Medical debt sending many over financial brink

-Since 1999, Keith and Deborah Krinsky of Magalia, Calif., have seen their health insurance deductible soar from $1,000 to $10,000. And their health-care costs have put them in a financial hole. A combination of Keith's chronic asthma and potential heart problems, Deborah's connective tissue disorder and fallen arches, and their kids' various scrapes and stumbles led them to amass a pile of credit card debt and forced them to refinance the mortgage on their house -- which they now are having trouble paying. Keith, once a plant manager for a trucking company in Chico, took a $30,000 pay cut to get a job with better health benefits. Deborah, who doesn't work because of her disability, said they are still fighting desperately to stave off foreclosure. "Right now, we are in the process of losing our home. We will probably go to my mother-in-law," Deborah said Monday. The Krinskys are not alone in their scramble to make ends meet because of medical issues. The connection between medical debt and the current credit crisis isn't a direct line, but it's strong enough to prompt Mike Leavitt, head of the U.S. Department of Health and Human Services, to declare at a recent news conference, "If we had any idea how many mortgages were foreclosed because people were crowded out by medical issues . . . Health-care costs are at the heart of many of the things happening." A Kaiser Family Foundation poll conducted in April, way ahead of the current economic meltdown, found that 28 percent of Americans reported that they or their families had had a serious problem paying health insurance or medical bills because of changes in the economy. And data from the Commonwealth Fund puts 41 percent of working-age adults -- 72 million people -- as having medical debt or having a problem paying medical bills, up from 34 percent -- or 58 million people -- in 2005. Many families find themselves managing until a crisis sends them over the edge. "The way people get in trouble is have substantial debt they're managing, they're paying mortgages and paying off credit card balances, but they're managing. Then a shock occurs," said Dr. Steffie Woolhandler, an associate professor of medicine at Harvard Medical School and co-author of a medical bankruptcy paper from the Consumer Bankruptcy Project. "In bankruptcy, in about half of those cases, that shock is a medical shock." "The shock often takes the form of higher bills. It can also take the form of higher bills and loss of work because you're sick," added Woolhandler, who is an advocate of national health insurance. This is what happened to Donna Smith and her husband, Larry. The Smiths, who raised six children together, consistently had employer-sponsored health insurance. Like the Krinskys, however, they began to notice a drift upwards in the cost of premiums as well as higher co-pays and higher deductibles in the 1990s. "While we were both well, we could absorb that creep," said Donna, formerly a newspaper editor and now a community organizer for the California Nurses Association and the National Nurses Organizing Committee in Chicago. But then the medical crises set in: Larry was diagnosed with serious artery disease, Donna with uterine cancer. "Our debt was accelerating, but it wasn't just accelerating in medical debt," Donna said. "What you do is you hang on, you borrow from another place and pay the doctor. It's a balancing act all the time." The Smiths took payday loans, Donna pawned her engagement ring, and they even crawled to relatives. "I can't tell you how humiliating it is," Donna said. "By the time you've gone through that kind of trauma, you've tapped out the good will of family and friends. You call them, and their tone of voice changes. You've damaged personal relationships. People are less excited about seeing you." By 2004, their health insurance policy had a maximum out-of-pocket exposure of $9,000, and they were sued by a dermatologist for an unpaid bill. The amount? A mere $600. Donna's wages were garnished, and the couple were forced to declared bankruptcy and sold their house for pennies on the dollar, all while they were technically fully insured. The couple first moved in with a daughter living in Colorado and are now renting in Chicago. "I don't know if we have enough working years left to buy a house," Donna said. "That's pretty heavy punishment for having gotten sick."