mr. speaker , this bill hurts americans . 
one group who will be especially hurt are family forced into bankruptcy because of a medical crisis . 
a recent study conducted by professors at harvard medical and law school showed that about half of all personal bankruptcies can be attributed to medical costs . 
among those who cited illnesses as a cause of bankruptcy , the average unreimbursed medical costs totaled nearly $ 12 , 000 even though more than three-quarters had health insurance . 
how does the bill hurt the families ? 
under the bill for the first time there will be a presumption that many of these families abuse the bankruptcy system . 
under current law , people facing a medical bankruptcy can seek several forms of relief . 
chapter 7 is by far the most common . 
under 7 debtors are required to forfeit all of their property other than the exempt assets in exchange for having their debts extinguished . 
current law already gives bankruptcy courts discretion to deny chapter 7 relieve where the filing is found to be a substantial abuse . 
but unlike this bill , current law provides a presumption in favor of granting relief to the debtor . 
the other option is chapter 13 where a debtor is required to continue paying creditors . 
this makes it more difficult for debtors to get back on their feet . 
this bill will hurt families facing medical bankruptcy because it will force many of them into chapter 13 . 
that is because it presumes that these families are abusing the bankruptcy system if they fail the means test . 
the means tests starts with a family 's income and then subtracts monthly expenses permitted by irs guidelines . 
but instead of using a debtor 's actual projected income , the means tests uses the debtor 's average income over the prior 6 months . 
thus , if a family 's bankruptcy was triggered by a loss of income resulting from a serious illness , the means test would still attribute the lost income for the purpose of determining whether the family is abusing the bankruptcy system . 
further , the means test uses the median income for a state . 
my constituents in santa clara county live in a high-cost area . 
almost nobody will be able to discharge their debts in bankruptcy from santa clara county because of that high cost , no matter how meritorious for their claim for relief . 
similarly , instead of using the debtor 's actual expenses , the inflexible guidelines developed by the irs is used . 
as a result , more families facing medical bankruptcy will be presumed to be abusing the system , will be forced into chapter 13 and will never be able to stand on their feet again . 
that is not right . 
the harvard study found that these struggling families did everything they could to pay their medical bills to avoid bankruptcy . 
one in five skipped meals . 
one-third had their electricity cut off . 
almost half lost their phone service . 
one in five was forced to move . 
incredibly , they also cut back on needed medications to try to avoid bankruptcy . 
in fact , half went without needed prescriptions . 
and a full 60 percent went without a needed doctor appointment . 
please join me in opposing this unfair bill . 
illness and injury as contributors to bankruptcy abstract : in 2001 , 1.458 million american families filed for bankruptcy . 
to investigate medical contributors to bankruptcy , we surveyed 1 , 771 personal bankruptcy filers in five federal courts and subsequently completed in-depth interviews with 931 of them . 
about half cited medical causes , which indicates that 1.9-2.2 million americans ( filers plus dependents ) experienced medical bankruptcy . 
among those whose illnesses led to bankruptcy , out-of-pocket costs averaged $ 11 , 854 since the start of illness ; 75.7 percent had insurance at the onset of illness . 
medical debtors were 42 percent more likely than other debtors to experience lapses in coverage . 
even middle-class insured families often fall prey to financial catastrophe when sick . 
`` if the debtor be insolvent to serve creditors , let his body be cut in pieces on the third market day . 
it may be cut into more or fewer pieces with impunity . 
or , if his creditors consent to it , let him be sold to foreigners beyond the tiber. '' -- twelve tables , table iii , 6 ( ca . 
450 b.c. ) our bankruptcy system works differently from that of ancient rome ; creditors carve up the debtor 's assets , not the debtor . 
even so , bankruptcy leaves painful problems in its wake . 
it remains on credit reports for a decade , making everything from car insurance to house payments more expensive . 
debtors ' names are often published in the newspaper , and the fact of their bankruptcy may show up whenever someone tries to find them via the internet . 
potential employers who run routine credit checks ( a common screening practice ) will discover the bankruptcy , which can lead to embarrassment or , worse , the lost chance for a much-needed job . 
personal bankruptcy is common . 
nearly 1.5 million couples or individuals filed bankruptcy petitions in 2001 , a 360 percent increase since 1980 . 
