News Flash! Medical bankruptcies haven’t gone away.

I am always amused by how some people will demean researchers and their methods when they don’t like the results, but tout them when they do. The last time a major paper was published on medical bankruptcies, it blamed a crappy health care system. A number of people, wanting to defend the status quo, disputed the results. Now another paper is showing that in Massachusetts, medical bankruptcies continue, even after that state passed its health care reform. It’s amusing to watch many of those same people now support those findings in proclaiming that the PPACA (sorta similar to Massachusetts reform) will fail to end bankruptcies.

Not everyone in inconsistent. Megan McArdle has been steadily skeptical of the methods. I understand many of her concerns, but don’t think they necessarily invalidate the findings. After all, is it that hard to believe that medical costs lead to bankruptcies? To her credit, though, Megan did acknowledge that even though she did have issues with the methods, it’s not an unbelievable result.

Austin summarized the findings from a newspaper article. That’s not what I want to focus on. I want to focus on the fact that some are pushing the results as an example of what to expect under the PPACA.

The study contained this paragraph:

For example, under Massachusetts’ reform, the least expensive individual coverage available to a 56-year-old Bostonian carries a premium of $5256 and a deductible of $2000, and covers only 80% 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. Uncovered services, such as physical therapy, drugs, or home care, might push out-of-pocket costs even higher.

That’s really bad.  $20,512 in expenses for a couple making $44,000 is huge, almost half of income. It’s no surprise at all that some people go bankrupt.  But would this occur under PPACA?

Well, if income is just above 300% of the FPL, then premiums can’t go above 9.5% of income, or $4180.  Out of pocket costs are capped at two-thirds of the max ($11,900) for a total of $7933. That means, in a bad year, the couple could be on the hook for just over $12,000.

Don’t get me wrong; that’s a lot of money. And it illustrates that for all the good the PPACA might do, it’s still going to leave some people exposed in terms of costs.  That’s more than 25% of income in medical expenses. But it’s still better – significantly better – that what’s going on in Massachusetts right now.

It’s important for us all to stick to facts. Medical bankruptcies appear to be down in Massachusetts, but still far too common. The PPACA will not eliminate medical bankruptcies, but it will likely do more to reduce them than Massachusetts reform has. And if our goal is to protect people from financial devastation due to illnesses, we still have a lot of work to do.


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