About half of all personal bankruptcies result from medical bills, according to a study conducted by Harvard's Law and Medical Schools (published January 31, 2005 in the journal Health Affairs). Most of these bankruptcies were declared by middle-class workers with health insurance.

In follow-up interviews, researchers found that the people whose bankruptcy had a medical cause were more likely than other debtors to do without such basic necessities as phone service, water or electricity or food. Three-fifths went without a needed doctor or dentist visit, while nearly half failed to fill a prescription.

Many families with insurance are bankrupted by medical expenses that are well below what the researchers considered to be catastrophic. "Most of the medically bankrupt were average Americans who happened to get sick," said Himmelstein, one of the study's authors. "Health insurance offered little protection as families faced unaffordable co-payments, deductibles and bills for uncovered items like physical therapy, psychiatric care and prescription drugs. Even the best job-based health insurance often vanished when prolonged illness caused job loss."

Of the workers with health insurance, 38 percent had lost coverage by the time they filed for bankruptcy because the illness often led to the loss of the job and insurance. Those who initially had health insurance but lost it during their illness incurred the highest bills - an average of $18,005. (This could result from two situations: (1) the people without insurance often went wiuthout care or used charity care and (2) once the insurance was lost, these workers faced higher doctor bills because they lost the discounts negotiated by the insurance company.)

"Our study is frightening. Unless you're Bill Gates, you're just one serious illness away from bankruptcy," said Dr. David Himmelstein, an associate professor at Harvard Medical School. "Too often, private health insurance is an umbrella that just melts in the rain."

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