fragmentary data from the legal literature suggest that illness and medical bills contribute to bankruptcy . 
most previous studies of medical bankruptcy , however , have relied on court records -- where medical debts may be subsumed under credit card or mortgage debt -- or on responses to a single survey question . 
none has collected detailed information on medical expenses , diagnoses , access to care , work loss , or insurance coverage . 
research has been impeded both by the absence of a national repository for bankruptcy filings and by debtors ' reticence to discuss their bankruptcy , in population-based surveys , only half of those who have undergone bankruptcy admit to it . 
the health policy literature is virtually silent on bankruptcy , although a few studies have looked at impoverishment attributable to illness . 
in his 1972 book , sen . 
edward kennedy ( d-ma ) gave an impressionistic account of `` sickness and bankruptcy. '' the likelihood of incurring high out-of-pocket costs was incorporated into older estimates of the number of underinsured americans : twenty-nine million in 1987 . 
about 16 percent of families now spend more than one-twentieth of their income on health care . 
among terminally ill patients ( most of them insured ) , 39 percent reported that health care costs caused moderate or severe financial problems . 
medical debt is common among the poor , even those with insurance , and interferes with access to care . 
at least 8 percent , and perhaps as many as 21 percent of american families are contacted by collection agencies about medical bills annually . 
our study provides the first extensive data on the medical concomitants of bankruptcy , based on a survey of debtors in bankruptcy courts . 
we address the following questions : ( 1 ) who files for bankruptcy ? 
( 2 ) how frequently do illness and medical bills contribute to bankruptcy ? 
( 3 ) when medical bills contribute , how large are they and for what services ? 
( 4 ) does inadequate health insurance play a role in bankruptcy ? 
( 5 ) does bankruptcy compromise access to care ? 
`` bankrupt '' is not synonymous with `` broke. '' `` bankrupt '' means filing a petition in a federal court asking for protection from creditors via the bankruptcy laws . 
a single petition may cover an individual or married couple . 
the instant a debtor files for bankruptcy , the court assumes legal control of the debtor 's assets and halts all collection efforts . 
shortly after the filing , a court-appointed trustee convenes a meeting to inventory the debtor 's assets and debts and to determine which assets are exempt from seizure . 
states may regulate these exemptions , which often include work tools , clothes , bibles , and some equity in a home . 
about 70 percent of all consumer debtors file under chapter 7 of the bankruptcy code ; most others file under chapter 13 . 
in chapter 7 the trustee liquidates all nonexempt assets -- although 96 percent of debtors have so little unencumbered property that there is nothing left to liquidate . 
at the conclusion of the bankruptcy , the debtor is freed from many debts . 
in chapter 13 the debtor proposes a repayment plan , which extends for up to five years . 
chapter 13 debtors may retain their property so long as they stay current with their repayments . 
under both chapters , taxes , student loans , alimony , and child support remain payable in full , and debtors must make payments on all secured loans ( such as home mortgages and car loans ) or forfeit the collateral . 
this study is based on a cohort of 1 , 771 bankruptcy filings in 2001 . 
for each filing , a debtor completed a written questionnaire at the mandatory meeting with the trustee , and we abstracted financial data from public court records . 
in addition , we conducted follow-up telephone interviews with about half ( 931 ) of these debtors . 
sampling strategy . 
we used cluster sampling to assemble a cohort to households filing for personal bankruptcy in five ( of the seventy-seven total ) federal judicial districts . 
we collected 250 questionnaires in each district , representative of the proportion of chapters 7 and 13 filings in that district . 
these 1 , 250 cases constitute our `` core sample. '' for planned studies on housing , we collected identical data from an additional 521 homeowners filing for bankruptcy . 
we based our analyses on all 1 , 771 bankruptcies with responses weighted to maintain the representativeness of the sample . 
data collection . 
with the cooperation of the judges in each district , we contacted the trustees who officiate at meetings with debtors . 
the trustees agreed to distribute , or to allow a research assistant to distribute , a self-administered questionnaire to debtors appearing at the bankruptcy meeting . 
