Thursday, March 20, 2008

Medical Expense Bankruptcies

A recent commenter accused me of being either an owner, employee, or a “plant” for medical insurance companies. His reasons, apparently, were that I don’t believe in socialized medicine, and I don't believe that medical expenses cause over half of personal bankruptcies.

I’m neither an owner, employee, nor a “plant” of medical insurance companies, although for a little over a year beginning in the summer of 1996 I was an internal auditor for Kaiser Permanente working out of their Oakland, California, headquarters.

On his first point, he’s right. I don’t believe in socialized medicine, and I have written several posts laden with proof that socialized medicine is doomed to failure because of its inefficiencies and the demographics of the populations it serves.

Inefficiencies: It’s run by governments, and there are no incentives for working harder or smarter. The United Kingdom National Health Service daily provides case studies in how not to provide adequate health services while having constant budget shortages, rationing of services, and longer waiting periods.

Demographics: Populations in the developed world are aging rapidly, and many are shrinking. Soon there won’t be enough workers paying in to support the ever-growing portion of the population demanding and receiving benefits.

Now to the ever-growing numbers of personal bankruptcies. A recent study found that medical problems contributed to roughly half of personal bankruptcies. When that study was announced, the word “contributed” became “caused” in the news releases.

A close study of the details of the study showed that illness did contribute to some of the bankruptcies, as would be expected. In some instances, illnesses caused loss of jobs and incomes, plus in some cases loss of medical insurance, and contributed to bankruptcy filings. In other cases even individuals with health insurance were unable to handle the co-payments, deductibles, and other medical expenses that weren’t totally covered by their policies.

The study showed that the number of personal bankruptcies was increasing at an alarming rate, and was now about twenty times greater than just two decades ago.

At this point I began to wonder about what it is about health-care costs today that make so many more American citizens go under financially than in years gone by. I know that Americans are healthier and living longer, more active lives than formerly. I supposed that could be a factor.

But then the study indicated that the profile of the typical filer for bankruptcy was a single female with two and a fraction children. At this point I heard an “Aha!” somewhere in the deep, dark recesses of my brain. Twenty years ago I never thought of the typical American family consisting of a single female and two and a fraction children.

That demographic explains a lot. A household headed by a single mother is financially very fragile. I wondered if there were more hidden gems in the study?

There were. In the past two decades easy credit proliferated, and many Americans sunk up to their eyeballs in debt. That explained why the very modest medical co-pays and deductibles were now pushing people with heath insurance over the edge into bankruptcy. They already had overextended credit, and any little unexpected extra expense was too much.

Then when the study asked them why they filed for bankruptcy, of course they mentioned that medical expenses were a contributing cause.

And when the study results were released, medical expenses “contributed” to bankruptcy became “caused” bankruptcy.

Its advocates had another stick to beat on us and drive us towards socialized medicine, at the same time most of the developed world is realizing it’s a failed system and introducing privatized medical services.

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