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PNHP RESOURCES

Dr. Steffie Woolhandler: Time to end medical debt, medical bankruptcy

The following is an unofficial, slightly edited set of excerpts from a March 4 telephone interview with Dr. Steffie Woolhandler, professor at the City University of New York School of Public Health at Hunter College, visiting professor of medicine at Harvard Medical School, and co-founder of Physicians for a National Health Program, conducted by Dr. Margaret Flowers and Kevin Zeese on their radio show “Clearing the FOG” on We Act Radio, 1480 AM, in Washington, D.C. It took place in the run-up to Strike Debt/Rolling Jubilee’s week of actions, March 16-23, which will spotlight the problems of medical debt and medical bankruptcy. The full radio show, which includes a spokesperson for Strike Debt, can be listened to here.

Dr. Margaret Flowers: Welcome, Dr. Woolhandler.

Dr. Steffie Woolhandler: Good morning. Thank you for having me.

How to people get into medical debt?

Some people get into medical debt because they have no insurance and they get sick. But the majority of people with serious medical debt have insurance, but their insurance is partial – full of gaps like copayments, deductibles and uncovered services.

So what happens is that people get sick, they try to use their insurance, and find that they’re still left holding literally thousands of dollars in unpaid medical bills.

You’ve done several research studies on health care and bankruptcy. What have those studies found?

We interviewed more than 2,000 people in federal bankruptcy court to figure out why they went into bankruptcy. In about 60 percent of all personal bankruptcies, medical bills and medical illness played a major role. Either people were uninsured and got sick, or they were insured, but found that their insurance really failed them when they had a serious illness.

More than three-quarters of people in medical bankruptcy had health insurance when they first got sick. Now, some of those people got so sick they lost their job, or they had to quit their job to take care of a sick family member. When they lost their job they lost their insurance. But even more commonly, people had insurance, usually private insurance, that they kept throughout their medical illness, but were bankrupted anyway because of gaps in coverage like copayments, deductibles and uncovered services.

What’s the trend regarding copayments, deductibles and uncovered services? Is the situation going to improve when Obamacare takes hold?

No. In fact, the federal health law will make the problem of gaps in coverage much more serious because the required insurance policies under the legislation are extremely skimpy. The so-called bronze policies, which are the cheapest policies that will meet the mandate under Obamacare, will only cover about 60 percent of your medical costs. People who buy those plans will still be responsible for 40 percent of total medical care costs. Typically, for someone with a bronze plan who got sick and tried to use their insurance, they would have at least $6,000 per person in out-of-pocket medical costs every single year they’re sick.

This is really the first time that the government has put its stamp of approval on such extremely skimpy policies. In the past, some states were trying to get consumer protections or were trying to regulate the insurance market to make the policies more generous, but Obamacare really reversed that trend with the federal government stepping in and saying we’re going to have these bronze policies that only pay 60 percent of your costs. The federal government is saying, “That’s fine with us, we think that’s OK.”

So the new federal health law has in some ways made the problem of underinsurance worse. It does improve the problem of being completely uninsured, we all know that. Approximately half of all currently uninsured people will receive coverage under Obamacare, and the other half – around 30 million people – will remain uninsured. But when we get to the problem of underinsurance, people with only partial coverage, Obamacare actually makes the situation worse.

The subsidies only kick in with the silver plan or higher. Is that true?

For whatever reason, the subsidies are only available if you purchase at the silver level, and the subsidies phase out at about 250 percent of the federal poverty level, so the subsidies disappear at a relatively low income level.

Can you speak about the impact of financial barriers to care on our health?

There’s a tremendous body of research saying that when people have no insurance, they don’t get preventive care, they don’t get primary care, and when they have a serious illness and go to the hospital they have much worse outcomes – they’re more likely to die.

There’s a growing body of evidence showing that people who have insurance, but have these skimpy policies, so-called underinsurance policies, also face really bad health consequences. When people have skimpy policies they delay getting primary care, they delay going to the hospital, and they also have worse outcomes than people who have full coverage.

We need a system where everybody has coverage for all medically necessary care, because that’s really the only way to assure people get the care they need, and it’s the only way to protect the budget of American families from the very high costs when a serious illness hits.

Do other countries have this problem of underinsurance?

Many countries have systems that cover virtually 100 percent of all medical care. In Canada, traditionally, people have 100 percent coverage of hospital costs, 100 percent coverage of doctors. Certainly in Great Britain there’s a tradition of 100 percent coverage for many people.

