Does Major Illness Cause Financial Catastrophe?

Objective: We examine the financial impact of major illnesses on the near-elderly and how this impact is affected by health insurance. Data Sources : We use RAND Corporation extracts from the Health and Retirement Survey from 1992-2006. Study Design : Our dependent variable is the change in household assets, excluding the value of the primary home. We use triple difference median regressions on a sample of newly ill uninsured near elderly (under age 65) matched to newly ill insured near elderly. We also include a control group of individuals who are not ill. Results : Controlling for the effects of insurance status and illness, we find that the median household with a newly ill uninsured individual suffers a statistically significant decline in household assets of approximately 30 percent relative to households with matched insured individuals. Newly ill insured individuals do not experience a decline in wealth. Conclusions : While insured newly ill individuals are protected against financial loss, the uninsured appear to be one illness away from financial catastrophe.