Drowning in Medical Debt
Could it be true that what goes down, must come up?
As Minnesota 2020 has previously reported, the rate of growth in medical spending has been on the decline in recent years, both federally and in Minnesota. While some health policy experts hoped that trend would continue, it seemed unlikely, given the depressed economy was considered the likely culprit.
In fact, it already appears the trend toward slower cost growth has reversed itself, according to a new report. While it’s possible the uptick in the growth rate for 2011 is an anomaly, the more likely story is our growth rate is climbing back to its pre-recession level.
That’s bad news for all of us, but especially for those hit with large medical bills. As the economy continues its tepid recovery, Minnesotans are likely to be especially sensitive to large, unexpected expenses, such as those wrought by serious illness and the medical care that comes with it. Studies have shown that as the cost of medical expenses have risen over the years, so, too have medically-related bankruptcies—from 8% of personal bankruptcies in 1981 to 50% in 2001.
A 2009 study published in the American Journal of Medicine found medical bills to be a contributing factor in a whopping 62% of personal bankruptcies across the nation by 2007. Of these, 78% had health insurance in some form, 66% owned their own home, and 60% had attended college, meaning even well-situated families could be just a serious illness away from bankruptcy. Minnesotans could be especially vulnerable, as a separate study from the Robert Wood Johnson Foundation found 21 percent of Minnesotans are underinsured, compared to the national average of 18 percent, and tend to face higher deductible plans.
The American Journal of Medicine study found medical bills were the primary driver of bankruptcy in 29% of cases, while contributing in other cases through income lost due to illness, income lost due to delivering care for an ill family member, the mortgaging of a home to pay medical bills, and other indirect effects.
Worse yet, given our current employer-based health insurance system, illnesses requiring employees to miss work can lead to a downward financial spiral: Individuals miss out on income when they are too sick to work and could lose their jobs due to their lack of productivity, and with them their health insurance and means of paying medical bills. According to the 2009 study, “[A] quarter of firms cancel [insurance] coverage immediately when an employee suffers a disabling illness; another quarter do so within a year.” Even for those with jobs that include health insurance as a benefit, bankruptcy could be just one misstep away.
Serious illness shouldn’t lead families down a road whose only destination is bankruptcy. The Affordable Care Act takes a large step forward in expanding health insurance coverage, but as these numbers show, coverage isn’t always enough. Insurance plans need to be robust enough to cover catastrophic illness and keep people out of bankruptcy. Otherwise, universal health insurance won’t create universal health care.