September 11th, 2009
11:03 AM ET

The Healthcare Hostage Crisis: Bankrupting the insured

Editor's Note: This article continues our 8-part series excerpted from the "Healthcare Hostage Crisis" chapter of AC360° contributor David Gewirtz's upcoming book, How To Save Jobs, which will be available in October. To learn more about the book, follow David on Twitter at http://www.twitter.com/DavidGewirtz. Last week, we looked at how America's healthcare compared with other countries. This week, we start our look at how America's insurance system is failing those who are already insured.

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/09/10/health.care/art.barack.obama.gi.jpg caption="In his address to Congress on Wednesday, President Obama pushed for the government to help the uninsured."]

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/07/28/art.vert.book.gewirtz.jobs.jpg width=292 height=320]

David Gewirtz | BIO
AC360° Contributor
Editor-in-Chief, ZATZ Publishing

Insurance coverage is another myth. We've all been led to believe that as long as we have insurance, we'll be taken care of. As insurance rates go up and up and up, we've been promised that even though it costs a lot more, it's worth it because our future is being assured.

But, like we've come to see with other aspects of the health care industry, health insurance is worse than broken - to many people, it seems more scam than service.

In August 2009, The American Journal of Medicine published a clinical research study entitled "Medical Bankruptcy in the United States, 2007: Results of a National Study." The research team consisted of David Himmelstein, MD, of the Harvard Medical School, Deborah Thorne, Ph.D., of Ohio University, Elizabeth Warren, JD, of Harvard Law, and Steffie Woolhandler, MD, MPH, also of Harvard Medical School.

I'm pointing out the research team here because I want you to understand that this is highly credible data.

There's one other thing I need to point out. This study was done in 2007, before the massive economic downturn that began during the 2008 presidential election cycle. What this means is the data presented provides far greater clarity about the health care industry's contribution to bankruptcy than it would have had the study been conducted later, when a lot of other bank failure-related issues might have muddied the mix.

Here's the key conclusion of their analysis:

In 2007, before the current economic downturn, an American family filed for bankruptcy in the aftermath of illness every 90 seconds; three-quarters of them were insured. Over 60% of all bankruptcies in the United States in 2007 were driven by medical incidents.

They had insurance

Some might say, "Those are pretty sobering numbers, but that's what they get for not having insurance." But here's where it gets really, really scary:

Most medical debtors were well educated, owned homes, and had middle-class occupations. Three-quarters had health insurance.

Three-quarters had health insurance. Put those two numbers together. Sixty percent of all bankruptcies in America were driven by people who couldn't pay their medical bills,  most of whom actually had health insurance.

The health insurance they'd been paying for. The health insurance, that for some people, cost more than their mortgage or their rent. The health insurance that many of their employers had been forced to pay as a mere factor of the competitive environment.

That health insurance. The health insurance that didn't insure their health.

So, let's run some numbers. Using the study's statement that a medically-related bankruptcy occurs every 90 seconds, that's 350,400 medically-related bankruptcies in 2007.

So how much did these medically-related bankruptcy filers owe? After all, insurance does have a coverage cap, usually somewhere in the millions of dollars. Clearly, if their coverage exceeded millions of dollars, it'd make sense for their insurance to run out.

Ah, but that wasn't the case. On the average, most of these families (or their employers) paid $12,680 for their insurance. Each year. And how much money was it that caused their bankruptcy? Take a deep breath. This is gonna make you very, very angry:

Out-of-pocket medical costs averaged $17,943 for all medically bankrupt families.

That's right. Most families (or their employers) paid an average of $12,680 per year and their bankruptcy (which will ruin their lives for far more than one year) was for $17,943 - a difference of a mere $5,263.

Next week, we'll look at some of the schemes insurers use to drop your coverage once you get sick.

Follow David on Twitter at http://www.Twitter.com/DavidGewirtz.

Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.

Filed under: David Gewirtz • Health Care
soundoff (10 Responses)
  1. Mari

    Excellent article. I read a statistic recently, " 99% of Americans are one serious illness away from bankruptcy."

