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Guest Post: Most Driven Into Debt by Medical Bills HAVE Health Insurance

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Washington’s Blog

Most driven into debt and bankruptcy by medical bills have health insurance. For example, Reader’s Digest notes:

Between 2000 and 2003, seven in ten adults who were driven into debt by medical expenses had insurance at the time.

Similarly, as of 2009:

More than 2.2 million California adults report having medical debt, and two-thirds of those incurred the debt while insured, according to the authors of “The State of Health Insurance in California (SHIC),” a comprehensive new report from the UCLA Center for Health Policy Research.

And as the Washington Post pointed out last year:

Sixty-two percent of all bankruptcies filed in 2007 were linked to medical expenses, according to a nationwide study released today by the American Journal of Medicine. That’s nearly 20 percentage points higher than that pool of respondents reported were connected to medical costs in 2001.

Of those who filed for bankruptcy in 2007, nearly 80 percent had health insurance.

Why is this happening?

Above and beyond the fact that health insurers nickel and dime everyone by trying to exclude necessary medical care from coverage (you’ve heard the horror stories), there are two additional reasons:

(1) People think that they are covered, and so authorize more health care than they would if they knew in advance that they would have to pay for it out of their own pocket;

and

(2) People are underinsured, and can’t afford to buy an adequate level of insurance for their needs.

As an interesting historical sidenote, the Nixon administration helped to launch the whole HMO concept. Specifically, as Michael Moore told Democracy Now last month:

[My researcher] found this Watergate tape—has nothing to do with Watergate, it’s one of the Nixon tapes—at the Archives, National Archives, where Nixon and Ehrlichman are discussing whether or not to support this HMO concept. And Ehrlichman says to Nixon, “You’re going to love this, because this is private enterprise. This isn’t like some freebie thing.” Nixon goes, “Oh, I like that. Tell me about it.” And then Ehrlichman says, “Well, this is how it’s going to work, these HMOs. They’re going to make more money by providing less care. The less care they give them, the patients, the more money the company makes.” Nixon goes, “Ooh, not bad!” And it’s all there on tape.

In the same interview, former top Cigna health insurance executive Wendell Potter confirmed to Democracy Now, “I do know that tape”.

Note: The effect of the new health care bill on this issue is beyond the scope of this essay.

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45 comments

  1. Hal Hancock

    F Bread, what if you think your insurance covers cancer (that is, covers therapies like chemotherapy) and doesn’t…quite…after all (for instance, via an obscure line down in the policy about a $2000/yr cap on medicines), even though you thought it was good insurance, blue cross, etc….

  2. sgt_doom

    I despise it the way so many articles and columns completely ignore the factual top three reasons for the extraordinary high medical costs in the USA:

    (1) Healthcare Hedge Funds which speculate on all segments of the healthcare sector.

    (2) Private Equity leveraged buyout firms whose LBOs affect all areas of the healthcare sector. (This includes not only PE LBOs, but SPACs, etc.)

    (3) Criminal corporations, and to a lesser extent, criminal organizations (such as those which buy pharmacies then do ultra-high billings on a customer’s account).
    The criminal corporations are responsible for billions in dollars in criminal penalties — which guess who they pass that, and their criminal profits they charge, onto? (E.g., Pfizer, Eli Lillty, Cigna, HCA, etc.)

    1. matthew slaughter

      1. whats a SPAC?

      2. so the LBO of healthcare… interesting… how does it link to CLOs? i was reading McDonald’s book on Lehman, he keeps talking about leverage buyout loans going into CLOs, almost as if CLO demand drove leverage buyouts, not anyone wanting to do legit buyouts.

      i can imagine a hedge fund shorting someones credit card debt while owning the health insurance company that puts them in bankruptcy.

      add in ‘mortality swaps’, maybe the hedgies are shorting someones lifespan while owning the health insurance company that denies them coverage?

      the trick is to track down specifics and write it up ‘for the new york times’, and live in greenwich village and eat at cool restaurants every night with your interesting friends.

      1. Psychoanalystus

        >> add in ‘mortality swaps’, maybe the hedgies are shorting someones lifespan while owning the health insurance company that denies them coverage? <<

        Many corporations are already taking secrete life insurance policies on their employees. This while having access to their health history.

        Welcome to America, the most corrupt and malicious nation on Earth, bar none.

        Psychoanalystus

        1. bobn

          “Many corporations are already taking secrete life insurance policies on their employees. This while having access to their health history.

          Names and evidence, please.

