More than 60 percent of all bankruptcies in the United States in 2007 were driven by medical incidents. In an article to be published in the August issue of the American Journal of Medicine, the results of a U.S. random-sample survey of bankruptcy filers shows that illnesses and medical bills contribute to a large and increasing share of bankruptcies.

In 2007, before the current economic downturn, an American family filed for bankruptcy in the aftermath of illness every 90 seconds. Most troubling about this statistic is that three-quarters of them were insured, according to the authors. They also found that the share of bankruptcies attributable to medical problems rose by 50 percent between 2001 and 2007.

Following up on a 2001 study in five states, where medical problems contributed to at least 46.2 percent of all bankruptcies, researchers from Cambridge Hospital/Harvard Medical School, Harvard Law School in Cambridge, Mass., and Ohio University in Athens, Ohio, surveyed a random sample of 2,314 bankruptcy filers in 2007, abstracted their court records, and interviewed 1,032 of them. They designated bankruptcies as ‘medical' based on debtors' stated reasons for filing, income loss due to illness and the magnitude of their medical debts.

Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6 percent, David U. Himmelstein, MD, an associate professor of medicine at Harvard, and colleagues. The odds that a bankruptcy had a medical cause were 2.38 fold higher in 2007 than in 2001.

According to the study, a number of circumstances propelled many middle-class, insured Americans into bankruptcy. For 92 percent of the medically bankrupt, high medical bills directly contributed to their bankruptcy, according to the authors.

Investigators found that many families with continuous coverage found themselves underinsured, responsible for thousands of dollars in out-of-pocket costs. Out-of-pocket medical costs averaged $17,943 for all medically bankrupt families: $26,971 for uninsured patients; $17,749 for those with private insurance at the outset; $14,633 for those with Medicaid; $12,021 for those with Medicare; and $6,545 for those with VA/military coverage. For patients who initially had private coverage but lost it, the family's out-of-pocket expenses averaged $22,568.

Individuals with diabetes and those with neurological disorders such as multiple sclerosis had the highest costs, an average of $26,971 and $34,167 respectively, according to the researchers. Hospital bills were the largest single expense for about half of all medically bankrupt families; prescription drugs were the largest expense for 18.6 percent.

"Our findings are frightening," Himmelstein said. "For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments and deductibles that illness can put you in the poorhouse. And even the best job-based health insurance often vanishes when prolonged illness causes job loss--precisely when families need it most."

"The U.S. healthcare financing system is broken, and not only for the poor and uninsured. Middle class families frequently collapse under the strain of a healthcare system that treats physical wounds, but often inflicts fiscal ones," he concluded.