Do people lose their homes over health expenses?
June 24, 2009 6:03 PM   Subscribe

Do people actually lose their homes to pay for health care in the US, or is this an urban myth?

Basically, I am doing some comparisons of the US vs. Canadian style single-payer health systems. What I can't find are real, documented cases of people being driven to bankruptcy and/or losing their home due to health care costs.

Does this really happen, or is it just a myth? What I would like are links to real stories of individuals who have lost everything due to health expenses, if they actually exist.

Much obliged!
posted by WinnipegDragon to Health & Fitness (39 answers total) 5 users marked this as a favorite
Best answer: I personally know 3 different households that filed bankruptcy on the basis of medical bills. I don't want to invade their privacy by detailing their stories, but I can tell you it definitely does happen. In each case it was one major illness and/or surgery that came at an inopportune time. All of them had insurance, but the coverage wasn't total and the excess ate up all their reserves.
Here's a link to a story about a few families that have had this situation as well.
posted by katemonster at 6:10 PM on June 24, 2009 [1 favorite]

If I remember correctly, one of the first segments of Michael Moore's Sicko concerned a late-middle-aged couple who, because of unexpected health care expenses, left their home and moved in with one of their children in a hastily converted spare room.
posted by Bromius at 6:10 PM on June 24, 2009

lose their homes specifically? not sure

but - in 2005 it was reported that medical bills are the leading cause of bankruptcy. and then just a couple weeks ago the american journal of medicine said the same thing holds true.
posted by nadawi at 6:11 PM on June 24, 2009

I recall seeing at least one example in the excellent Frontline episode "Sick Around America," which you can watch online.
posted by dhammond at 6:11 PM on June 24, 2009 [1 favorite]

The book Uninsured in America is one of the bigger places where this bankruptcy figure [and many more] came from. This is a quote in the Malcolm Gladwell article about the book.
The U. S. health-care system, according to “Uninsured in America,” has created a group of people who increasingly look different from others and suffer in ways that others do not. The leading cause of personal bankruptcy in the United States is unpaid medical bills. Half of the uninsured owe money to hospitals, and a third are being pursued by collection agencies.
The issue as I understand it, being just a hobbyist interested in health care, is that people with no health care often wind up with staggering medical bills if they wind up with cancer or have a bad accident. These bills do not go away and many people are not savvy enough to know that many of these fees can be negotiable [and frankly some of these costs are not negotiable]. If you have bills you can't pay, especially if they're ongoing, this can put you into a fairly permanent financial crisis, and if you own your own home, in some US States [though not all] your house is considered an asset and you are expected to sell it before you can technically go bankrupt. Movies like Sicko detail what happens to some of these families. PBS did a special with the same name as the book which might have more specifics. Both have well-documented personal stories and I'm sure if you search any amrican newspaper for "health care" and bankruptcy, you will find many more. It's not so much that this sort of thing is commonplace, it's that it's the sort of thing that I think a lot of people would agree should never happen in a civilized country and so the fac tthat it happens at all is deeply troubling.
posted by jessamyn at 6:13 PM on June 24, 2009 [1 favorite]

Google "Lost his home" and healthcare" Here's one link off the first page of hits.

"Lost his home" healthcare|medical-bills
"Lost their home" healthcare|medical-bills
"Lost her home" healthcare|medical-bills
posted by If only I had a penguin... at 6:14 PM on June 24, 2009

I know two people who filed bankruptcy because of medical expenses. Both apartment dwellers so didn't have homes to lose, but both got swamped by medical bills following bad accidents which involved hospitalizations and surgeries.
posted by OolooKitty at 6:14 PM on June 24, 2009

posted by Flunkie at 6:14 PM on June 24, 2009

I have a friend who sold his house to pay off health care costs. He had just gotten married and had moved into his wife's house, so it was not exactly "losing his house to health care," but he spent the proceeds on treatment.
posted by GenjiandProust at 6:15 PM on June 24, 2009

And here's a couple of others.
The phrase you want is "medical bankruptcy".
posted by katemonster at 6:16 PM on June 24, 2009

Our closest friend filed bankruptcy over medical debt due to minor complications during his wife's pregnancy. The hospital bill was about $20,000 for a simple C-section and 3 nights of observation (no ICU or intensive care for mother or baby). This was in Austin.
posted by crapmatic at 6:25 PM on June 24, 2009

(correction, that was not the hospital bill, that was the hospital + anesthesiologist + surgeon, etc, everybody billing separately)
posted by crapmatic at 6:25 PM on June 24, 2009

I was middle class growing up and my father's immunosupressant drugs after his heart transplant were over $800 a month WITH insurance. We didn't lose the house but he's been dead for two years and my mom is still paying off 15k in credit card debt. So no, it's probably not a myth but YMMV.
posted by ShadePlant at 6:30 PM on June 24, 2009

My partner's mom was uninsured when she was diagnosed with stage four lung cancer. None of us realized that or we would have made sure she had health insurance.