questionnaires ( which were available in english and spanish ) included a cover letter explaining the research project and human subjects protections and encouraging debtors to consult their attorneys the questionnaire asked about demographics , employment , housing , and specific reasons for filing for bankruptcy , it also asked whether the debtor had medical debts exceeding $ 1 , 000 , had lost two or more weeks of work-related income because of illness , or had health insurance coverage for themselves and all dependents at the time of filing , and whether there had been a gap of one month or more in that coverage during the past two years . 
in joint filings , we collected demographic information for each spouse . 
during the spring and summer of 2001 we collected questionnaires from consecutive debtors in each district until the target number was reached . 
follow-up telephone interviews . 
the written questionnaire distributed at the time of bankruptcy filing invited debtors to participate in future telephone interviews , for which they would receive $ 50 ; 70 percent agreed to such interviews . 
we ultimately completed follow-up telephone interviews with 931 of the 1 , 771 debtor families , a response rate of 53 percent . 
the telephone interviews , conducted between june 2001 and february 2002 using a structured , computer-assisted protocol , explored financial , housing , and medical issues . 
detailed medical questions . 
each of the 931 interviewees was asked if any of the following had been a significant cause of their bankruptcy : an illness or injury ; the death of a family member ; or the addition of a family member through birth , adoption , custody , or fostering . 
those who answered yes to this screening question were queried about diagnoses , health insurance during the illness , and medical care use and spending . 
interviewers collected information about each household member with medical problems . 
in total , we collected in-depth medical information on 391 people with health problems in 332 debtor households . 
data analysis . 
we used data from the self-administered questionnaires ( and court records ) obtained from all 1 , 771 filters to analyze demographics , health coverage at the time of filing , and gaps in coverage in the two years before filing . 
we also used the questionnaire to estimate how frequently illness and medical bills contributed to bankruptcy . 
we developed two summary measures of medical bankruptcy . 
under the rubric `` major medical bankruptcy '' we included debtors who either ( 1 ) cited illness or injury as a specific reason for bankruptcy , or ( 2 ) reported uncovered medical bills exceeding $ 1 , 000 in the past years , or ( 3 ) lost at least two weeks of work-related income because of illness/injury , or ( 4 ) mortgaged a home to pay medical bills . 
our more inclusive category , `` any medical bankruptcy , '' included debtors who cited any of the above , or addiction , or uncontrolled gambling , or birth , or the death of a family member . 
data from the 931 follow-up telephone interviews were used to analyze hardships experienced by debtors in the period surrounding their bankruptcy , including problems gaining access to medical care . 
the in-depth medical interviews regarding 391 people with medical problems are the basis for our analyses of which household members were ill , diagnoses , health insurance at onset of illness , and out-of-pocket spending . 
two physicians ( himmelstein and woolhandler ) coded the diagnoses given by debtors into categories for analysis . 
sas and sudaan were used for statistical analyses , adjusting for complex sample design . 
to extrapolate our findings nationally , we assumed that our sample was representative of the 1 , 457 , 572 households filing for bankruptcy during 2001 . 
human subject committees at harvard law school and the cambridge hospital approved the project . 
who files for bankruptcy ? 
exhibit 1 displays the demographic characteristics of our weighted sample of 1 , 771 bankruptcy filers . 
the average debtor was a forty-one-year-old woman with children and at least some college education . 
most debtors owned homes ; their occupational prestige scores place them predominantly in the middle or working classes . 
on average , each bankruptcy involved 1.32 debtors ( reflecting some joint filings by married couples ) and 1.33 dependents . 
extrapolating from our data , the 1.5 million personal bankruptcy filings nationally in 2001 involved 3.9 million people : 1.9 million debtors , 1.3 million children under age eighteen , and 0.7 million other dependents . 
medical causes of bankruptcy . 
exhibit 2 shows the proportion of debtors ( n = 1 , 771 ) citing various medical contributors to their bankruptcy and the estimated number of debtors and dependents nationally affected by each cause . 
more than one-quarter cited illness or injury as a specific reason for bankruptcy ; a similar number reported uncovered medical bills exceeding $ 1 , 000 . 
some debtors cited more than one medical contributor . 
