Healthcare reform in Mass. has not solved medical bankruptcy

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Despite politicians’ claims to the contrary, Massachusetts’ mandatory health insurance scheme, although vastly expanding coverage, has not significantly ameliorated the rates of medical bills- and illness-induced bankruptcies in the state, suggesting the need for improved redesign of health insurance prior to the national adoption of Massachusetts’ mandatory health coverage system, according to a study published March 8 in the American Journal of Medicine.

Since the 2006 passage of healthcare reform mandating insurance coverage for all Massachusetts residents, and the legislation’s implementation in 2008, the state has cut the number of uninsured in half, amounting to 5.5 percent of residents, the lowest of any U.S. state. Moreover, Massachusetts Governor Deval Patrick has written, “Because of our reform . . . families are less likely to be forced into bankruptcy by medical costs.”

Finding no published data to affirm this statement, David U. Himmelstein, MD, from City University of New York School of Public Health in New York City, and colleagues randomly surveyed Massachusetts debtors and reviewed court records, before and after state health reforms, to examine rates of bankruptcy and their relevance to medical bills and illnesses. The questionnaires were mailed to 483 residents, yielding responses from 199 bankrupt households.

The authors defined medical bankruptcy as including one of the following among debtors: $5,000 or at least 10 percent of income owed to uncovered medical bills; medical bills or illness as the reported reason for bankruptcy; two or more weeks of work-related income loss due to debtor illness or medical disability; two or more weeks of lost income due to a sick family member; a mortgaged home to pay off medical bills.

Massachusetts saw 10,093 bankruptcy filings in 2009, 52.9 percent of which were due in part to medical bills or illness. These figures represented 51 percent growth—an absolute increase of 2,589 individuals—in the number of bankruptcies filed in the state compared with pre-reform, 2007 numbers.

At the same time, the proportion of state bankruptcies attributed to medical bills and illnesses decreased by a non-significant amount, accounting for 59.3 percent of Massachusetts bankruptcies in 2007 and 52.9 percent of filings in 2009. Nationally, medical bankruptcies accounted for 62.1 percent of all U.S. bankruptcies in 2009.

On the one hand, the authors pointed out, Massachusetts already posted lower bankruptcy rates than most of the nation prior to reforms; on the other side, the state’s increase in the number of medical bankruptcies was smaller than the growth seen by most of the U.S.

Most of Massachusetts medical and non-medical debtors were women, college graduates and previous homeowners. The medically bankrupt were significantly more likely to be unemployed in Massachusetts, which the authors argued was probably the result of higher disability rates among this group. The average age of debtors was just older than 48 years.

The authors noted that the recession that began in 2008 played an important role in the increasing rates of bankruptcy across the country.

“Despite a marked decline in the uninsurance rate in Massachusetts since the implementation of health reform, the proportion of bankruptcies that occurred in the wake of medical problems has not decreased significantly, and the absolute number of medical bankruptcies has actually increased by one third,” said Himmelstein and co-authors.

The overwhelming majority of medically bankrupt Massachusetts residents, 89 percent, were covered by health insurers, representing an increase from the 84.1 percent of debtors that were medically covered in 2007.

“[O]ur findings are incompatible with claims that health reform has cut medical bankruptcy filings significantly,” the authors noted. “Although Massachusetts’ slower than average increase in filings since 2007 raises the possibility that health reform may have attenuated the recession’s impact, this effect was at best modest, and the milder than average housing crisis in the state seems a likelier explanation.”

Himmelstein and co-authors also pointed out that Massachusetts health costs and gaps in coverage had increased sharply—as in the rest of the country—since the state instituted mandatory coverage, leaving families responsible for significant out-of-pocket expenses. “For example, under Massachusetts’ reform, the least expensive individual coverage available to a 56-year-old Bostonian carries a premium of $5,256 and a deductible of $2,000, and covers only 80 percent of the next $15,000 in costs for covered services. Thus, an insured couple with medical problems and an income greater than $44,000 (ie, >300% of poverty, the eligibility threshold for insurance subsidies) might pay $20,512 in annual medical expenses, a figure that far exceeds the financial capacities of the average American family.”

The authors said non-response bias and observed underreporting of medical bills in surveys versus phone interviews might have influenced their results to a limited degree.

Himmelstein and colleagues considered that despite the effective expansion of coverage to Massachusetts residents, state lawmakers “did little to upgrade existing coverage or reduce costs.” This is particularly relevant to national reform, they argued, because the sanctioned system “closely mirrors” that of Massachusetts.

“Our data do not suggest that healthcare reform cannot sharply reduce the number of medical bankruptcies,” the authors maintained. “Indeed, medical bankruptcy rates appear lower in Canada, where national health insurance provides universal, first dollar coverage. Instead, these data suggest that reducing medical bankruptcy rates in the United States will require substantially improved—not just expanded—insurance, as well as better disability insurance programs to provide income support to ill individuals and family caregivers.”