Insured, middle class, and broke from health costs


CAMBY, IND. -- Until the fourth trip to the hospital in 1998, Zachery Dorsett's parents thought their son was a normal child who was having trouble getting over a passing illness. He was 7 months old, and it was his second case of pneumonia.

Sharon and Arnold Dorsett were concerned about Zachery's health, but they were not worried about the financial consequences. They were a young, middle-income couple, with health insurance that covered 90 percent of doctors' bills and most prescription drug costs.

Then the bills started coming in. After Zachery spent a week in the hospital, the couple's share came to $1,100. They enrolled in a 90-day payment plan with the hospital and struggled to make the monthly installments of nearly $400, hoping that they did not hit any other expenses.

But Zachery, who was eventually found to have an immune system disorder, kept getting sick, and the expense of his treatment - fees for tests, hospitalizations, medicine - kept mounting, eventually costing the family $12,000 to $20,000 a year. This year, the Dorsetts stopped making mortgage payments on their house, outside Indianapolis, because they could not afford them. In March, they filed for bankruptcy.

Never have patients had so many medical options to extend, enrich or alter their lives. But these new options are expensive, and with them has come a change for which many Americans - even those with health insurance - are financially ill prepared.

After decades in which private and government insurance covered a progressively larger share of medical expenses, insurance companies are now shifting more costs to consumers, in the form of much higher deductibles, co-payments or premiums. At the same time, Americans are saving less and carrying higher household debt, and even insured families are exposed to medical expenses that did not exist a decade ago. Many do not realize how vulnerable they are until the bills arrive.

Lawyers and accountants say that for the more than 1.5 million American families who filed for bankruptcy protection last year, the most common causes were job loss and medical expenses. New bankruptcy legislation, which went into effect Oct. 17, requires middle-income debtors to repay a greater share of their debt.

Even after the Dorsetts took out a second mortgage to pay off their credit cards, by the end of the year they had racked up credit card debt again - and had higher mortgage payments. And each year, their projected expenses were greater.

A monthly infusion of immune globulin to bolster Zachery's immune system costs $54,000 a year, of which the Dorsetts pay more than $5,000.

For the Dorsetts, this is what the end looked like, according to the family's bankruptcy filing: They had $1,431 in their checking and savings accounts; they owed $29,146 on various credit cards; and, after refinancing their house to pay down their credit cards, they could no longer afford the payments on their house or car. Arnold Dorsett, 40, who works on commercial heating and air conditioning systems, sometimes stitching together 90-hour weeks, earns $68,000 a year.

As the bills mounted Sharon Dorsett forced her husband to acknowledge that he could not simply work more hours.

In a study of 1,771 people who filed for bankruptcy, reported this year by four researchers at Harvard and Ohio University, 28 percent said the cause was illness or injury. Most were middle class, educated and had health insurance at the start of the treatment. The figure suggests that as many as 400,000 American families file for bankruptcy each year because of medical expenses.

"Not only are the bills higher, but the way we pay for care has changed," said Elizabeth Warren, a professor at Harvard Law School and one of the study's authors.

"Today, the doctor takes a credit card, and a family might be paying that off at extraordinary interest rates," Warren said. "So people may recover physically from major medical injury, but may not recover financially."

Though health care costs have been rising for decades, changes in insurance starting around 2001 have put more pressure on consumers, especially those who need the most treatment, said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan research group financed primarily by the Robert Wood Johnson Foundation.

In the 1990s, as medical expenses rose faster than inflation, insurance companies limited costs of coverage by limiting patients' treatment options through the system known as managed care. Even as hospitals and drug companies introduced expensive new treatments, out-of-pocket costs for patients actually slowed down during the decade.

But as consumers objected to the limits imposed by managed care, insisting on more choice, the tradeoff has been higher insurance premiums and higher out-of-pocket costs, said Dr. Arnold Milstein, medical director of the Pacific Business Group on Health.

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