Medical bills cited in 67% of consumer bankruptcies

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Elizabeth Warren said it back in 2001 and 2007 and a new study finds it’s still true today — illness and medical bills are a factor in two-thirds of all consumer bankruptcies. The latest study from the Consumer Bankruptcy Project reports that medical bills contributed to 58.5% of bankruptcies, while illness-related income loss contributed to 44.3%; many debtors cited both of these medical issues.

The study found that more than half a million families suffer bankruptcies each year that are linked to illness or medical bills. The figure — 530,000 — is not significantly different today than it was prior to passage of the Affordable Care Act, the authors of the study noted.

Warren, now a U.S. Senator from Massachusetts and a Democratic presidential hopeful, was a law professor at Harvard University when the two earlier studies were conducted.

The latest study was published as an editorial in the American Journal of Public Health. The study, carried out by a team of two doctors, two lawyers, and a sociologist from the Consumer Bankruptcy Project (CBP), surveyed a random sample of 910 Americans who filed for personal bankruptcy between 2013 and 2016, and abstracted the court records of their bankruptcy filings. The study provides the only national data on medical contributors to bankruptcy since the 2010 passage of the ACA.

Obamacare effect


The current study found no evidence that the ACA, often called Obamacare, reduced the proportion of bankruptcies driven by medical problems: 65.5% of debtors cited a medical contributor to their bankruptcy in the period prior to the ACA’s implementation as compared to 67.5% in the three years after the law came into effect.

The responses also did not differ depending on whether the respondent resided in a state that had accepted ACA’s Medicaid expansion.

The researchers noted that bankruptcy is most common among middle-class Americans, who have faced increasing copayments and deductibles in recent years despite the ACA. The poor, who were most helped by the ACA, less frequently seek formal bankruptcy relief because they have few assets (such as a home) to protect and face particular difficulty in securing the legal help needed to navigate formal bankruptcy proceedings.

Relative to other bankruptcy filers, people who identified a medical contributor were in worse health and were two to three times more likely to skip needed medical care and medications.

A melting umbrella

“Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy,” said Dr. David Himmelstein, the lead author of the study, a Distinguished Professor at the City University of New York’s (CUNY) Hunter College and Lecturer at Harvard Medical School.

“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. Private health insurance is a defective product, akin to an umbrella that melts in the rain,” Himmelstein said.

In the article, the authors note that “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.”

About the Author

Truman Lewis
Truman has been a bureau chief and correspondent in D.C., Los Angeles, Phoenix and elsewhere, reporting for radio, television, print and news services, for more than 30 years. Most recently, he has reported extensively on health and consumer issues for ConsumerAffairs.com and FairfaxNews.com.