Medical Bankruptcy

Consumers face debt for numerous reasons. Debt can be due to loss of income, decrease in income, disaster, unchecked spending, and more. A significant source of debt is due to medical bills, often caused by weak or no insurance coverage. Some individuals with serious and exploratory conditions may seek alternative treatment that is not covered by insurance. People may be compelled to undergo untested and non-traditional medical procedures due to the lack of success from traditional procedures. Under these circumstances, people have no choice but to assume a repayment obligation without prospects for repayment. This leads to large debt, with bankruptcy the only option for relief. This is known as medical bankruptcy.

Medical Bankruptcy Metrics

In 2013, Nerdwallet Health compiled statistics that display the seriousness of medical bankruptcies. It estimated that households containing 1.7 million people will be affected by medical bankruptcies every year. The causes are high medical bills due to lack of insurance, high-deductible insurance, and procedures not covered by insurance. Because healthcare costs are astronomical, corresponding debt is large and can accumulate quickly.

A 2009 study by Himmelstein et al stated that 62% of all consumer bankruptcies were medical bankruptcies. The study pointed to out-of-pocket expenses for various ailments as the cause. Specifically, multiple sclerosis, injuries, stroke, mental illness, and heart disease were the leading cause of debt-induced consumer bankruptcy.

However, Northwestern’s Kellog School of Management conducted a survey of medical bankruptcies and found that 17% of bankruptcies were medically-related. This number significantly conflicts with the Himmelstein study.

While the exact percentage is unclear, it is clear that those people who are uninsured, underinsured, hold high-deductible insurance, or are undergoing an uninsured procedure will often face crushing debt due to high medical bills.

The Affordable Care Act

Among other topics, medical bankruptcies were a discussion point in the buildup to passing the Affordable Care Act, or Obamacare. Those in favor of Obamacare showed statistics of medical bankruptcies and put forward universal health care as a solution. Universal health care, in the form of Obamacare, would place the person requiring medical treatment in the healthcare system. Under the system, a person would receive medical treatment without bills and deductibles so there would be no concern of medical care-induced debt, proponents of the Act argued. In turn, bankruptcies would fall by as much as 62% (presuming the numbers are accurate).

Others countered that this argument is specious. Based on a parallel with other countries offering universal health care, the people requiring the most care would not receive such care from a licensed doctor. The administrator of the health care plan can decide that such procedures are too expensive. As a result, the patient seeking treatment would feel compelled to look at secondary options in other countries, which likely would not accept any insurance. This would make medical bills higher and treatment of inferior quality. In turn, bankruptcies would increase due to medical care.

Someone dealing with medical concerns is likely going through a difficult time. Paying those bills may be an additional burden. If you are facing medical debt, contact the debt relief firm of Melanie Tavare.