Another 600,000 spouses, elderly parents and other dependents were affected.

Three-Quarters Were Insured

Surprisingly, most of those bankrupted by medical problems had health insurance. More than three-quarters were insured at the start of the bankrupting illness. Among those with private insurance, however, one-third had lost coverage -- at least temporarily -- by the time they filed for bankruptcy.

Often illness led to job loss and with it the loss of health insurance. Out-of-pocket medical costs (for co-payments, deductibles and uncovered services) averaged $13,460 for those with private insurance at the onset of their illness versus $10,893 for the uninsured.

The highest costs -- averaging $18,005 -- were incurred by those who initially had private coverage but lost it in the course of their illness. Many families were bankrupted by medical expenses well below the catastrophic thresholds of high deductible plans that are increasingly popular with employers. The authors comment that even their own coverage from Harvard leaves them at risk for out-of-pocket costs above levels that often led to medical bankruptcy.

In many cases, high medical bills coincided with a loss of income as illness forced breadwinners to lose time from work.

Illness Contributed to More Than Half

The research, carried out at Harvard Law School and Harvard Medical School, and supported by a grant from the Robert Wood Johnson Foundation, is the first in-depth study of medical causes of bankruptcy.

With the cooperation of bankruptcy judges in five Federal districts (in California, Illinois, Pennsylvania, Tennessee and Texas) the researchers administered questionnaires to 1,771 bankruptcy filers and reviewed their court records.

931 of the filers subsequently underwent more detailed interviews about their financial and medical circumstances. The researchers found that illness and medical bills contributed to at least 46.2%, and as many as 54.5% of all bankruptcy filings.

One Serious Illness Away

"Our study is frightening. Unless you're Bill Gates, you're just one serious illness away from bankruptcy," Dr. David Himmelstein, the lead author of the study and an Associate Professor of Medicine at Harvard commented.

"Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection. Families with coverage faced unaffordable co-payments, deductibles and bills for uncovered items like physical therapy, psychiatric care and prescription drugs.

"And even the best job-based health insurance often vanished when prolonged illness caused job loss -- precisely when families needed it most. Too often, private health insurance is an umbrella that melts in the rain," Dr. Himmelstein said.

Loss of Assetss, Deep Personal Shame

"When medical debts and lost income from illnesses leave families facing a mountain of bills, bankruptcy is their last chance to stop the collection calls and try to put their lives back on track," noted Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard and a study co-author.

"Bankruptcy costs these families substantial assets and deep personal shame," Professor Warren, a leading expert on personal bankruptcy, continued. "A person may recover physically from a medical problem, but millions of Americans will never recover financially from their encounters with the health care system," she said.

"We need to rethink health reform," said study co-author Dr. Steffie Woolhandler, an Associate Professor of Medicine at Harvard and primary care physician in Cambridge, Massachusetts. "Covering the uninsured isn't enough. We must also upgrade and guarantee continuous coverage for those who have insurance."

The full article is available online.