    2. ella

      Let’s add the obscene profits. “HCA 3Q Profit Leaps 24%; plans $2 billion dividend. HCA Inc” http://findarticles.com/p/articles/mi_7401/is_42_18/ai_n56381059/ “Hospital Corporation of America (HCA) is the largest private operator of health care facilities in the world,[1] It is based in Nashville, Tennessee, United States and is widely considered to be the single largest factor in making that city a hotspot for healthcare enterprise.” http://en.wikipedia.org/wiki/Hospital_Corporation_of_America

      This is just a sample and does not include the profits from health insurance companies. Imagine, what kind of a country allows obscene profits from health care and what of a people allow it to occur.

  3. F. Beard

    I note that I am being impersonated again by the Indian pornography pusher. Note the lack of avatar.

  4. attempter

    The effect of the new bill, if it goes forward, will obviously be to intensify this effect, render it even more pernicious.

    What rational person would expect anything else? The bill not only maintains these rackets in existence, it tremendously enhances their power. The business model, as we didn’t need that quote to show us since it’s empirically proven (though the quote proves that the effect was intended from the start), is to extract as large a rent as possible while paying out as little as possible. “Health insurance” on its face makes no sense as a concept, and experience has long proven the practical manifestation of this conceptual incoherency.

    So people were already making the rational choice to forego this fraudulent “insurance”, even before the Depression hit. That process was only going to accelerate.

    That’s why Obama and the Democrats rushed to the sector’s assistance. Obama’s first priority for his presidency was to rescue these criminals at the expense of the American people. Their goal was to bail out the insurance rackets by forcing people to buy this worthless “policy”, this Stamp. It’s really a poll tax being collected so that this worthless parasite can exist at all.

    The bill is also designed to help employers shift their health costs to workers, and to force workers into the individual antitrust-exempted “market”. Obama’s own CBO says the bill will increase costs in this individual market.

    So there’s the intent of the bill: The insurers are bailed out, the government rounds up a forced “market” for them, no credible quality control is placed on these policies, no cost controls are imposed upon them, in fact the bill tacitly encorages them to jack up costs, employers meanwhile get to jettison employer-supplied insurance, the government continues its abdication of this core function, and the individual is driven into this extremely expensive poll-taxed state of nature. Meanwhile less and less care is actually to be provided, as we’ve already seen in Massachusetts, where thousands are forced to buy insurance they can’t afford to use.

    As with every other policy of corporatist kleptocracy, the goal is wealth redistribution upward, in this case through direct extortion by the government goon. If this policy can actually be enacted, it will be a great leap forward in kleptocratic technique: Direct state robbery.

    As I wrote the other day, there will then be no limit on the possible mandates. These bills will be like privateering commissions, letters of marque or bills of attainder. Obamacare is the prototype as well as the extreme example.

    1. run75441

      attempter:

      Not much objectivity in your comments and much subjectivity. Its pretty, but, it is also weak.

      “will obviously be to intensify this effect, render it even more pernicious.”

  5. suzanne

    While the bulk of my medical debt is from not being able to afford health insurance while I was a temp worker, when I finally was hired on full-time, I incurred more debt while insured under HMO because my wages were still not enough to completely pay for the 20% co-pay for my daughter’s birth. Then I lost my job so there was no chance at paying back the debt.

  6. Pete

    Knowing what is and isn’t covered under your insurance is a huge problem. As an experiment, next time you visit a medical establishment ask your caregivers how much anything is or is going to cost. They will have no idea. Then say, “hold on while I call by insurer”. Yeah, right, the doctor will get up and leave and come back in 20 minutes. Then say, “well it isn’t covered, what are my options?” She will tell you alternatives and you will have to call again and so forth. This is, of course, asinine, but that is how a “rational” consumer of medicine would have to behave. Now try doing this while hacking up a lung or bleeding from a femoral artery or with a fever of 103 degrees or a kidney stone or a …you get the message. Do you think the insurance companies might have an unfair advantage in this whole process?

    1. Hal Hancock

      So true. When our 3 yr old’s eyes were brimming with yellow (conjunctivitus), and she was wailing, and the urgent care clinic was closed at 8pm, then we went to the ER, of course. The result makes you wonder where the money goes. The building isn’t that expensive, the staff isn’t all driving mercedes, etc.

  7. tyaresun

    Our family went to a travel clinic before our India trip and were told that things like polio booster shots, hepatitis shots, and pills for typhoid and malaria are not covered by my insurance. This cost me a few hundred dollars.

    If one of us would have fallen sick to any one of these illnesses, these morons would have spent thousands for the hospital costs.