After she died, my partner spent about a year and a half on the phone with various hospitals trying to negotiate the debt down. A super huge chunk of it is still there, even after being on the phone literally everyday. His dad sold their house to pay some of it, and is currently paying on the rest of his dead wife's bills from his social security, which is almost nothing. He was laid off from his job of 40-odd years without the pension he was promised, so the most he can afford to pay towards each of the hospitals' bills is about $25/month (the lowest that was able to be negotiated).

We've talked about having him move in with us because he can't really afford to live anywhere, even given how cheap rents are in the midwest.

So he didn't technically lose his house over health expenses, but he had to put all the money from selling his house towards his spouse's health expenses, leaving him with nothing.

Not so much a myth to me.
posted by ugf at 6:30 PM on June 24, 2009

Filing Bankruptcy does not necessarily mean that one loses one's home. In most states in the US, a filer's home is protected under a homestead exemption: the bankruptcy court won't force the sale of the home to pay off any debts and the homeowner, if there is sufficient income, can continue paying the mortgage payments. (Each state is different and there might be debt/equity ratios that are taken into account that I'm not mentioning here).

If, however, there's no income or the income is too low, then the homeowner will be foreclosed upon (or have to exercise other options that involve selling the house). Because of the homestead exemption, though, many folks get to keep their houses despite filing bankruptcy.

I'm not saying that losing the house b'c of medical bills is purely urban myth, but am merely pointing out that filing bankruptcy does not necessarily mean losing the house.
posted by LOLAttorney2009 at 6:32 PM on June 24, 2009

Yes, I know two people this has happened to in the last year. One was a woman in her early 30s who got cancer and ran out of benefits and the other is an older woman who's husband died of cancer, he had insurance but she is still facing selling their (paid for) home to pay off the medical bills and had also to cash out her pension. I do not know where she will live after.
posted by fshgrl at 6:49 PM on June 24, 2009

Mod note: few comments removed - if you have concerns about Michael Moore you can email them direct to the OP.
posted by jessamyn (staff) at 6:51 PM on June 24, 2009

A couple near me sold their home and moved into a cheap apartment because they couldn't cover the cost of "treatments" (not sure) for the husband.

I suspect there are a lot of these "soft" disasters. That won't count as a "lost home", the same way people refinancing a home they already own for an "extra" $200,000 won't really show up in the data.

(And yes, it's ridiculous. The American-style "eat the poor" approach to health care is appalling.)
posted by rokusan at 7:03 PM on June 24, 2009

LOLAttorney is right, except for the reality that many people will get under some debt, then take out a home equity loan to pay it down or off. Then they accumulate some more, borrow some more, etc. Pretty soon the amount they owe is the majority of the value of the home. Bankruptcy does nothing to help these people, because the secured loan will not be discharged.

And this does not even take into account falling real estate values, upside-down loans, etc.
posted by megatherium at 7:04 PM on June 24, 2009

Yes, it happens. But people "lose their homes" for all kinds of reasons. Medical debt is some of the easiest debt to manage. But if someone has a bunch of other debt, the sum total becomes unmanageable.

I imagine there are people who go bankrupt in Canada and the UK due to medical issues too.
posted by gjc at 7:05 PM on June 24, 2009

If you can try and get statistics for the causes of personal bankruptcy in other countries with single payer systems.

I've seen stuff that points out that illness is also a major cause of bankruptcy in places with single payer health care too. It's substantially lower than in the US, but getting cancer or something leads many, many people to substantial drops in income even if they can get health care.

