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THOMAS OLIPHANT

Blaming the bankrupt

WASHINGTON

I BUMPED into an arresting fact the other day about personal financial catastrophes while studying an important new examination of bankruptcy in this country.

Four out of 10 people interviewed as part of a Harvard Law School and Medical School study of Americans who were going through the agony of the process said they had lost their telephone service during the two years before they filed. More than half had skipped doctor or dental appointment because of the cost, more than 40 percent had not filled a prescription, and nearly one in five had missed meals.

This genuine cross-section -- more than 900 interviews of people in five federal court districts plus a detailed look at more than 1,700 cases -- clashes with the stereotype the Bush administration and its business buddies favor in their unrelenting campaign to make bankruptcy even more of a demeaning, draining ordeal than it already is. The Harvard study comes at a time when the administration and its conservative congressional bosses are about to start a new effort to tighten the bankruptcy law screws.

This kind of organized cruelty demands a stereotype -- of the profligate, irresponsible conniver who spends more effort trying to hide assets and dodge creditors than working hard and paying off. In the Bush propaganda, bankruptcy is a financial planning tool for the irresponsible.

The reality is heartbreaking -- bankruptcy as the only way out for upwards of 3 million adults and children who have gone through a living hell. Most arresting of all is the study's discovery that roughly half of these cases stem not from spending sprees on credit cards but from medical bills flowing out of illness.

It is a fact of economic life today, not a symptom of cultural decline, that personal bankruptcy is not uncommon, with roughly a third more filing now than there were a generation ago. In the same period, the available evidence is that medical causes of financial catastrophe have increased explosively -- by a factor of something like 23 -- right along with exploding costs and declining availability of adequate insurance.

Among the researchers working on the Harvard study -- in many respects the first detailed examination of the medical roots of personal financial stress -- was Harvard Law professor Elizabeth Warren. With her daughter two years ago, she wrote ''The Two-Income Trap," a pioneering examination of the extreme fragility of working family life right up through the middle-class. It's important to remember that while vitally important by itself, bankruptcy is but the tip of an even larger iceberg of vulnerability and distress.

Having the trappings -- a job, health insurance, etc. -- of middle-class life is no defense against the economic ravages of illness. Fully three-quarters of the filers had health insurance at the onset of the illiness that broke them. They ended up with average, out-of-pocket costs of nearly $12,000.

The study found that increasingly common lapses in insurance coverage were a major indicator of susceptibility to bankruptcy; nearly 40 percent of the filers had experienced such a lapse. Of those covered at the outset, three-fifths were under private insurance plans and a third lost that protection during their emergency. Sixty percent cited bills from healthcare providers as the major contributor; 47 percent cited drug costs; and more than half cited curtailed employment income because of their own illness or the need to care for a family member.

It also showed how the primary cause can produce others. Fifteen percent of those with second or even third mortgages on their homes cited medical expenses as the reason. According to the survey, delinquencies in mortgage and rent payments, credit card payments, and utility bills were often the result of dipping into those accounts to try to keep up with vital medical expenses.

The evidence from the study also underlines the extent to which inadequate insurance coverage contributes to family distress when emergencies occur and that such stingy policies are more the result of employer choices than personal ones. As the study put it, ''We doubt that such under-insurance reflects families' preference for risk. Few Americans have more than one or two insurance options. Many insured families are bankrupted by medical expenses well below the catastrophic thresholds of the deductible plans that are increasingly popular with employers."

The obvious implication is that the separation of health insurance from employment via universal, comprehensive coverage of the kind available in Canada and Western Europe is the sensible alternative. Short of that ideal, there is much that could be done to help, but the Bush solution is to restrict the already painful choice of bankruptcy on the basis of a false stereotype.

The study concludes with a useful allegory. ''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."

Thomas Oliphant's e-mail address is oliphant@globe.com. 

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