  8. Omitted Kingdom

    We live in a global deflationary environment. There is no reason for any price of medical care or any cost of medical care to be rising. Price=what you pay now. Cost=what you pay over time in opportunity cost. Both are falling. In India, you can hire an MD to do medical writing for $20 an hour. We need the side by side list of prices and costs in India and the US. Numbers out of context are meaningless.

  9. Bullsmith

    Treating people’s ability to stay alive as a product and letting a health insurance cartel decide how much of the nation’s wealth to keep is a guaranteed disaster. When does it stop? What’s your life worth? What’s to stop insurers from taking every penny they can get and, as this article so wonderfully provides, not even providing actual, comprehensive, insurance. And I very much fear Americans are going to discover that what HCR really did was lock in the insurer’s stranglehold on the population.

  10. d cortex

    He left out the speech Nixon gave following the Kaiser Permanente back room discussion.
    He announced, lying through his teeth, exactly the reverse..
    that is, he promised Americans more coverage for less in premiums in a public speech. Michael Moore’s ‘Sicko’ details this well.

  11. Jim Haygood

    Typical health ‘coverage’ is emphatically not ‘insurance’ as we know it.

    ‘Insurance’ is what I have on my car. After the first $1,000 deductible, which is my responsibility, my auto liability insurance pays every single dollar of a claim up to the policy limit — no haggling, no doubt, no question.

    Health policies full of legalistic carve-outs are intrinsically fraudulent, and should be prohibited as contrary to the public interest — as should first-dollar indemnification coverage, which is not insurance either.

  12. mark

    “And as the Washington Post pointed out last year:

    Sixty-two percent of all bankruptcies filed in 2007 were linked to medical expenses, according to a nationwide study released today by the American Journal of Medicine. That’s nearly 20 percentage points higher than that pool of respondents reported were connected to medical costs in 2001.

    Of those who filed for bankruptcy in 2007, nearly 80 percent had health insurance.

    Why is this happening?”

    First, the description of the study is wrong. the “”62%” included a significant proportion of individuals who did not themselves have medical expenses in the sense ofout of pocket expenses, but had relatives with expenses, or had to take time off to care for others, and so on. Read the study.

    Why is this happening?

    Well it suggests that medical debt is really not “the” cause of those bankruptcies. Go back and look at the study again. It does not say medical debt is “the” cause. It says it is “a” cause. The study does not examine what proportion of a person’s debts are “medical debt”. It could be 5% or 90%, you don’t know.

    It is worth noting that the threshold for counting a medical debt that the study employs is virtually identical to the amount that the IRS allows when it calculates ability to pay back taxes. That allowance is statutorily meant to be an ordinary amount. So the study has quite a low threshold. That is one trick they used to get the numbers up high enough to make the argument they wanted.

    Finally, when people go bankrupt, they get out from under their debts! In most cases, most of their property is exempt from creditors. So they actually come out of bankruptcy much better off. It is the creditors who get the shaft.

    1. Binky Bear

      Except that the bankruptcy laws have changed and it is much much harder to discharge debts. Further the insurance and health care industries find it profitable to pursue people in civil court for damages, or sell debts through back markets where even after bk they will harass and abuse people.
      The word Serfdom comes to mind, despite your deep sympathy for creditors.

  13. Frank

    Simple plan. Insure everyone for basic medical, emergency and preventive care. Insure nothing more. All hospitalizations and surgery to be paid out of pocket. Sit back, wait till Wall Street investors yell and scream that there are no bonuses and pharmaceuticals scream when no one can afford their overpriced drugs that extend life a literally for a few days. The average guy will get hurt but it won’t take long before we get a sensible medical plan.

    1. anne

      well…. come on over to Australia!! … we need country Dr’s badly – national health here, and none of the bullshit. Have had a US dr move into town a few months ago – he loves it and says how easy it is to treat people without the insurance crap. Doctoring is about treating people – not being a bloody accountant at the same time. And there is no such thing as medical bankruptcy here.

      Lived in the US for 7 yrs and would not buy into the insurance scam – moved back to Aust. because of national health (oh and I worked for a Dr in the US – he quit private practice as it was such a pain in the bottom).

  14. Psychoanalystus

    This country is so backward in so many respects, but when it comes to health care it is downright evil and malicious. I am a doctor, I work in the field. I see horrific situations on a weekly basis. Just in the last 2 months I had 2 patients die because Medicare would not pay for an MRI in one case and for a bone fracture for the other. They died of pain, depression, and overdose of pain medication.