    Let's make healthcare affordable for all Americans.

    September 13, 2009 at 4:43 pm |
  2. Sue Daggitt

    Thankyou for exposing this very real problem. Many Americans are blissfully uninformed about their health insurance coverage. I work with people everyday that have no insurance due to job loss, inability to pay or have been denied coverage due to pre-existing conditions. In addition, we need to address claim denials that can require hours of phone calls, composing letters of appeal, and chasing down medical staff to provide additional documentation. Most people do not have the time or capacity to pursue these denials, as they can be very complex and labor intensive.

    September 11, 2009 at 10:14 pm |
  3. matt

    From the outside looking in from Canada I just cannot believe that the mighty USA has never looked at healthcare systems that have been successfully in operation in at least 20 countries around the world for in excess of 50 years. Germany ,France,Canada, etc has every citizen
    covered by health care from the cradle to the grave without exception. For a small fee every month for those that can afford it they provide 100% coverage for standard healthcare .Those that cannot afford it get the identical same 100% coverage.. No fear of bankruptcy at any time due to medical bills. No fear of being denied health care due to pre-existing conditions. The peace of mind for seniors as well as growing families in Canada knowing to never having to worry about their healthcare costs is beyond a state of happiness. It is euphoric . Take a look at the Canadian system and say goodbye to everyday worry. We know it works up here and we sincerely hope you can solve yours. The enire world is watching you closely.

    September 11, 2009 at 9:10 pm |
  4. Annie Kate

    From those calculations it doesn't seem to make much sense to enroll in health insurance . You might do better if you took what you are shelling out for premiums and invest it in a financial instrument that pays some interest but protects your principle. That way if you have a catastrophic illness you have a better chance of being able to pay for it. By the way, car insurance and house insurance is not much better.

    September 11, 2009 at 5:50 pm |
  5. joe

    These statistics are alarming, sad, and a disgrace. They point out the real state of the once secure middle class; one illness or accident away from financial devastation. The average working class person in the USA has no real peace of mind with such a financial land mine only a step or two in the wrong direction. This burdon should be lifted from all of our good citizens .There would be more joy and comfort in everyones life. Less anger and frustration.. Less crime, divorce, and substance abuse. Hope for the younger generations.
    Yes it is a moral issue!
    It must be done before we destroy ourselves.

    September 11, 2009 at 3:53 pm |
  6. Yolanda

    In 2001 I was close to filing bankruptcy due to a medical condition I had been diagnosed with at the age of 22. Very well educated, very highly paid, very well insured. Total owed 14,000. Which blossomed to 17,000. Total prescriptions costs per month total $1,100 dollars. Most of my claims for my rare condition were denied as "experimental". There were so many doctor's, insurance EOB, denials, appeals, etc. you just can't keep up. Once you go on disability, your income is reduced. And once you have a diagnosed condition, it is impossible to get any insurance except the HIPAA plans or an employer sponsored plan. It is a cycle of hell. I now keep 5-7K on hand as savings just in case. Total sham. Health insurance only work's when you are well and need preventative care. If you get sick, not so much.

    September 11, 2009 at 2:36 pm |
  7. Melissa

    It already makes me sick. Its why I'm such a harsh advocate for a public insurance option.

    September 11, 2009 at 2:12 pm |
  8. Josh- California

    Health care is broken. These people have proven it. Now the American people should open there eyes, and realize that health care needs to be reformed. Its not only the fact that most American families can't offered health care, its the fact that if you have health care, you still can't offord it.

    September 11, 2009 at 2:08 pm |
  9. Conserve' for USA

    Tort reform can take care of this. But, does this administration want to help do this? It doesn't sound like they do. Can't believe anything unless it is in writing.

    September 11, 2009 at 1:18 pm |
  10. earle,florida

    I rest my case Mr Gewirtz, some great digging by you sir,that the spin-meisters won't be able to put back in the bottle!

    September 11, 2009 at 11:56 am |