Medical Bills, Illness Contribute To Two-Thirds Of Personal Bankruptcies

Medical expenses remain the most common cause of personal bankruptcy in the United States, according to a new study published in the American Journal of Public Health. And despite expanding health insurance coverage to thousands of families, the Affordable Care Act has done little to change the fact that illness and medical bills contribute to roughly two-thirds of all personal bankruptcies filed in the country, Medical Xpress reports.

Study Confirms Financial Burden Of Medical Expenses, Disease

Writing in the American Journal of Public Health, researchers from the Consumer Bankruptcy Project confirmed through a survey of 910 Americans who filed for personal bankruptcy between 2013 and 2016 that 66.5% of respondents cited medical problems and expenses as key contributors in their choice to file for bankruptcy.

Extrapolating from their findings, the Consumer Bankruptcy Project estimates that around 530,000 families file for bankruptcy due to illness and medical bills each year, according to the Fiscal Times. Around 800,000 people filed for bankruptcy in 2016. Compared to other bankruptcy filers, those who cited medical illness and expenses tended to be in worse health and were between two and three times more likely to skip necessary medical care.

Debtors Cite Medical Bills, Illness-Related Income Loss

A majority of respondents, 58.5%, said that medical bills contributed to their personal bankruptcy. 44.3% cited illness-related income loss as a main driver in their bankruptcies, although many debtors cited both problems to explain their decision. In the article, the study authors write, “medical bills frequently cause financial hardship, and the U.S. Consumer Financial Protection Bureau reported that they were by far the most common cause of unpaid bills sent to collection agencies in 2014, accounting for more than half of all such debts.”

Affordable Care Act Failed To Reduce Bankruptcies

The study, conducted by a team of two doctors, two attorneys and a sociologist, provides the only nationally-representative data on the medical contributors to bankruptcy since the 2010 passage of the Affordable Care Act, which dramatically increased insurance coverage throughout the United States.

In spite of the Affordable Care Act, the new study from the Consumer Bankruptcy Project found no evidence that the law reduced the proportion of bankruptcies driven by medical problems.

If anything, the proportion of personal bankruptcies with medical problems at their root has only increased. Prior to the Affordable Care Act’s implementation, surveys conducted by the Consumer Bankruptcy Project found that around 65.5% of debtors cited either medical bills or illness-related income loss as a key contributor to their bankruptcy. That number showed little change after the Affordable Care Act came into effect; during the three years after the law was implemented, a total of 67.5% of debtors said that medical problems and bills contributed to their bankruptcies. Nor did the responses of debtors change between states that have accepted the Affordable Care Act’s Medicaid expansion option.

Personal Bankruptcy Burdens Middle-Class Americans

In their study, the researchers note that personal bankruptcy is most common among middle-class Americans, the same group currently facing increases in co-payments and deductibles over recent years. Poorer Americans, who saw the most benefit in the wake of the Affordable Care Act, are less likely to seek out formal bankruptcy relief, in many cases because they lack the personal assets to protect and often face difficulty in securing legal assistance.

Study lead author Dr. David Himmelstein, a Distinguished Professor at the City University of New York’s Hunter College, said, “unless you’re Bill Gates, you’re just one serious illness away from bankruptcy. For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, copayments and deductibles that illness can put you in the poorhouse. And even the best job-based health insurance often vanishes when prolonged illness causes job loss – just when families need it most.”