Some of the European countries do have copayments; however, in those countries they have much more equal income distribution so they don’t have the huge group of very poor people that we have here, or even low-income people like we have here, who just don’t have the cash in their pocket to pay a copayment.

We have a bad situation in the United States with a lot of income inequality, lots of people who are just barely getting by on their paychecks, and then health care costs, which even if you have insurance, can run into thousands and thousands of dollars out-of-pocket expenses every year.

How will Obamacare affect the middle class?

The underinsurance is actually a very big hit on working families. People are living paycheck to paycheck but are getting by, they’re making it work, and then something like appendicitis or a bad car accident will sink the family and push them into bankruptcy. So one of the things that would really improve the financial security of working families would be if insurance really covered everything.

You’ve also lived and worked in Massachusetts. How is their health law working out?

The Massachusetts health law was the model for the national plan. In Massachusetts, the new law cut the number of uninsured by approximately half, which is what is expected to happen nationally, but you still have about half of the uninsured around, lacking insurance.

The problem is that after enactment of the law, a lot of the services that were available free for the uninsured have been cut. Safety-net funding was reduced by the law. And again that’s going to happen with Obamacare. There’s about $36 billion in cuts to safety-net hospital payments under the federal health law. There will still be uninsured people – 30 million of them after Obamacare is fully implemented – but the safety-net institutions that care for them will be starved of funds. So, while some people may be better off under Obamacare, certainly, some folks who are uninsured will be significantly worse off under the new legislation.

So basically what’s happening is that cuts are being made to public programs so as to subsidize private insurance?

Yes, that’s what’s going on. And it’s important to remember that the safety-net institutions are not just there for uninsured people – that’s very important, of course – but safety-net institutions also take care of patients with insurance who can’t get care in the private sector. Some who have mental illness problems, or substance abuse problems, may not be welcome in the private sector, regardless of their insurance. Those folks may have to seek care in the safety net, and those institutions have seen their funds taken away and given to private insurance under the Massachusetts law and also the Obamacare legislation.

Has the Massachusetts reform controlled costs?

Health care costs have absolutely not been controlled in Massachusetts despite the fact that then-Gov. Romney claimed that the 2006 reform would control them. Massachusetts’ health care costs are the highest in the nation and continue to rise very rapidly. In fact, it’s pretty certain that they’re the highest health care costs anywhere in the world.

How about medical bankruptcies in Massachusetts? You’ve also done research on that, correct?

Medical bankruptcy in Massachusetts still accounts for about half of all bankruptcies. That was true before the 2006 legislation went into effect and that was true after 2009, after the legislation had been around for a couple of years.

It’s pretty clear that what was done in Massachusetts didn’t impact the problem of medical bankruptcy in any significant way. And if you look at what the insurance is like in Massachusetts, it’s pretty similar to what will occur under Obamacare, that is, very high copayments and deductibles.

If you go on the Massachusetts exchange website, it’s actually called The Connector, you’ll see the cost of a policy of someone in their fifties. For someone in their fifties, the premium would be about $5,000 per year, but then that policy would come with a $2,000 deductible – so figure $7,000 out-of-pocket before the insurance pays a single penny. And then, thereafter, for the next $15,000 in spending, you, the patient, are responsible for 20 percent of the costs, year after year.

Keep in mind that the plans in Massachusetts are a little better than what we can expect under Obamacare.

You’ve been working on these problems for many years. What do you think is the solution?

A single-payer solution, sometimes called an expanded and improved Medicare for all. Everyone would be covered in a program like Medicare, only the single payer would eliminate all of the copayments and deductibles that exist in Medicare.

It’s sometimes called a single-payer system. It’s the type of system that they have in Canada and in several western European countries. You pay for the system out of taxes. Patients have complete free choice of doctor and hospital. There’s no copayments, no deductibles for covered services.

Nations with single-payer systems actually have lower health care costs than in the United States, largely because the administrative costs in a single-payer system are so much lower. If you just have one agency, something like Medicare or Social Security, paying all the doctor bills, giving budgets to hospitals, and so on, you save several hundred billion dollars a year on health care paperwork and administration and that makes the entire health care system substantially more affordable, not just for individuals, but for the government and society.

How can listeners to this program get involved?

I mostly want to echo what’s been said by some of the Strike Debt/Rolling Jubilee people. People are in debt and it’s not your fault if you’re in debt and it’s particularly not your fault if you’re in debt because of a medical problem. This is unfair. No other developed nation forces people to go into debt because they get sick. We need to be thinking of moving toward a fair, efficient, single-payer system so that no one ever has to go into debt because they have the misfortune of being sick.