To start you off, here are stats for Australia for 2008. Illness is described as the cause for 11% of personal Bankruptcies in Australia. It is the 4th leading cause for personal bankruptcy.
posted by sien at 7:22 PM on June 24, 2009

Best answer: nthing LOLAttorney2009's comment: "filing bankruptcy does not necessarily mean losing the house" is correct as a general rule. My professional experience is that unpaid/uninsured medical costs frequently act as the proverbial "straw that breaks the camel's back" as most people try to pay what they can by whatever means they can, i.e., credit cards, installment payments, home equity loans, lines of credit. But at some point, it's simply not possible to keep up with the rising costs of a severe medical condition. So the medical bills are the trigger for the filing of bankruptcy, which in turn results in the issue of keeping the home coming into play because it's most folks largest asset. Depending on the amount of debt secured by the home through 2nd/3rd/equity-based line of credit mortgages, it becomes very difficult or financially impossible to keep the home at that point.

Apart from bankruptcy, another factor that plays into this is that hospital/provider liens have become increasingly onerous over the last 10-15 years in terms of their priority, scope, and lack of realistic defenses by patient-debtors. The result is that they have absolutely no incentive to discount billings to un-insureds. It's just a matter of waiting it out until they get paid.

Just try and challenge "reasonable and customary" billings by a large hospital - the response you get is basically, "Well, we charge everybody $12 bucks for a band-aid so of course it's 'customary' and that $12 is 'reasonable' because we have to cover overhead, which includes the million dollar salary of our CEO."

Well, you don't charge [insert name of insurance carrier] $12 for a band-aid. "No, of course not; they have contract with us for 10,000 band-aids for their insureds; you only bought one band-aid." But you got a great volume deal on band-aids from your supplier because you knew you were going to sell 10,000 to [insurance carrier]. "Yes, but you don't have insurance."

Can't argue with logic like that.

So, essentially, the system encourages the filing of bankruptcy in these situations because it's left the uninsured consumer with really no other realistic alternative.
posted by webhund at 7:55 PM on June 24, 2009 [4 favorites]

My friend's uncle and his wife sold their big house and lived in a trailer for most of their life as their only child was a schizophrenic for whom they could not get insurance. They had to pay for all his treatment and medication out of pocket. He was a bank manager and made very good money, and they could barely keep a roof over their heads.
posted by x46 at 7:57 PM on June 24, 2009

I'm sorry I don't have a link for you, but a friend's parents were upside-down on the mortgage for their home of many years and ended up having to walk away and rent a cheaper place in order to afford medical bills. (I believe they were upside-down in the first place because of having to refinance to take money out to pay medical bills.)
posted by EmilyClimbs at 8:06 PM on June 24, 2009

Response by poster: Wow, I didn't expect it to be worse than I imagined...
posted by WinnipegDragon at 8:14 PM on June 24, 2009

A friend's wife had a heart transplant last year. She spent 9 months of the past year in the hospital. The medical bill is $6MM, plus $2K per month for the 42 pills she takes daily. They've sold their house and boat.
posted by doncoyote at 8:15 PM on June 24, 2009

This is a report on what happens financially when people with insurance get an expensive disease, like cancer. This is a survey of people about their financial experiences as the result of a cancer diagnosis.

My usual disclaimer: I work for the place that produced those reports, but I don't work in either of those program areas, and didn't have a hand in writing either of them.
posted by rtha at 9:14 PM on June 24, 2009

Just to be clear on people filling bankruptcy, bankruptcy != loosing your house. Or just reemphasizing for that matter.

Also, to note, the people I've known in such cases (yes, multiple) needing emergency or continuing physical therapy (which insurance does not cover all of) claim that universal healthcare would not help, seeing as the people I know in those cases already had health care coverage, but the private insurance would not cover all the medical bills needs for full and proper health care. Interestingly enough, all the people in those cases are against universal health care, but strongly for health care reform, though I'm not exactly sure what that mean in the grand scheme of things, as any repair in their eyes still requires private coverage which required bankruptcy in the first place.

I think part of the issue from them comes from the physical therapy aspect or emergency surgery, where the perception is that government-led healthcare (taking Canada for example?) may mean that a kid with certain disabilities necessitating physical therapy at 1 month old will not get the health care he/she needs until 1 year later when another set of therapy is needed, repeating the cycle- not because of money, but because a citizen has to wait x amount of time for health care.
posted by jmd82 at 9:41 PM on June 24, 2009

Illness is described as the cause for 11% of personal Bankruptcies in Australia. It is the 4th leading cause for personal bankruptcy.

