Stephen Feman
Last year, the American Journal of Medicine included a disturbing story about bankruptcy in America. In that study of five states (California, Illinois, Pennsylvania, Tennessee, and Texas), it was found that medical expenses had become a causal factor in almost 50 percent of all personal bankruptcies. That investigation revealed that these financial catastrophes had been occurring for some years, but the proportion related to health care appeared to have grown over the same period of time as many of our other health care concerns. In fact, a logistic regression analysis of the data revealed that the odds "that bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001." That report became more disconcerting when it described the average person impoverished by medical debt. The typical individual was a 41-year-old with a job and some college education, who was working to support a family with young children. In addition, that research indicated that the strongest predictor of a working person developing a catastrophic combination of severe illness and bankruptcy was the loss of health insurance during the preceding two years. As we all know, situations like that are not uncommon in the current economic climate, because many existing jobs have had their benefits reduced.

Well, that’s sad, but my interest was in whether that had any special meaning for the people of Missouri. When I examined the issue, I found that it is difficult to perform a similar data analysis within this state. Nevertheless, for those interested in this subject, there are other links that can be used to learn about the local situation. At the Federal Reserve Bank of St. Louis, people have been concerned about local bankruptcy problems for many years. Interestingly, as far back as in 1998, research performed at the Federal Reserve Bank of St. Louis found that the medical expenses of the health care uninsured were a leading cause of bankruptcy in this region. More recently, such bankruptcy problems were re-examined and a relationship to medical expenses was found to continue to exist. Then, another study discovered an additional relevant factor: The average national personal bankruptcy filing rate in the United States in 2004 was 380 out of every 100,000 people. If one examines each individual state, Missouri wins again. In Missouri, in the year 2004, there were 700 personal bankruptcies for every 100,000 people. That was found to be the highest rate of personal bankruptcy in the United States that year.

So, what does this mean to you? Some may recall my October 2009 post. There, I showed that Missouri spends a larger portion of the state GDP per person for health care than most other states. Compared to the U.S. average, that is about $500 more per person in this state. At the same time, average life expectancy in Missouri is two years less than the U.S. average. That means we are spending more and getting less. Now, the personal bankruptcy data implies that some of those who are surviving this health care dilemma are being driven into poverty. As the original report showed, these are hardworking, educated people trying to support their families.

Previous reports from the Show-Me Institute revealed that certain types of insurance programs, like Health Savings Accounts, can be used to prevent such health care–related financial catastrophes. Because this has become a greater problem now than it was when those reports were written, one would expect the insurance market to respond to this need. Some of the brightest people work in the insurance industry, and they need to create a product that addresses this issue. An additional problem is that most of the people that need this type of insurance are not aware of their danger, so some public education is needed. Now that there is a bit of a breather in the rush to health care reform, perhaps there is time to look at this situation, and the other free-market ways that can be developed to help the people of Missouri.

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Stephen Feman