.S. personal bankruptcies in 2007, a 50% increase from 2001, according to a study released Thursday, Reuters/Boston Globe reports.

The study was funded by the Robert Wood Johnson Foundation and will be published in the August issue of the American Journal of Medicine.

For the study, researchers at Harvard Law School, Harvard Medical School and Ohio University identified people who had filed for bankruptcy using public court records. The researchers then randomly surveyed 2,134 families who filed for bankruptcy between January 2007 and April 2007 -- before the current economic recession (Fox, Reuters/Boston Globe, 6/4).

Researchers found that medical bills and related problems, such as lost wages for people with illnesses or their caregivers, contributed to 62% of all bankruptcies filed in 2007 (Girion, Los Angeles Times, 6/4). Of those people, 92% had medical bills of more than $5,000, or 10% of pretax family income, according to the study (Reuters/Boston Globe, 6/4).

About 78% of people who filed for bankruptcy in 2007 had health insurance. The study found that those people with private coverage who filed medical-related bankruptcy had average medical bills totaling $17,749, compared with $26,971 for uninsured people.

Study co-author Steffie Woolhandler, a practicing physician and an associate medical professor at Harvard University, said, "Health insurance is not a guarantee that illness won't bankrupt you," adding, "Lots of health insurance comes with big copayments, deductibles and uncovered services. So you can be insured and still end up with big bills. At the same time, even if you have good insurance through your employer, you can lose it if you get sick and can't work."

The largest expense for about half the families that filed medical-related bankruptcies was hospital charges.

According to the study, most of the people who filed health-related bankruptcies "were solidly middle class before financial disaster hit."

Robert Zirkelbach, a spokesperson for America's Health Insurance Plans, said that although the health insurance industry understands that medical costs create a financial burden for families and businesses, the industry itself is in a better position to control those costs and that the industry has a plan to prevent people from being forced into bankruptcy over medical costs.

Zirkelbach added, "In fact, in our comprehensive reform proposal we recommended in December [2008] that Congress should look at an out-of-pocket spending cap and a system of tax credits for low-income people," adding, "If an individual's health expenses reached a certain level, there could be tax credits or other assistance to help those individuals" (Los Angeles Times, 6/4).

Broadcast Coverage

On Thursday, NPR's "Morning Edition" reported on the study ("Morning Edition," NPR, 6/4).

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