You're talking about something different, sien -- that's bankruptcy from a lack of income, but instead of getting laid off being the cause of unemployment, here it's illness inhibiting the ability to work. Everyone else is talking about bankruptcy from an excess of debt, and here the cause of the debt is medical bills. That's probably also compounded by the illness making it difficult or impossible to work, but people in a single-payer system don't have to worry about debt from medical bills.
posted by incessant at 10:28 PM on June 24, 2009

For Canadian statistics to compare with you will want to look at the Office of the Superintendent of Bankruptcy Canada which quotes 15% of bankruptcies of people over 55 are the result of medical issues (including bills and loss of income). Of course, you will need to compare the per capita bankruptcies as well

I am fortunate in that I don't know anyone that has suffered severe financial hardship because of their poor health (and strangely, I know a lot of sick older people). I know upwards of thirty people that have had cancer/heart attacks/difficult births/major injuries/psychiatric disorders and none of them have had either medical bills or wait times exceeding a few days for diagnostics, surgery or physical therapy. Except for eating disorders, know one woman had to wait a few months to get into a free facility ten years ago.
posted by saucysault at 10:39 PM on June 24, 2009

I imagine there are people who go bankrupt in Canada and the UK due to medical issues too.

As others have said, there's a difference between being bankrupted by your illness and being bankrupted by your treatment.
posted by holgate at 10:55 PM on June 24, 2009

For your paper, you might want to acknowledge the "other side" of the argument. There's a phrase that is used, and I'm sorry that I can't find it or remember it right now. But, the idea is that the medical cost was the last of a series of financial problems, so that it's not entirely the medical cost that drives people into bankruptcy or home loss.

For example, someone is living paycheck to paycheck, with, say, $10,000 in credit card debt. Then they get a huge medical bill. The medical bill drives them over the edge financially, but they were not doing well before the medical bill.

Now having said that, I think there might be some truth to that, but basically it's crap. My mother had cancer for 16 years. Her employer changed health insurance policies 3 times during those years. Each policy had a $1 million limit. She went through three $1-million policies. And, both my parents carried insurance for the family, so she also used money from my dad's insurance (which would pick up what hers did not cover). That's over three million dollars in 16 years, just for medical expenses. I would definitely argue that it does not matter what your finances are like, if you don't have insurance that debt would be more than you could deal with.

So, a recommendation for your paper: Do a small amount of investigating what medical costs are, and what typical insurance coverage is in the US. I find that people outside the US rarely understand just how expensive medical care is here.
posted by Houstonian at 2:18 AM on June 25, 2009

Response by poster: Thank you all for the input. This has been eye opening to say the least.
posted by WinnipegDragon at 6:14 AM on June 25, 2009

Some people sell their homes because they won't qualify for certain types of public aid or public health insurance plans (Medicaid, state plans, etc.) with the asset of a house. I talk to uninsured people/poor chronically ill people regularly who are told they can't get this assistance or that assistance from a government agency or charity because they own their home (even if they're still paying it off). Having a mortgage instead of a rent doesn't mean jack, though if you can't keep the lights and heat on or eat and go to the doctor.
posted by ishotjr at 6:41 AM on June 25, 2009

my father was a kidney transplant pioneer--i.e., very early (1961? 62? somewhere in there) recipient. although the new kidney initially looked promising, he died about a year & a half later. fast forward several years, and i very clearly remember my mom coming home from work in our small ohio town with an exotic & foreign concoction--shrimp. breaded, frozen shrimp, and frozen shrimp cocktail. she was quite excited & said we were having a special celebration. when i asked why, she told me that the doctors had told her they'd forego the rest of the $ she owed them for my father's surgery & lengthy hospitalizations. my father had quite good insurance for the time, i believe, but i also remember fund drives our neighbors held to help pay the bills. my mother told me sometime later that she was on the hook for somewhere between $10 & $15k when the doctors & hospital cut her loose from the obligation, which she'd dutifully been paying.

about 40 years later, my brother was diagnosed with stage 4 hodgkins. he was at the hospital one day pre stem cell transplant, rounded a corner & almost ran right into a couple he knew. she had been diagnosed with some sort of cancer or another, had undergone frequent hospitalizations, and was on the waiting list for a marrow transplant. he told me that the couple had used up all their savings, taken out every loan they could, and were trying to sell their house to keep their heads above water. they'd moved into some furnished apartment close to the hospital because of proximity & her frequent need to be there. about 6 weeks after he told me that story, the woman died. complications from pneumonia, i think.

my brother was lucky to have *very* good insurance. he's doing fine now--just passed the 5 year mark & is cancer free! his insurance, though, comes with a $1m lifetime cap. if his hodgkins resurfaces, or if something else befalls him, he's very likely to end up in the same boat as the woman he almost knocked over when he rounded the corner in the hospital. it's a very big boat. a big, scary boat.
posted by msconduct at 7:40 AM on June 25, 2009

