Why we can’t wait until 2014

This study analyzes data from the RAND Corporation’s Health and Retirement Study conducted from years 1992 through 2006. The authors sought to compare their data with the claims of other researchers which estimated that anywhere from between 50-62 percent of bankruptcies are the result of medical illness. In most cases of illness, insurance covers the bulk of medical expenses. However, there often are many out-of-pocket costs such as copays, coinsurance, and deductibles. Even for insured patients, these out-of-pocket costs can prove to be challenging. For a person who happens to be uninsured, medical expenses must be borne one hundred percent. The authors of this study examined several key illnesses including, diabetes, cancer, emphysema, heart disease, stroke, and psychiatric illness. Individuals who suffered illness and were uninsured prior to becoming ill were the cohort of interest. These individuals were compared to others matched on the basis of initial (pre-illness) assets, income, home ownership, and the presence of pre-existing medical conditions. Newly ill, uninsured households for which no matches were achievable were excluded from analysis.

Evaluation of the data revealed a total of 304 newly ill, uninsured households and compared them to similar households that were either (1) insured and had a new illness or (2) uninsured and healthy.
The outcome of interest was the net change in assets – including savings and checking accounts, retirement accounts, businesses, stocks and bonds, vehicles, and real estate (excluding the primary residence). Compared to similarly matched households, those households that experienced a new illness and were uninsured had a median net loss of assets of 54 percent or $4,240 (for households with initial assets between $1,000-$200,000). For all newly ill, uninsured households with initial assets up to $300,000, the median loss of assets after illness struck was 33 percent or $3,006. Potential confounding factors included homeownership and college education, both of which had a positive impact on household asset change.

In an attempt to illustrate their findings, the authors suggested that readers think of 4 similarly situated households with initial assets of $20,000. After passage of time, one household that is healthy and uninsured and another that is newly ill and insured would still have roughly the same amount of assets. By comparison, the newly ill, uninsured household would only have $15,600 in assets remaining. Thus, the authors conclude that the consequences of illness for an uninsured household are potentially devastating from a financial standpoint.

Commentary
The purpose of insurance is to anticipate and protect against catastrophic financial loss. In the case of health insurance, the purpose is to protect a family’s financial well-being in the event an expensive illness arises. This study clearly demonstrates that families that are uninsured expose themselves to significant financial risk. When compared to similar households, those that are uninsured and suffer illness stand to lose approximately one-third to one-half of their accumulated assets. With over 45 million Americans without health insurance, a heart attack or a major car crash could spell financial ruin to millions of American families. Although this study is flawed because comparisons to uninsured households require selecting similarly situated matches – low income, minority, and often non-citizen households, it does suggest that expanding health insurance coverage will protect the financial well-being of many Americans, reduce bankruptcies, and contribute to the revival of the economy. Unfortunately, many benefits of the health reform bills in Congress do not take effect immediately. Many American families cannot wait until 2014 for Medicaid expansions, premium subsidies, limits on deductibles, guaranteed issue, and prohibitions on pre-existing conditions to take effect.
HSR. 2009; Article online before print.

by
Cedric K. Dark, MD, MPH

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