October 2009

Grant Results

SUMMARY

Researchers with Harvard Medical School studied the relationship between illness, injury and bankruptcy among more than 1,700 individuals who had filed for personal bankruptcy in federal court in five states in spring and summer 2001.

Key Findings and Policy Implications
Among the researchers' key findings from an article in the February 2005 issue of Health Affairs:

  • Medical problems contributed to about half of all bankruptcies.
  • A lapse in health insurance coverage during the two years before filing for bankruptcy was a strong predictor for a medical cause of bankruptcy.
  • Medical bankruptcy is the result of uncovered bills as well as lost income due to illness.
  • Nearly 52 percent of the medical problems involved ongoing chronic illnesses.

The article also laid out a set of policy implications, including:

  • Even brief lapses in insurance coverage may be ruinous and should not be taken lightly.
  • Many health insurance policies are too skimpy in the face of serious illness.
  • Even good employment-based coverage sometimes fails to protect families because illness may lead to job loss and a subsequent loss of coverage.
  • Illness often leads to financial catastrophe through loss of income, as well as high medical bills.

Funding
The Robert Wood Johnson Foundation (RWJF) provided $293,507 to support this unsolicited project from May 2001 through July 2003. The Cambridge Medical Care Foundation is a nonprofit entity that receives and distributes grant funds in support of research conducted by faculty affiliated with the Cambridge Health Alliance (which includes the Harvard-affiliated Cambridge Hospital). The principal investigators have appointments at both Harvard and the Cambridge Health Alliance.

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THE PROBLEM

In 2001, approximately 1.5 million American families filed for bankruptcy, a 90 percent increase since 1990, according to the administrative office of the U.S. Courts. Previous research, conducted in 1999 by Elizabeth Warren, J.D., of the Harvard Law School, documented that medical problems were second to job-related issues as a cause of bankruptcy.

No other systematic studies have examined the relationship among health problems, health care bills and bankruptcy. Court records, in which medical debt may appear as debts owed to collection agencies or even credit card companies, yield little insight into the problems of medical bankruptcy. Routine government surveys do not address this issue. Key questions could be answered through interviews with individuals who file for bankruptcy.

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RWJF STRATEGY

The number of uninsured Americans grew in 2001, as many people lost their jobs because of the economic slowdown, which was exacerbated by the terrorist attacks of September 11. In response, RWJF bolstered its efforts to increase the number of Americans with health coverage through three key strategies:

  • Building support for expanding both public and private health coverage.
  • Making enrollment easier for uninsured individuals currently eligible for existing public health coverage programs.
  • Supporting efforts by individual states to develop and test new programs.

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THE PROJECT

The purpose of the project was to study the role that illness, injury and other medical causes play in individuals filing for personal bankruptcy.

With cooperation from the chief judges in federal bankruptcy courts in California, Illinois, Pennsylvania, Tennessee and Texas, the researchers administered a written questionnaire to 1,771 individuals who had filed for personal bankruptcy during the spring and summer of 2001 under Chapter 7 or Chapter 13 of the federal bankruptcy code.

The researchers reviewed their court records and conducted follow-up telephone interviews with 931 of them to obtain more detailed information about their financial and medical circumstances. The researchers sought answers to the following questions:

  1. Who files for bankruptcy?
  2. How frequently do illness and medical bills contribute to bankruptcy?
  3. When medical bills contribute to bankruptcy, how large are the bills and for what services?
  4. Does inadequate health insurance play a role in bankruptcy?
  5. Does bankruptcy compromise access to care?

For the purposes of the study, the researchers defined major medical bankruptcy as individuals who met one of the following qualifications:

  • Cited illness or injury as a specific reason for bankruptcy;
  • Reported uncovered medical bills in the previous two years greater than $1000;
  • Lost two weeks of work-related income due to illness or injury; or
  • Mortgaged a home to pay medical bills.

Under a more inclusive category, which researchers called any medical bankruptcy, they included people who cited any of the above, or one of the following:

  • Addiction.
  • Uncontrolled gambling.
  • Birth of a family member.
  • Death of a family member.

The Cambridge Medical Care Foundation is a nonprofit entity that receives and distributes grant funds in support of research conducted by faculty affiliated with the Cambridge Health Alliance, a Massachusetts health system that provides health care services in Cambridge and the Boston area. The alliance includes Cambridge Hospital, which is affiliated with Harvard Medical School. The principal investigators have appointments at both Harvard and the Cambridge Health Alliance.

