Nobody's safe. That's the warning from the first large-scale study of medical bankruptcy.

Health insurance? That didn't protect one million Americans who were financially ruined by illness or medical bills last year.

A comfortable middle-class lifestyle? Good education? Decent job? No safeguards there. Most of the medically bankrupt were middle-class homeowners who had been to college and had responsible jobs -- until illness struck.

As part of a study at Harvard University, our researchers interviewed 1,771 Americans in bankruptcy courts nationwide. To our surprise, half said that illness or medical bills drove them to bankruptcy. So each year, 2 million Americans -- those who file and their dependents -- face the double disaster of illness and bankruptcy.

But the bigger surprise was that three-quarters of the medically bankrupt had health insurance.

How did illness bankrupt middle-class Americans with health insurance? High copayments, deductibles, exclusions from coverage and other loopholes left some holding the bag for thousands of dollars in out-of-pocket costs. But medical problems often bankrupted even families with Cadillac coverage.

Too sick to work, they suddenly lost their jobs. With the jobs went most of their income and health insurance -- a quarter of all employers cancel coverage the day you leave work because of a disabling illness; another quarter do so in less than a year. Many of the medically bankrupt qualified for some disability payments and had the right under the COBRA law to continue their health coverage -- if they paid for it themselves. But how many families can afford a $1,000 monthly premium for coverage under COBRA, especially after the breadwinner has lost his or her job?

Bankrupt families lost more than just assets. One out of five went without food. A third had their utilities shut off, and nearly two-thirds skipped needed doctor or dentist visits. These families struggled to stay out of bankruptcy. They arrived at the bankruptcy courthouse exhausted, brought low by a healthcare system that could offer physical cures but left them financially devastated.

Many in Congress have a response to the problem of increasing medical bankruptcies: Make it harder for families to file bankruptcy regardless of the reason for their financial troubles. Bankruptcy legislation -- widely known as the credit industry wish list -- has been introduced yet again to increase costs and decrease protection for everyone who turns to the bankruptcy system for help. With the dramatic rise in medical bankruptcies now documented, this tired approach is no different than a congressional demand to close hospitals in response to a flu epidemic. Making bankruptcy harder puts the fallout from a broken healthcare system back on families, leaving them with no escape.

The problem is not in bankruptcy laws but the healthcare finance system and chronic debates about reforming it. The Harvard study shows:

• Health insurance isn't an on-off switch, giving full protection to everyone who has it. There is real coverage and there is faux coverage. Policies that can be canceled when you need them most are often useless. So is bare-bones coverage such as the Utah Medicaid program pioneered by new Health and Human Services Secretary Mike Leavitt, which pays for primary-care visits but not specialists or hospital care. We must talk about quality, durable coverage, not just getting more names listed on nearly useless insurance policies.
  
• The link between jobs and health insurance is strained beyond the breaking point. A harsh fact of life is that illness leads to job loss, and that can mean a double kick when people lose their insurance. Promising them high-priced coverage through COBRA is meaningless if they can't afford to pay. Comprehensive health insurance is the only real solution for poor and middle-class Americans alike.
  

Without better coverage, millions more Americans will be hit by medical bankruptcy over the next decade. It won't be limited to the poorly educated, the barely employed or the uninsured. Those financially devastated by a serious illness are at the heart of the middle class.

Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem. Time is running out. A broken healthcare system is bankrupting families across this country.

Elizabeth Warren (segatore@law.harvard.edu) is a law professor at Harvard University.

© 2005 Miami Herald

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