I went bankrupt in 2005 due to medical bills and I had insurance. Now, granted, what Houstonian said applies perfectly to me: someone is living paycheck to paycheck, with, say, $10,000 in credit card debt. Then they get a huge medical bill. The medical bill drives them over the edge financially, but they were not doing well before the medical bill. but it was the $9,000 in medical bills that sent me over the edge. My son broke his arm in several places; he had to have surgery & a plate put in to hold the bone together and $9,000 was what I owed after the insurance paid what they considered to be their share. Even people with insurance often cannot afford medical care here. Isn't that nifty?

On the bright side, though, that bankruptcy was the best thing I ever did. It wiped out my ex husband's credit card bills and the medical bills; I got to keep my car and now I've gotten my financial shit together for the first time in my life. I even own a house now. Of course, the bankruptcy laws have been changed since then and it's much more difficult now to get a fresh start, although medical bills keep on climbing and wrecking more peoples' lives.
posted by mygothlaundry at 7:40 AM on June 25, 2009

The uninsured have it worse than anyone, of course. But the insured are also in a tenuous situation. You see the example that mygothlaundry posted. Here's how that can work - I have a $1500 deductible and then a 80/20 split after that, meaning the insurance picks up 80% and I pay 20%. Now let's suppose either my wife or myself is hit with a serious illness or injury, and the bill comes out to $100,000 (for the sake of easy math, we'll say $101,500) after the insurance company discounts. The first $1,500 is my responsibility. That leaves $100,000. Assuming the insurance pays everything it's supposed to, that means I'm left with a bill of $21,500 - and that's with insurance. There are a lot of people out there who just don't have that kind of money available to them. (The insurance is often prohibitively expensive itself; we're healthy 30-somethings who don't smoke, haven't had a history of being sick, and yet I work a day a week just to pay my health benefits. For a lot of people it's a lot worse than that.)

Something that complicates matters is that everyone bills separately. The hospital is one bill. Each doctor will be a separate bill after that. Any medical equipment (crutches, etc.) will be billed separately if they are provided by anyone besides the hospital. Imaging (x-ray, CT, MRI) will be another bill if it is done by a third party. Someone coming out of a hospital stay will often be faced with multiple bills, sometimes 10-20. Even if you're able to pay them, keeping track of them can be difficult at best, and the doctors offices are known to lose track of them as well, leading to additional grief when someone tries to sort out a double billing or having to prove they already paid.
posted by azpenguin at 8:11 AM on June 25, 2009

Medical bankruptcy is fairly common. I know several people who've been through it. However, losing one's home as a result of medical bankruptcy is not automatic.

In general, the bankruptcy laws attempt to protect your primary residence (and in some states your primary vehicle) from being encumbered by creditors during the bankruptcy process.

The issue is that the process is set up with the assumption of incoming cashflow; you lose all your savings but not your house, with the expectation that income will allow you to stay in the house. If you don't have any income — if you were making your mortgage payments or property-tax payments out of savings, for instance — then you really can end up losing your house. Not from the medical bankruptcy directly, but from foreclosure or property tax seizure proceedings down the road, when you can't pay those bills because your cash cushion is gone.

From what I've seen, how bad a medical bankruptcy is depends a lot on how savvy and well-advised the people going through it are. If you know what you're doing, and retain the services of lawyers and accountants before you're broke, you can use the bankruptcy process to protect major assets like a house and car. It still sucks, but a friend-of-a-friend went through it and came out the other side feeling like they'd dodged a bullet: they kept their house, their car, and had their health. However, anecdotally anyway, it seems like people who burn all their cash before admitting that bankruptcy is imminent and unavoidable are the ones who get screwed: they can't afford a bankruptcy attorney (or just don't know how to get one) or anyone else to help them through the process, and they get steamrolled by their creditors.

I think like almost everything else it boils down to a class issue; someone with a good or reasonably good understanding of finances and the US legal system, and just generally how to work bureaucracy to their advantage, and an appreciation for paperwork and meeting deadlines and everything else, can probably survive okay. Someone without one or more of those things — someone who's in denial, or just doesn't have good financial skills, or who misses response deadlines or doesn't/can't read the notices they're getting — is likely to get crushed.
posted by Kadin2048 at 9:11 AM on June 25, 2009

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