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FINDINGS

The researchers reported the following findings in an article in the February 2005 issue of Health Affairs:

  • Medical problems contributed to about half of all bankruptcies. Under the more restrictive definition, some 46.2 percent of bankruptcies studied were related to medical illness or injury. Using the more inclusive definition, that figure increased to 54.5 percent of bankruptcies. The average debtor was a 41-year-old woman with children and at least some college education. Most debtors owned homes.
  • Medical debtors are similar to other debtors, but they are more likely to experience a lapse in health insurance coverage. A lapse in health insurance coverage during the two years before filing for bankruptcy was a strong predictor for a medical cause of bankruptcy. Three-quarters (75.7 percent) of people who filed bankruptcy due to illness or injury had coverage at the onset of their illness. Sixty percent initially had private coverage, but one-third lost it during the course of their illness.
  • Medical bankruptcy results from lost income due to illness, as well as uncovered medical bills. Nearly 60 percent of families bankrupted by medical problems indicated medical bills (i.e., from medical providers) contributed to bankruptcy; 47.6 percent cited drug costs; 35.3 percent had curtailed employment due to illness (about half of the time to care for someone else).
  • Nearly 52 percent of the medical problems involved ongoing chronic illnesses. Families bankrupted by medical problems cited varied, and sometimes multiple, medical diagnoses. Nearly 27 percent reported cardiovascular disorders; one-third reported trauma/orthopedic/back problems; 10 percent reported each of the following: cancer, diabetes, pulmonary or mental disorders, and childbirth-related or congenital disorders.

Limitations

The researchers reported the following limitations:

  • The study sample may not be fully representative of all personal bankruptcies in the United States. However, those who filed under Chapter 7 of the federal bankruptcy code resembled Chapter 7 filers nationally (the only group for whom demographic data has been compiled nationally from court records). As in all surveys, the researchers relied on the truthfulness of the respondents. Some debtors may have blamed their predicament on socially acceptable medical problems rather than admitting to irresponsible spending. The researchers believe that several factors suggest the respondents were candid:
    1. debtors filed extensive financial information with the courts under penalty of perjury
    2. the details requested during the telephone interview make a generic claim of "medical problems" difficult to sustain
    3. many of the debtors were interviewed in their homes and their lifestyles reflected that of people under economic constraint, with modest furnishing and few luxuries.
  • Even when data are reliable, making causal inferences from a cross-sectional study is perilous. Many debtors described a complex web of problems involving illness, work and family. Dissecting medical from other causes of bankruptcy is difficult.

Policy Implications

The researchers discussed the following policy implications of their work in the article in Health Affairs:

  • Even brief lapses in insurance coverage may be ruinous and should not be taken lightly. Although 45 million Americans are uninsured at any point in time, many more experience spells without coverage. The researchers found little evidence that such gaps were voluntary.
  • Many health insurance policies are too skimpy in the face of serious illness. Many insured families are bankrupted by medical expenses that fall well below the "catastrophic" thresholds of high-deductible plans, which are increasingly popular with employers.
  • Even good employment-based coverage sometimes fails to protect families because illness may lead to job loss and a subsequent loss of coverage.
  • Illness often leads to financial catastrophe through loss of income, as well as high medical bills. Disability insurance and paid sick leave are critical to the financial survival of individuals with a serious illness.

Communications

The researchers published an article titled, "Illness and Injury as Contributors to Bankruptcy," which appeared in the February 2005 issue of Health Affairs. The Associated Press, the New York Times, Fox News and ABC News as well as NPR, CBS and ABC radio carried reports on the study findings. People magazine published a story of families bankrupted by illness.

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AFTER THE GRANT

In 2007, with RWJF support the researchers at Harvard and Ohio Universities conducted a follow-up study to update the research they conducted on bankruptcies declared in 2001. Among their key findings:

  • Illness, injury and medical expenses contributed to 62.1 percent of the bankruptcy cases studied from 2007.
  • The proportion of bankruptcy filers citing medical-related factors increased almost 50 percent between 2001 and 2007.
  • Most of the 2007 respondents—about 70 percent—had health insurance coverage at the time they filed for bankruptcy.

See Grant Results on ID# 056590.

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GRANT DETAILS & CONTACT INFORMATION

Project

Studying Medically Related Bankruptcies

Grantee

Cambridge Medical Care Foundation (Cambridge,  MA)

  • Amount: $ 293,507
    Dates: June 2001 to May 2003
    ID#:  042425

Contact

David U. Himmelstein, M.D.
(617) 498-1032
dhimmelstein@challiance.org
Steffie Woolhandler, M.D., M.P.H.
(617) 497-1268
swoolhandler@challiance.org

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BIBLIOGRAPHY

(Current as of date of this report; as provided by grantee organization; not verified by RWJF; items not available from RWJF.)

Articles

Himmelstein DU, Warren E, Thorne D and Woolhandler S. "Illness and Injury as Contributors to Bankruptcy." Health Affairs, Suppl. Web Exclusives:W5-63–W5-73, 2005. Abstract available online.

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Report prepared by: Barbara Matacera Barr
Reviewed by: Richard Camer
Reviewed by: Marian Bass
Program Officer: Nancy L. Barrand