Medical bills account for 40% of bankruptcies

BMJ 2000; 320 doi: (Published 13 May 2000) Cite this as: BMJ 2000;320:1295
  1. Scott Gottlieb
  1. New York

    Exorbitant medical bills in the United States play a huge part in personal bankruptcies, accounting for about 40% of the filings last year, according to a new study.

    About 500000 Americans filed for bankruptcy protection in 1999 largely because of heavy medical expenses, according to the study, which is to be published next month in a finance journal, Norton's Bankruptcy Adviser.

    “Very little attention has been paid to the number of people who are in bankruptcy because of serious medical problems,” said the study's lead author, Harvard law professor Elizabeth Warren. “It's a reminder that many of the families in bankruptcy have been pressed to the edge by expenses stemming from illness or injury.”

    Professor Warren and colleagues found that elderly people and women, as well as families headed by single women, were the groups in bankruptcy that were hardest hit by medical expenses. The findings illustrate how fragile middle class status is for many American families, Professor Warren said. These families are “just one serious illness away from financial collapse,” she said. “What a scary way to think about America.”

    Professor Warren and her colleagues, Teresa Sullivan, dean of graduate studies at the University of Texas, and lawyer Melissa Jacoby, surveyed people who filed for bankruptcy in 1999 in eight judicial circuits nationwide, accounting for about 18% of all filers.

    If the results are projected nationwide, 326441 bankruptcies last year were related to an illness or injury to the filer or a family member, and 267575 other filers had substantial medical bills though they also listed other reasons—or gave no reason—for their bankruptcies. In addition to serious illness or injury, experts have also cited job loss or divorce as frequent causes of bankruptcy.

    The study comes at a time when legislation making it harder for people to sweep away credit card and other debts through bankruptcy is before Congress. The pending legislation seeks to apply new standards for determining whether people filing for bankruptcy should be forced to repay their debts under a reorganisation plan approved by the courts instead of having them dissolved.

    The new study on medical bills and bankruptcy “will become a factor in the debate” over the legislation, said Frank Torres, legislative counsel for the Consumers Union, a consumer advocacy group. “Now it's up to Congress whether or not they'll pay attention to it.”

    Credit card issuers contend that current bankruptcy law makes it too easy for debtors to walk away from their obligations, even if they could in fact repay a substantial portion of their debt. Issuers are pressing Congress to tighten the requirements for bankruptcy by making it harder to file for bankruptcy protections, which wipe out most debts.

    Warren said that the implications of her findings are that if such families are denied the ability to wipe out debts in bankruptcy, some will lose their homes and “many of these people will face collection for the rest of their lives.”

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