    All I have to say about this country’s health care, the so-called “best medical system in the world” as it is often described by that criminal party of cheap corporate whores and gangsters called the GOP is this: this nation has a third world healthcare system, and tens of thousands of people die every year in order to satisfy the infernal greed, demonic selfishness, and maliciousness of these monstrous health insurance corporations that YOU support in this country’s formerly democratic institutions known as the US Congress and Senate. These companies, these insurance companies need not be reformed, they need to be utterly destroyed, utterly obliterated, and their executives and key employees need to be prosecuted as common murderers, because that is precisely what they are.

    My medical opinion about this country is that it has become a planetary cancer, a metastasized malignancy poisonous to its own people as well as to the rest of the world. Fortunately, the path it’s committed itself to guarantees its collapse.

    Psychoanalystus

  15. Psychoanalystus

    As far as medical debt goes, I have a simple solution: stick them with it. Do not pay it. If enough people do that, we will bring this monstrous system down in a heartbeat and fortunately build a new and civilized one, like the rest of the world has done.

    If you have an emergency problem (heart attack, broken leg, stroke) and don’t have insurance, just go to the emergency room, and then stick them with the bill. If you need more lengthy procedures like cancer treatment, dental work, do it overseas. Foreign doctors not only are much, much better than these arrogant undertrained morons here, but the costs of most procedures are 5, 10, or even 20 times lower than here.

    The same goes for medication. If you need any medication and your insurance will not cover it, take a trip to Europe or Mexico and get a year’s supply at 1/5-th the cost.

    The formula for changing this monstrosity called US health care is simple:
    (1) If you can stick them with an emergency bill, do it.
    (2) For non-emergency needs or medication, take care of it abroad.

    Let’s let these sons of bitches eat cake!

    Psychoanalystus

  16. derek

    Both the article and the comments miss the obvious.

    If someone in the family is very ill, they either can’t work, or someone has to stay home to care for them. Plus there are extra expenses such as travel, medications, whatever.

    If you have a two income family with no savings and high debt load, anything will put you in bankruptcy. One breadwinner trashes their knee and has an operation and 4-6 month rehab.

    What is missing is disability insurance.

    Derek

  17. Expat

    If slitting the throats of newborn babies could be made profitable enough, rest assured the government and some corporations would make sure it happened.

  18. armand g eddon

    We seek permanence in a transient world, at the current low cost of 17% GDP to the medical establishment, while the Christian God offers immortality asking but a tithe, and Buddhists seek nothing more than detachment and liberation, free of charge. Born to perish, we will bankrupt the nation resisting, so thank God for Spirit …

  19. petridish

    The medical insurance “industry” can generate profit in only one way–by selling a promise never intended to be kept. The industry peddles NOTHING, packaged as a life-saving essential at a premium, ever-escalating price.

    90% of the healthcare consumed by an American is consumed in the last year of life, and so most American healthcare is already paid for by the government.

  20. tar, etc.

    Ah, the perfect place to bring this up. Why aren’t we all charged the same price for hospital services?

    I know someone who had a very expensive surgery. The hospital bill said it cost $198,000, yet also stated the insurer paid only $19,000 for it. Which is the actual cost?

    Assume it really cost the hospital $198,000. Why did they only charge the insurer $19k, presumably because they buy in bulk? Did the hospital not transfer $179k in value to the insurer, and did they both reveal the transaction on their taxes?

    Suppose the real cost is $19k. Why does the hospital charge those without insurance $198k ? How can they justify such a surcharge? The only rationale I’ve heard is that an uninsured patient is in the same pool as all the uninsured that didn’t pay their bills, but that makes no sense. As this article points out, even uninsured have unpaid bills. A hospital should only be charging actual costs and not be justifying arbitrary billing under the guise of insurance risk management pools.

  21. Puffer

    Two points.

    1- Growing families with young to middle age adults need to keep One
    parent home to wipe snotty noses, feed cookies & milk when kid
    return home from school….better yet home school, and keep kids
    healthy. A return to yesterday? Yes. Health and its delivery system
    is broken beyond repair. If you can afford it you will know it.

    2- This leaves seniors with medicare. Huge numbers alone prevent
    wholesale screwing with this quadrant- for the time being. Sign up
    for A & B , and get a good supplemental insurance carrier, such as
    Mutual of Omaha. Note: State to your Doc (prior to any procedure)
    in his office: “I have Medicare and this supplemental insurance. Is
    this sufficient? Its all I got!”
    Seven serious procedures and three major surgery’s in four years has
    cost $0. out of pocket. Peace of mind.