nearly half ( 46.2 percent ) ( 95 percent confidence interval = 43.5 , 48.9 ) of debtors met at least one of our criteria for `` major medical bankruptcy. '' slightly more than half ( 54.5 percent ) ( 95 percent ci = 51.8 , 57.2 ) met criteria for `` any medical bankruptcy. '' a lapse in health insurance coverage during the two years before filing was a strong predictor of a medical cause of bankruptcy ( exhibit 3 ) . 
nearly four-tenths ( 38.4 percent ) of debtors who had a `` major medical bankruptcy '' had experienced a lapse , compared with 27.1 percent of debtors with no medical cause ( p & amp ; lt ; .0001 ) . 
surprisingly , medical debtors were no less likely than other debtors to have coverage at the time of filing . 
( more detailed coverage and cost data for the subsample we interviewed appears below. ) medical debtors resembled other debtors in most other respects ( exhibit 1 ) . 
however , the `` major medical bankruptcy '' group was 16 percent ( p & amp ; lt ; 03 ) less likely than other debtors to cite trouble managing money as a cause of their bankruptcy ( data not shown ) . 
privations in the period surrounding bankruptcy . 
in our follow-up telephone interviews with 931 debtors , they reported substantial problems . 
during the two years before filing , 40.3 percent had lost telephone service ; 19.4 percent had gone without food ; 53.6 percent had gone without needed doctor or dentist visits because of the cost , and 43.0 percent had failed to fill a prescription , also because of the cost . 
medical debtors experienced more problems in access to care than other debtors did ; three-fifths went without a needed doctor or dentist visit , and nearly half failed to fill a prescription . 
medical debt was also associated with mortgage problems . 
among the total sample of 1 , 771 debtors , those with more than $ 1 , 000 in medical bills were more likely than others to have taken out a mortgage to pay medical bills ( 5.0 percent versus 0.8 percent ) . 
fifteen percent of all homeowners who had taken out a second or third mortgage cited medical expenses as a reason . 
follow-up phone interviews revealed that among homeowners with high-risk mortgages ( interest rates greater than 12 percent , or points plus fees of at least 8 percent ) , 13.8 percent cited a medical reason for taking out the loan . 
following their bankruptcy filings , about one-third of debtors continued to have problems paying their bills . 
medical debtors reported particular problems making mortgage/rent payments and paying for utilities . 
although our interviews occurred soon after the bankruptcy filings ( seven months , on average ) , many debtors had already been turned down for jobs ( 3.1 percent ) , mortgages ( 5.8 percent ) , apartment rentals ( 4.9 percent ) , or car loans ( 9.3 percent ) because of the bankruptcy on their credit reports . 
medical diagnoses , spending , and type of coverage . 
our interviews yielded detailed data on diagnoses , health insurance coverage , and medical bills for 391 debtors or family members whose medical problems contributed to bankruptcy . 
in three-quarters of cases , the person experiencing the illness/injury was the debt or spouse of the debtor ; in 13.3 percent , a child ; and in 8.2 percent , an elderly relative . 
illness begot financial problems both directly ( because of medical costs ) and through lost income . 
three-fifths ( 59.9 percent ) of families bankrupted by medical problems indicated that medical bills ( from medical care providers ) contributed to bankruptcy ; 47.6 percent cited drug costs ; 35.3 percent had curtailed employment because of illness , often ( 52.8 percent ) to care for someone else . 
many families had problems with both medical bills and income loss . 
families bankrupted by medical problems cited varied , and sometimes multiple , diagnoses . 
cardiovascular disorders were reported by 26.6 percent ; trauma/orthopedic/back problems by nearly one-third ; and cancer , diabetes , pulmonary , or mental disorders and childbirth-related and congenital disorders by about 10 percent each . 
half ( 51.7 percent ) of the medical problems involved ongoing chronic illnesses . 
our in-depth interviews with medical debtors confirmed that gaps in coverage were a common problem . 
three-fourths ( 75.7 percent ) of these debtors were insured at the on-set of the bankrupting illness . 
three-fifths ( 60.1 percent ) initially had private coverage , but one-third of them lost coverage during the course of their illness . 
of debtors , 5.7 percent had medicare , 8.4 percent medicaid , and 1.6 percent veterans/military coverage . 
those covered under government programs were less likely than others to have experienced coverage interruptions . 
