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FORBES Article - August 2013 - Cancer Causing Bankruptcy
FORBES Article - August 2013 - Cancer Causing Bankruptcy
2005, you can see that the bankruptcy rate for cancer patients is substantially higher than for the matched controls. Then around 2005, there was a steep spike in bankruptcy filings, a spike that occurred in anticipation of the Bankruptcy Abuse Prevention and Consumer Protection Act. People declared bankruptcy earlier than they might otherwise have done so, out of fear that they wouldnt be able to do so when the new law came into effect. Then following that major increase in bankruptcy filings, the subsequent rate declined, since the pool of potential bankruptees had been diminished. Nevertheless, even in the subsequent periods, its clear that people with cancer diagnoses continued to have a higher rate of bankruptcy than people without such diagnoses. How much higher? About 2 times, on average, across all cancers. The strength of this study over the Himmelstein study is that it does not arbitrarily classify a particular bankruptcy as medical simply because a person faces, for example, $5,000 in healthcare costs in a given year. Instead, it simply analyzes how much more likely people are to file for bankruptcy should they experience a cancer diagnosis. Returning to Joanne Reed, who suffered significant financial distress after developing breast cancerin her specific case, it is difficult to tell whether the cancer was the main culprit in causing her fiscal woes. She admitted to us in the interview that she was already carrying significant credit card debt before her illness. On the other hand, she was able to keep her head above water, economically speaking, until her illness caused her to lose her job. It is very likely that breast cancer was the final financial weight that pulled her under. But we will never know. With any specific individual, it could be difficult to tell how large of a role health problems played in their financial distress. That is why Ramseys methodology gets us much closer to a useful understanding of what is really happening. Those of us debating medical bankruptcy need to be very clear about what is at stake here. It starts with recognizing the distinction between bankruptcies due to medical expenses versus those caused, more generally, by medical illness. In Joanne Reeds case, she had some large chemotherapy bills to pay. But her biggest financial problem was that she lost her job. It is hard to pay off any kind of bill (much less credit card debt) when you are not receiving a paycheck. Policy makers and politicians have long recognized that the main financial impact of illness is loss of income from being unable to work. Indeed, the first national health plan was created in Germany by Bismarck in 1883, at a time when the cost of healthcare was trivial. The goal of Bismarcks plan was not to help people pay their medical bills. Instead it was to help them recapture lost wages. For that reason, this national program was only offered to working men. Women and children were not seen by Bismarck as needing the help of the welfare state, since illness would not cause them to lose wages. Because job status plays such an important role in how health problems impact financial wellbeing, we should be skeptical of anyone who claims that health insurance is the key to eliminating medical bankruptcy. Health insurance is clearly important in reducing the financial impact of illness. Healthcare is a lot more expensive than it was in the days of Bismarck. According to the CDC, the average out-of-pocket costs associated with breast cancer diagnoses are greater than $50,000. That is a lot of money, especially when you consider the average American has less than $40,000 in savings at retirement age. Health insurance matters in reducing the financial burden of illness. Indeed, recent reports on the Oregon Medicaid experiment prove this point dramatically. In 2008, the state of Oregon expanded its Medicaid program, but with more people waitlisted for Medicaid than it could afford to cover, the state entered eligible people into a lottery, thereby providing a natural experiment to assess the impact of Medicaid healthcare coverage on peoples lives. Many pundits were surprised at the minimal impact that Medicaid coverage had on peoples healthno change in their blood pressure or cholesterol, for example, and certainly no change in mortality over the short run. But these pundits overlooked the more predictable and potentially important impact of Medicaid coverage on peoples livesit protected them from medical expenses. People lucky enough to receive Medicaid were significantly less likely to experience catastrophic expenditures or to have to borrow money to pay their bills. Health insurance really does help people when they face costly illnesses. But it will never be a panacea, because many people will still face the biggest cost of illnessthe inability to hold down a paying job. To alleviate medically related bankruptcy, we need to alleviate bankruptcy more generally. But alleviating bankruptcy is a goal that is necessarily controversial. It pits our understandable desires to assist people in need against our recognition that any such assistance distorts the marketplace, creating disincentives to work and incentives to feign illness or injury. As we continue to debate these important matters, keep in mind the lessons of Joanne Reeds story. People living on the fiscal edge are often one nudge away from a steep fall. The key to fiscal solvency is to incentivize people to save money, and encourage them to insure themselves from unexpected adversity. With decent savings and good insurance, fewer Americans should need to declare bankruptcy.
Source: www.forbes.com/sites/peterubel/2013/08/16/beware-of-cancer-metastasizing-to-your-wallet/