Medical costs prove a burden even for some with insurance

Think your health insurance has you covered? Think again.

Even insured workers can find themselves on the hook for thousands of dollars, often at a time when illness has decreased their income.

Few workers realize the limits of their insurance until the bills start coming for: policies that don’t cover rehabilitation care or limit it to a few visits; expensive drugs that come with a 20 percent charge, rather than a $20 co-pay; separate deductibles for drugs and medical care; doctors at “in-network” hospitals that aren’t members of the insurer’s network, leaving patients vulnerable to thousands of dollars in bills; annual “out-of-pocket maximums” that aren’t always true ceilings on expenses.

Such costs can quickly add up. A drug co-payment of 20 percent, for example, could cost thousands a year for patients taking some cancer drugs. Avastin, a colon cancer drug, recently went on the market at a price of more than $4,000 a month. Erbitux, another colon cancer treatment, can cost $12,000 or more for a month’s treatment. Gleevec, for leukemia, is more than $2,000 a month.

That’s the reality for Rita Wirsch, a 55-year-old clerical worker in Hamilton, Ohio, who is struggling to pay off about $10,000 in medical bills that her insurance did not cover. The total added up over four years, bill by bill, in amounts from $25 to more than $400 a pop. Three months on disability pay this year after surgery put her further behind.

“I thank God every day that I have insurance,” says Wirsch. “But there’s a problem in the U.S. for hard-working people.”

And it isn’t likely to change.

More workers are facing larger medical bills as employers increase what they must pay for doctor visits, drugs and hospital care in an effort to control health care costs. Some employers are embracing high-deductible policies — requiring workers to pay $1,000 or more a year in expenses before insurance kicks in. Such policies are also common for the self-employed, who buy their own insurance, because premiums are generally lower.

Shifting more costs to the insured is having ripple effects. Hospitals are collecting more upfront from patients, after being left with bad debt by insured patients who failed to pay their deductibles. Insured patients are also attracting charity efforts: The Patient Advocate Foundation, for example, has a program aimed solely at helping insured patients make the co-payments on their prescription drugs. The group pays up to $2,500 annually toward drug co-payments for qualified patients with four conditions: the eye disease macular degeneration, and cancers of the breast, lung or prostate.

“The fully insured middle-class people who become ill with critical or life-threatening illnesses, it can completely ruin their financial health,” says Beth Darnley, chief program officer for the foundation.

Many Americans are not prepared. Whether struggling to meet mortgage costs, college tuition and other expenses — or simply buying all the latest gadgets — few are saving enough to weather unexpected bad times. The personal savings rate, the difference between what people earn and what they spend, fell for the second-straight year in 2004 to the lowest level since 1934.

But it isn’t just catastrophic illness or accident that leads to financial stress. For some, ordinary medical problems can lead to seemingly insurmountable bills.

“Families are paying more and more for health insurance that covers them less and less,” says Elizabeth Warren, a Harvard professor and co-author of a recent study of bankruptcy filings in five states. The study concluded that medical bills contributed to half of all personal bankruptcies.

The bills, coupled with a low savings rate for most American families, tip about 1 million into bankruptcy each year, Warren says. The average out-of-pocket medical debt for those who filed is about $12,000, and 68 percent had health insurance at the time of their bankruptcy filing.

Things might soon get tougher for some families. Federal bankruptcy legislation that goes into effect in six months could require many people to repay all or part of their debts, including medical bills.

Some have questioned the bankruptcy study findings. Greg Scandlen, a policy analyst with the Galen Institute, a free-market health care research group, says the definition of medical bankruptcy in the study was so broad that the results are not useful in determining whether medical bills were the main source of families’ financial troubles or a small part.

“I’m not denying at all that there’s a problem out there, but this study doesn’t tell us anything about the dimensions of that problem,” Scandlen said.

Several thousand dollars in charges might not sink a highly paid worker, but the middle class and those on the lower end of the pay scale can find themselves spending a significant share of their income on medical care.

A recent report by the Center for Studying Health System Change found that the proportion of low-income, chronically ill patients who were insured but still spent more than 5 percent of their income on health costs rose from 28 percent to 42 percent from 2001 to 2003. The study defined low income as being below 200 percent of the poverty line, or about $36,800 for a family of four in 2003.

“Bankruptcy is just the tip of the iceberg: 29 million Americans are in medical debt,” says Jennifer Edwards of the Commonwealth Fund, a private foundation that supports research on health and social issues.