few medical debtors had elected to go without coverage . 
only 2.9 percent of those who were uninsured or suffered a gap in coverage said that they had not thought they needed insurance ; 55.9 percent said that premiums were unaffordable , 7.1 percent were unable to obtain coverage because of preexisting medical conditions , and most others cited employment issues , such as job loss or ineligibility for employer-sponsored coverage . 
debtors ' out-of-pocket medical costs were often below levels that are commonly labeled catastrophic . 
in the year prior to bankruptcy , out-of-pocket costs ( excluding insurance premiums ) averaged $ 3 , 686 ( 95 percent ci = $ 2 , 693 , $ 4 , 679 ) ( exhibit 5 ) . 
presumably , such costs were often ruinous because of concomitant income loss or because the need for costly care persisted over several years . 
out-of-pocket costs since the onset of illness/injury averaged $ 11 , 854 ( 95 percent ci = $ 8 , 532 , $ 15 , 175 ) . 
those with continuous insurance coverage paid $ 734 annually in premiums on average over and above the expenditures detailed above . 
debtors with private insurance at the onset of their illnesses had even higher out-of-pocket costs than those with no insurance . 
this paradox is explained by the very high costs -- $ 18 , 005 -- incurred by patients who initially had private the human face of bankruptcy . 
debtors ' narratives painted a picture of families arriving at the bankruptcy courthouse emotionally and financially exhausted , hoping to stop the collection calls , save their homes , and stabilize their economic circumstances . 
many of the debtors detailed ongoing problems with access to care . 
some expressed fear that their medical care providers would refuse to continue their care , and a few recounted actual experiences of this kind . 
several had used credit cards to charge medical bills they had no hope of paying . 
the co-occurrence of medical and job problems was a common theme . 
for instance , one debtor underwent lung surgery and suffered a heart attack . 
both hospitalizations were covered by his employer-based insurance , but he was unable to return to his physically demanding job . 
he found new employment but was denied coverage because of his preexisting conditions , which required costly ongoing care . 
similarly , a teacher who suffered a heart attack was unable to return to work for many months , and hence her coverage lapsed . 
a hospital wrote off her $ 20 , 000 debt , but she was nevertheless bankrupted by doctor 's bills and the cost of medications . 
a second common theme was sounded by parents of premature infants or chronically ill children ; many took time off from work or incurred large bills for home care while they were at their jobs . 
finally , many of the insured debtors blamed high copayments and deductibles for their financial ruin . 
for example , a man insured through his employer ( a large national firm ) suffered a broken leg and torn knee ligaments , he incurred $ 13 , 000 in out-of-pocket costs for copayments , deductibles , and uncovered services -- much of it for physical therapy . 
bankruptcy is common in the united states , involving nearly four million debtors and dependents in 2001 ; medical problems contribute to about half of all bankruptcies . 
medical debtors , like other bankruptcy filer , were primarily middle class ( by education and occupation ) . 
the chronically poor are less likely to build up debt , have fewer assets ( such as a home ) to protect , and have less access to the legal resources needed to navigate a complex financial rehabilitation . 
the medical debtors we surveyed were demographically typical americans who got sick . 
they differed from others filing for bankruptcy in one important respect : they were more likely to have experienced a lapse in health coverage . 
many had coverage at the onset of their illness but lost it . 
in other cases , even continuous coverage left families with ruinous medical bills . 
study strengths and limitations . 
our study 's strengths are the use of multiple overlapping data sources ; a large sample size ; geographic diversity ; and in-depth data collection . 
although our sample may not be fully representative of all personal bankruptcies , the chapter 7 filers we studied resemble chapter 7 filers nationally ( the only group for whom demographic data has been complied nationally from court records ) . 
several indicators suggest that response bias did not greatly distort our findings . 
as in all surveys , we relied on respondents ' truthfulness . 
might some debtors blame their predicament on socially acceptable medical problems rather than admitting to irresponsible spending ? 
several factors suggest that our respondents were candid . 
first , just prior to answering our questionnaire , debtors had filed extensive information with the court under penalty of perjury -- information that was available to use in the court records and that virtually never contradicted the questionnaire data . 
they were about to be sworn in by a trustee ( who often administered our questionnaire ) and examined under oath . 
