Research: medical bills leading cause of bankruptcy


As lawmakers in Minnesota and other states grapple with budget deficits, one public-health and medical researcher is cautioning against cuts to medical coverage as a budget-balancing tool because the consequences may be even more costly.

David Himmelstein, a professor of public health at City University in New York and an associate professor of medicine at Harvard Medical School, has researched medical-related bankruptcies for the past decade. He says those bankruptcies went up substantially between 2002 and 2007, even before the Great Recession hit – and that the vast majority involved people who had some level of insurance.

“Most people who are driven into bankruptcy by illness and medical bills actually have coverage, but it’s such inadequate coverage that it doesn’t keep them from financial ruin. They’re facing huge premiums and copayments and deductibles – and things that aren’t covered by their insurance.”

Common targets for budget cuts include public-sector benefits and health and human services. Minnesota lawmakers recently proposed a bill to move public-sector employees to a high-deductible health plan and make them responsible for 100 percent of the plan’s premium. For workers with families who have just one medical condition, the estimated out-of-pocket expenses would top $20,000 – and Himmelstein says that’s an unreasonable proposition.

“Saying you’re going to shift a large bill onto public employees is tantamount to saying that you’re going to bring financial ruin to a substantial number of those people.”

Don’t expect national health-care reform to entirely pick up the slack, Himmelstein warns. In a report released earlier this month, he and his fellow researchers looked at Massachusetts in 2009, three years after it had passed a state health-reform law that served as a model for the national law.

“What Massachusetts did was to give people really inadequate coverage. It traded uninsurance for underinsurance. That really didn’t work. When people were seriously ill, they ended up with such huge medical bills that they really didn’t have coverage that could keep them out of the bankruptcy court.”

The report suggests that substantial improvement in coverage and better disability insurance would better protect families. It points to Canada’s model, where national health insurance provides universal, first-dollar coverage.

The national medical-bankruptcy study is online at The Massachusetts medical-bankruptcy study is at