As my colleague Kevin Gipson pointed out not so long ago, there’s no such thing as a “medical bankruptcy.” There’s no box you check on the bankruptcy petition for “medical bankruptcy.” You must list all your debts, including medical debt. There are, however, many bankruptcy cases where medical debt contributed to–or was even the primary cause of–the debtor’s need to file bankruptcy.
The debate about the connection between medical debt and bankruptcy has being raging for a long time. The American Journal of Medicine recently published a study showing that medical debt has contributed to over 60% of bankruptcies. In the vast majority of these cases debtors had other kinds of debt as well, such as credit cards and taxes. But they also had at least some medical debt.
The study has been used to support health care reform. And those who oppose health care reform have attacked the study. One such attack went so far as to claim that “medical bankruptcy is a myth” and that “[t]here is no evidence to indicate that a government-run healthcare system in the United States will reduce personal bankruptcies.”
Oddly, the author admits that studies show that medical debt was a contributing factor in 17% of bankruptcies. The last time I checked 17% was quite a bit more than zero. How could it be, then, that universal coverage would not “reduce personal bankruptcies”?
I recently had a client come in with $175,000 in medical debt. Ironically but not surprisingly, she accumulated much of the debt during a time when she had health insurance but while her condition was excluded as a pre-existing condition.
I also saw a man a few months ago with approximately $150,000 in medical debt. During his first bout with heart disease, he had no health insurance and accumulated significant debt as a result. He then tried to obtain insurance, but the health insurance companies denied him coverage. He then had another heart attack, which produced even more medical debt.
Ask any bankruptcy attorney and he’ll tell you he sees plenty of cases where medical debt is a contributing factor in the bankruptcy filing. Is it 60% or is it 17%? I really don’t know. We shouldn’t be proud of either number.
Medical bankruptcy does not exist in countries with universal health coverage like Japan, Canada, Great Britain, Taiwan, Germany, Italy, Switzerland, Sweden, Norway, Austria, Finland, and France, just to name a quick dozen. But, here in the wealthiest, most powerful country in the world, medical debt forces many people into bankruptcy.
And let’s think about all that medical debt. Where does it go? We can’t afford to cover the 47 million Americans without insurance, or at least that’s what we’re told. But what happens to that $175,000 of medical debt my client will discharge in her Chapter 7? What happens to the other $150,000 my other client will discharge in his Chapter 7?
To quote the late David Davidoff, an outstanding bankruptcy attorney in Kalamazoo, Michigan for several decades, “the good must pay for the bad.” He wasn’t talking about health care; he was talking about business costs. And it doesn’t matter what business you are in. It’s all the same. If you don’t get paid for goods or services from some clients, you must charge more from other clients.
We have a non-system where more and more people can’t afford health insurance or can’t buy it even if they can afford it. They go without, and when something goes wrong, they can’t pay. Doctors must make a certain amount of money, as must hospitals, labs, and pharmaceutical companies. So they charge more to those who can pay. Those of us fortunate enough to afford policies are part of the shrinking number of Americans who can still pay for health insurance.
The result is that costs escalate, insurance premiums go up, more people can’t afford to pay the premiums, those people become uninsured, medical providers don’t get paid to treat those patients, so medical providers charge more, insurance goes up….you get the picture. It’s not difficult to diagnose the problem.
Everyone uses the health care system, whether they have insurance or not. The law mandates that they must be treated. Just go down to your local emergency room to see this “system” in action. However, unless we come up with a way to make everyone pay for using the system, it will eventually collapse.
The only means of doing this is by universal coverage, whether by use of private insurance or by using some single payer system. We know everyone is already using the system. We must now allow everyone to pay for it. Let’s hope politics will be set aside long enough to come up with a solution to this problem before it gets worse. Medical bankruptcy is not a myth; it’s a sad reality for far too many Americans.
Russell A. DeMott is a Charleston, South Carolina bankruptcy lawyer who helps people file Chapter 7 and Chapter 13 bankruptcy.