at few other points in life are full disclosure and honesty so aggressively emphasized . 
second , the details called for in our telephone interview -- questions about out-of-pocket medical expenses , who was ill , diagnoses , and so forth -- would make a generic claim that `` we had medical problems '' difficult to sustain . 
third , one of us ( thorne ) interviewed ( for other studies ) many debtors in their homes . 
almost all specifically denied spend-thrift habits , and observation of their homes supported these claims . 
most reflected the lifestyle of people under economic constraint , with modest furnishings and few luxuries . 
finally , our findings receive indirect corroboration from recent surveys of the general public that have found high levels of medical debt , which often result in calls from collection agencies . 
even when data are reliable , making casual inferences from a cross-sectional study such as ours is perilous . 
many debtors described a complex web of problems involving illness , work , and family . 
dissecting medical from other causes of bankruptcy is difficult . 
we can not presume that eliminating the medical antecedents of bankruptcy would have preventing all of the filings we classified as `` medical bankruptcies. '' conversely , many people financially ruined by illness are undoubtedly too ill , too destitute , or too demoralized to pursue formal bankruptcy . 
in sum , bankruptcy is an imperfect proxy for financial ruin . 
trends in medical bankruptcy . 
although methodological inconsistencies between studies preclude precise quantification of time trends , medical bankruptcies are clearly increasing . 
in 1981 the best evidence available suggests that about 25 , 000 families filed for bankruptcy in the aftermath of a serious medical problem ( 8 percent of the 312 , 000 bankruptcy filings that year ) . 
our findings suggest that the number of medical bankruptcies had increased twenty-threefold by 2001 . 
since the number of bankruptcy filings rose 11 percent in the eighteen months after the completion of our data collection , the absolute number of medical bankruptcies almost surely continues to increase . 
policy implications . 
our data highlight four deficiencies in the financial safety net for american families confronting illness . 
first , even brief lapses in insurance coverage may be ruinous and should not be viewed as benign . 
while forty-five million americans are uninsured at any point in time , many more experience spells without coverage . 
we found little evidence that such gaps were voluntary . 
only a handful of medical debtors with a gap in coverage had chosen to forgo insurance because they had not perceived a need for it ; the overwhelming majority had found coverage unaffordable or effectively unavailable . 
the privations suffered by many debtors -- going without food , telephone service , electricity , and health care -- lend credence to claims that coverage was unaffordable and belie the second , many health insurance policies prove to be too skimpy in the face of serious illness . 
we doubt that such underinsurance reflects families ' preference for risk ; few americans have more than one or two health insurance options . 
many insured families are bankrupted by medical expenses well below the `` catastrophic '' thresholds of high-deductible plans that are increasingly popular with employers . 
indeed , even the most comprehensive plan available to us through harvard university leaves faculty at risk for out-of-pocket expenses as large as those reported by our medical debtors . 
third , even good employment-based coverage sometimes fails to protect families , because illness may lead to job loss and the consequent loss of coverage . 
lost jobs , of course , also leave families without health coverage when they are at their financially most vulnerable . 
finally , illness often leads to financial catastrophe through loss of income , as well as high medical bills . 
hence , disability insurance and paid sick leave are also critical to financial survival of a serious illness . 
only broad reforms can address these problems . 
even universal coverage could leave many americans vulnerable to bankruptcy unless such coverage was much more comprehensive than many current policies . 
as in canada and most of western europe , health insurance should be divorced from employment to avoid coverage disruptions at the time of illness . 
insurance policies should incorporate comprehensive stop-loss provisions , closing coverage loopholes that expose insured families to unaffordable out-of-pocket costs . 
additionally , improved programs are needed to replace breadwinners ' incomes when they are disabled or must care for a loved one . 
the low rate of medical bankruptcy in canada suggests that better medical and social insurance could greatly ameliorate this problem in the united states . 
in 1591 pope gregory xiv fell gravely ill . 
his doctors prescribed pulverized gold and gems . 
according to legend , the resulting depletion of the papal treasury is reflected in his unadorned plaster sarcophagus in st . 
peter 's basilica . 
four centuries later , solidly middle-class americans still face impoverishment following a serious illness . 
