The recession’s continuing toll in California

Medical debt is an under-recognized household burden. In 2009, 2.6 million Californians had some form of medical debt, which 400,000 more than in 2007, according to the UCLA Center for Health Policy Research.

Access to care is normally measured nationally by the percentage of Americans who are uninsured. This deflects attention from people who are underinsured or dealing with burdensome medical debt. The typical benchmark for being underinsured is paying 10 percent or more out of pocket for health care. People under financial strain often forgo needed medical care.

Unlike other expenses, medical costs are difficult to budget for. The uninsured are especially disadvantaged because they receive bills up to 2.5 times what public and private insurers pay. Unlike individuals, health plans can negotiate lower prices for treatment costs. Only 1 out of 8 uninsured families can pay their hospital bills in full.

Nearly half of the uninsured did not fill at least one prescription in the past year and more than half had medical problems for which they did not seek care. One out of 5 had medical debts exceeding $8,000. They lose one-third to one-half of their assets to medical expenses when tragedy strikes. According to a government study, most uninsured people have “virtually no” savings and had media financial assets of just $20.

Medical bills are playing more prominent roles in personal bankruptcies. Medical expenses contributed to nearly two-thirds of bankruptcies filed in 2007, according to a Harvard research study. The share of bankruptcies associated with medical bills increased 50 percent between 2001 and 2007.

The authors were blunt: “The U.S. health-care financing system is broken, and not only for the poor and uninsured. Middle-class families frequently collapse under the strain of a health-care system that treats physical wounds, but often inflicts fiscal ones.”

Lead researcher David Himmelstein, who advocates a single-payer system, said in a statement: “Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy. For middle-class Americans, health insurance offers little protection.”

Three-quarters of those filing for bankruptcy had medical insurance when they became ill or injured. Many found that they were underinsured and had large out-of-pocket expenses. One-quarter of employers cancel coverage immediately when an employee suffers a disabling illness, and another quarter do so within a year. Medical bankruptcy is rare in developed nations other than the United States. Besides having better medical safety nets, Europeans pay about half as much as Americans do for out-of-pocket expenses.

Some conditions are financially devastating. According to the study, people with multiple sclerosis paid an average of more than $34,000 out of pocket in 2007. Those with diabetes paid nearly $27,000 and those with serious injuries paid about $25,000.

Himmelstein also examined the impact of the 2006 Massachusetts health-reform law. The percentage of bankruptcies tied to medical bills changed little after reform, indicating that federal reform will not have much effect.

Himmlestein said, “Massachusetts’ health reform, like the national law modeled after it, takes many of the uninsured and makes them underinsured – typically giving them a skimpy, defective private policy that’s like an umbrella that melts in the rain. The protection’s not there when you need it.”

Other researchers say such bankruptcy figures are overblown. They estimate that medical bills contribute to less than 20 percent of bankruptcies and primarily affect those with incomes closer to poverty level.

A study of medical financial burden and mortgage foreclosures found a strong link. Seven of 10 homeowners had a significant medical episode in the two years prior to foreclosure proceedings. More than one-third had outstanding medical bills greater than $2,000 and 1 out of 8 used home equity to pay for care.