Poverty Is a Pre-Existing Condition: Why the Affordable Care Act Matters

Without adequate health insurance, medical expenses can quickly devastate one's finances.
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Last week I wrote about asset poverty and the huge difference it makes to a family's economic security to have assets -- savings, home equity, etc. -- that they can tap into during tough times. As we mark the one-year anniversary of the Affordable Care Act, we should remember what a crucial role the health care reform law is starting to play in protecting people's financial safety net.

That health and wealth are connected is thoroughly documented. For example, people in the highest income group can expect to live, on average, at least six and a half years longer than those in the lowest. Even those in the middle (families of four making $41,300 to $82,600 a year in 2007) will die, on average, two years sooner than those at the top.

While most of the data on health and wealth is based on income -- not always an adequate measure of poverty, as I noted last week -- there is an unmistakable connection between health and one's ability to hold onto assets and maintain a financial safety net. A 2010 study by researchers from MIT, Dartmouth and Harvard found "large and substantively important correlations between poor health and asset accumulation." Looking at survey data from the National Bureau of Economic Research, the researchers found that from 1992 to 2008, those in the healthiest one-third "had accumulated, on average, more than 50 percent more assets than those in the bottom third of the health distribution."

Without adequate health insurance, medical expenses can quickly devastate one's finances. A 2005 Harvard and Ohio University study found that a staggering 55 percent of bankruptcies were caused by medical debt. By 2007, that number had shot up to 62 percent, with the share of bankruptcies attributable to medical expenses rising by nearly 50 percent from 2001 to 2007.

There's a similar connection between medical expenses and foreclosures. A 2008 study, for example, found that 49 percent of foreclosures were at least partly caused by medical issues, with over two-thirds of those who experienced foreclosure reporting at least one factor such as medical bills, lost work due to illness, or the need to care for a sick family member.

That's why the Affordable Care Act is so crucial. While it won't solve all of the problems of our health care system, it will give American families real and substantial protection against having their homes and savings wiped out by medical expenses.

Under the law, children can't be denied coverage due to pre-existing conditions, a provision that will expand to include adults in 2014. Seniors struggling with the "donut hole" that sticks them with a large bill for prescription drugs have already gotten some relief and will get more. Lifetime caps on coverage will go away. And 32 million people with no insurance today will have it once the law is fully implemented -- with several types of assistance to help pay for it, including tax credits for small employers who insure their workers.

It's important to keep these real-world implications in mind as we mark health care reform's anniversary and sort through the propaganda from those who would repeal the law, many of whom still spout utter nonsense about a "government take-over of health care" and the entirely fictional "death panels."

Asset poverty is a pre-existing condition, one that can affect both your health and the whole trajectory of your life. One of the best cures for it is a health care system that covers everyone at a manageable cost. The Affordable Care Act gets us most of the way there, and it's good for both our economic and physical health.

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