Testimony of Steffie Woolhandler, M.D., M.P.H., on medical bankruptcy
Before the Subcommittee on Administrative and Commercial Law
House Judiciary Committee
July 28, 2009
Mr. Chairman, members of the Committee. I’m Steffie Woolhandler. I am a primary care doctor in Cambridge, Massachusetts, and professor of medicine at Harvard. I am also senior author of two studies on medical causes of bankruptcy, one published in Health Affairs in 2005, and the latest in the August 2009 issue of the American Journal of Medicine. Both studies were done in collaboration with colleagues at Harvard Law School and Ohio University.
In our most recent study, medical bills and illness contributed to 62.1 percent of all personal bankruptcies. Between 2001 and 2007, the proportion of all bankruptcies attributable to medical problems rose by 49.6 percent. The striking conclusion from our study is that private health insurance is a defective product that leaves millions of middle-class families vulnerable to financial ruin. Unfortunately, the health reform plan now under consideration in the House would do little to address this grave problem.
We found that most of the medical bankruptcy were middle class — before their financial crisis hit. Two-thirds were homeowners and three-fifths had gone to college. In many cases, high medical bills were part of a cascade of problems that resulted from illness, along with lost income as illness forced a breadwinner to lose time from work. Often illness led to job loss, and with it the loss of health insurance.
The overwhelming majority of those bankrupted by illness in our study had health insurance. Seventy-eight percent were insured at the start of the bankrupting illness; 60.3 percent who had private coverage. These families had done everything right. They worked hard, paid their premiums and thought they were covered. Yet when illness hit they found themselves unprotected, ruined by co-payments, deductibles and bills for uncovered services like home care and physical therapy. Medically bankrupt families with private insurance ran up uncovered medical bills that averaged $17,749.
Our study raises a warning flag that leaving most Americans to rely on private insurance plans means leaving them unprotected. And a public plan option that mimics the rules and coverage of private plans won’t help.
In Massachusetts, we have three years of experience with the kind of plan the House is now debating, and it’s a sad experience. Reform hasn’t made care affordable for the middle class, and it has decimated the safety net that the poor continue to rely on. In 2007, only 5.4 percent of Massachusetts were uninsured — the lowest in the nation. Yet, medical problems underlay 3 out of 5 bankruptcies — the same proportion as in the rest of the country.
In our state, failure to buy insurance is illegal, punishable by a $1,000 fine — as big a fine as for beating your wife or making a terrorist threat. For a middle-income 56-year-old, the cheapest coverage available through the Connector — the state’s insurance exchange — costs $4,900 for a policy with a $2,000 deductible before it pays for any care, and a 20 percent co-payment after that. A diabetic with such coverage is almost certain to lay out $10,000 each year for medical care. In two years he’d accumulate $20,000 in medical bills — more than the amount that bankrupted the average family in our study. This kind of insurance — sold with the stamp of approval of the Connector — is a cruel joke which Congress should not repeat.
And for everyone financially ruined by illness, many more suffer physically because they don’t get the care they need. Access to an insurance policy is not the same thing as access to health care. By 2008, only 3 percent remained uninsured in Massachusetts, yet among those WITH health insurance, 18 percent skipped care because they couldn’t afford it. Moreover, those unable to afford care find safety net hospitals and clinics shuttered. Our governor and Legislature — desperate to keep the reform afloat as costs escalate more rapidly than predicted — have drained funds from the safety net.
Reform needs to replace the defective private insurance that most families have with insurance that is always there, and that covers all medically necessary care without co-payments or deductibles. That’s the kind of coverage people in other wealthy nations get through single-payer national health insurance. Only single-payer national health insurance can make universal, comprehensive coverage affordable by saving the hundreds of billions we now waste on insurance overhead and bureaucracy . In nations like Canada that have single payer health plans, medical bankruptcy is rare. You have a historic opportunity to make real reform happen this year. But overwhelming evidence indicates that the reform you seem poised to pass will fail to protect American families.