Will health savings accounts leave people vulnerable to bankruptcy?(PRO & CON)

YES

When we studied more than 900 people who had filed for personal bankruptcy, more than half of them cited medical causes (Health Aff. [Mill-wood] Feb. 2, 2005; [Web exclusive]). This was true even though three-quarters of the debtors had health insurance at the onset of their illness. Of those, the majority had private coverage, although a third of those with private coverage lost it during the course of their illness. Those who were on public programs such as Medicare and Medicaid were much less likely to experience gaps in health coverage.

Not surprisingly, a lapse in health insurance coverage during the 2 years before filing was a strong predictor of a medical cause of bankruptcy. Nearly 40% of the debtors who had a "major medical bankruptcy" had experienced a lapse in coverage, compared with 27% of debtors who did not have a medical cause.

Of those who didn't have coverage, 56% said that premiums were unaffordable, 7% couldn't get coverage because of a preexisting condition, and most others cited employment issues, such as job loss or ineligibility for employer-sponsored coverage, as their reason for being uninsured.

A health savings account, which involves patients paying for their care up to a certain dollar amount, after which a catastrophic coverage policy kicks in, probably would not have helped most of these people. That's because debtors' out-of-pocket medical costs were often below levels that are commonly labeled "catastrophic." In the year before their bankruptcy, out-of-pocket health care costs--not counting insurance premiums--averaged $3,686.

Of course, any coverage that's employer based--as many of these health insurance policies were--often fails to protect families, because illness may lead to job loss and the consequent loss of coverage.

Only broad reforms can address these problems. As it is in Canada and most of western Europe, health insurance should be divorced from employment to avoid coverage disruptions at time of illness. The low rate of medical bankruptcy in Canada suggests that better medical and social insurance could greatly ameliorate this problem in the United States.