  22. financial matters

    The medical field is stretched tight and has much disorganization. I think eventually we might see more primary care being given out by nurse practitioners, leaving more complicated problems for physicians.

    The insurance field is a total mess. We have a country that combines top of the line medicine for some with 3rd world conditions for others. Uninsured patients can often pay double for a procedure that insurance companies have negotiated special rates for. And many people are just a job loss away from being uninsured. Hospitals often provide emergency and other care for people who can’t pay and this is often made up by higher insurance premiums for those who can.

    I see health care reform as trying to get a grip on some of these problems. If more people become insured through various mechanisms this helps level out the playing field, provides a degree of security, and helps avoid transfers of payments which can obscure true costs.

    Having blocs of insured patients empowers them to negotiate for reasonable medical reimbursements. Also the reform bill requires the insurance companies themselves to be more transparent as to what portion of their revenues they are using for medical care.

    Medical care is a complicated subject as it involves choices as to what is a persons right to basic care and should it be solely on their ability to pay. Also what is reasonable compensation to motivate the varying level of training necessary to provide medical care. These are societal choices but I think they can be more easily made where there is greater transparency in the overall process allowing for more informed discussions.

  23. run75441

    F.

    When have you read your health insurance coverage document from page to page? And when have you had to ask what a hospital or doctor will charge for a treatment? For the former, I would suggest 99% of the population has not read the verbage of their plan (including you). For the former, I will also suggest that beyond the cost of an office visit ($150 to $225), most doctors and their office can not tell you the cost of particular blood tests, imaging, urine tests, etc. There are price tags on the tests for you to read.

    So you have pneumonia and the doctor orders up a barrage of tests. I asked how much? My healthcare insurance was catastrophic in plan as I was unemployed and I came home from “Showdown in Chicago” sick. The first battery tests I submitted to because my wife insisted on it. The second barrage of tests I waited 3 days WITH STILL NO ANSWER until a clerk said to go offsite.

    And the hospital was no podunk place . . . University of Michigan.

  24. Jim the Skeptic

    You are kidding right??

    I remember reading my Blue Cross & Blue Shield plan. It gave the briefest descriptions and constantly referred to the “Master contract”.

    They paid “80% of the usual, customary, and reasonable” charges. What a joke, they never paid more than 50% of the actual bill. No doctor would accept what these bandits called usual, customary, and reasonable” charges.

    The best thing that ever happened to me was the HMOs. I knew what my co-pay was in advance. The downside was having to use only their doctors, but I never had any complaints about those doctors.

    More generally, a large part of the problem is that there are no standardized policies. So you can’t compare them. I get a simple summary of the policies at the beginning of open enrollment. That should be the law.

    And heaven help those in the individual health insurance market. Seems to be like the contract was when I bought my home, they could have built an outhouse and claimed it met the provisions of the contract!

    The USA brand of capitalism is so fragile that the taxes used to support universal health care in the REST OF THE DEVELOPED WORLD would bring the whole tent down!

    Actually we don’t have capitalism, we have a deviant variant which subsidizes businesses!

  25. Lidia

    Well Jim, I agree with your comment up to the point where you say that the US has a “deviant variant” of capitalism. In fact that is not so;; this is all working out exactly as capitalism would have it: Capitalism is just fractional reserve lending in real terms rather than abstract terms.

    You start with set-aside “capital” (excess production) which is supposed to then be leveraged to increase—and capture—excess production exponentially. The longer this game goes on—increase/capture, increase/capture—the greater the percentage of real production is hoovered up by capitalist claims. Insurers’ profits just get re-invested into another round of exponential extractive enterprise. We will continue producing more “health care” at the same time we make even basic care unaffordable for the majority, not just because CEOs are greedy, but because the mathematics of our religiously-beloved system impel it.

    Leave aside fiat currency… the capitalist assumption remains that infinite exponential extraction of real wealth can continue its aggregation. TPTB will do anything to make sure that people don’t see that this is happening, or that if they do, they misunderstand why.

  26. F. Beard

    You start with set-aside “capital” (excess production) which is supposed to then be leveraged to increase—and capture—excess production exponentially. Lidia

    It is government privilege that allow leverage above about 2-1.

    .. but because the mathematics of our religiously-beloved system impel it. Lidia

    The Bible forbids usury between fellow countrymen. Fractional reserves, particularly with a government enforced monopoly money supply, is theft which the Bible also forbids.

    Strangely and miraculously, common stock as money seems perfectly acceptable in the Bible.

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