Massachusetts After Health Reform – Do Medical Bankruptcies Spell Trouble for the Rest of Us?

So, now that Massachusetts residents have had an individual mandate for health care since January 2008, how has that impacted their rate of medical bankruptcies, which were projected to fall? According to a clinical research study recently published in the American Journal of Medicine (Medical Bankruptcy in Massachusetts: Has Health Reform Made a Difference?), medical bankruptcies in that state rose by more than one third between 2007 and 2009. The number of state residents who were uninsured decreased by approximately half, from 10.4% in 2006, when the Massachusetts health care reform was passed, to 5.5% in 2008, when the plan was implemented, lower than any other state, according to the study, which quoted Census Bureau figures.


But, we probably shouldn’t worry, because the Massachusetts health plan bears little resemblance to the ACA, right? Not according to doctors David U. Himmelstein, Deborah Thorne, and Steffie Woolhandler, who conducted the study and published the results on March 8. They claim that Massachusetts’ health reform law “closely mirrors” the ACA, and that the state’s law increased access to health insurance for its citizens but failed to substantially upgrade existing coverage or reduce costs.

In fact, as attorney Charles K. (Chip) Kerby, Liberté Group LLC, Washington, D.C. pointed out in a recent webcast (Looking Ahead to the Health Insurance Exchanges: What You Need to Know Now), both the Massachusetts health plan and the ACA have individual and employer mandates, health care exchanges, and premium subsidies. The Massachusetts plan can give all of us a good idea for what state exchanges will look like in the future, Kerby says.

According to Himmelstein, Thorne, and Woolhandler, while the new Massachusetts health care system has increased coverage for many people who were previously uninsured, the new health coverage was insufficient to counteract the high cost of premiums and gaps in coverage consisting of such things as copayments, deductibles, and uncovered services, problems that were in place before the law was passed, and that continue to exist. This is why, perhaps, that most medical bankruptcies in general appear to affect middle-class families with health insurance, they said.

For example, they point out that, under the least expensive coverage available in the Massachusetts plan, it’s conceivable that an insured couple with an income exceeding 300% of the poverty level, which is the eligibility threshold for insurance subsidies, might only make $44,000, but might have to pay $20,512 in medical expenses, and this wouldn’t include uncovered services such as physical therapy, drugs, or home care. Adding to the problem, they contend, is the fact that many people have lost their jobs, either due to the recession, or because of illness. Also, health costs have risen sharply since the state’s health care reform law was enacted.

While the authors acknowledge that the recession may have had an impact on the number of bankruptcy filings, they argue that it doesn’t change the fact that Massachusetts Governor Deval Patrick’s statement that the new health care reform would mean that “. . .families are less likely to be forced into bankruptcy by medical costs” was perhaps overly optimistic.

However, the study’s authors are hopeful that the ACA can actually reduce the number of bankruptcies in the United States, and they point to Canada as an example of a nation with national health coverage, but with an apparently lower number of bankruptcies than we have in the U.S. To lower the chance of an increase in medical bankruptcies, they advise that the ACA will have to improve, not just expand, insurance to citizens, and will have to include better income support for the sick and their caregivers via improved disability insurance programs.

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