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The Financial Crisis and Medical Bankruptcy

Posted on | September 30, 2008 | No Comments

Will the financial crisis accelerate medical bankruptcy?As we’ve learned over the past few weeks, America’s finances have been massively mismanaged in the wake of intentional dismantling of our historic checks and balances. What we’ve also been forced to acknowledge is that our economy, on a national and global level, is an extraordinarily integrated affair. Everything, it seems, is tied to everything else. The great fear, voiced repeatedly by pundits this past week, is that “what has happened on Wall Street will spread to Main Street.” But the reality is, it already has.

On September 24, 2008, two studies were released that demonstrated health care costs, for both insured and uninsured, were pushing increasing numbers of American families to bankruptcy. The Kaiser Family Foundation and the Center for Studying Health System Change say the studies “underscore the mounting additional strain that medical care is placing on working Americans.” As Drew Altman, president of the Kaiser Family Foundation, said, “The problems people are having paying for health care and health insurance are a central dimension of the economic and pocketbook concerns right now.” Total cost for family coverage averages $12,680, up 5% from 2007 for insured employees. The employees now contribute 27% of that, or $3,354. The studies show that this is enough to push many families to the brink. One in five had trouble paying their medical bills last year with half of them borrowing money to pay the bills and 20% contemplating bankruptcy.

You wouldn’t think that a premium of $3,354 a year could do that. But you have to add in co-pays and add-ons for those unlucky enough to confront an illness. Together these costs reach the “breaking point”. And as I outlined in a Health Politics piece back in 2006, that breaking point is low, and getting lower, as citizens have amassed additional debt.

To learn more about how medically related bankruptcy occurs, watch this week’s video, included with this blog post – it’s taken from our Health Politics archives. You’ll need to visit the Health Politics website to watch this video.

The studies released last week estimate that 57 million Americans, 75% of whom are insured, are straining to pay medical bills. As Karen Davis of the Commonwealth Fund remarked, “It’s a serious health problem and a serious economic problem. What we’re seeing is families are not in a position to shoulder the financial risk.”  The question now: “Is it possible to stabilize the financial disarray of Wall Street without addressing the health system disarray of Main Street in tandem?”

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