By MedPage Today Staff
MedPage Today, April 18, 2017
Bankruptcy is common in the U.S., and medical bills often play a role — even for people with health insurance, according to Stephanie Woolhandler, MD, of the Albert Einstein College of Medicine, in New York City. The number of bankruptcies ranges from 1 million to about 1.5 million per year depending on how well the economy is doing, and medical bills are by far the most common item sent to collection agencies, she noted.
Following is a transcript of her remarks:
Three-quarters of people who are bankrupted by medical costs actually had insurance, at least when they first got sick. Many of them lost their insurance because they lost their job when they got sick, but for the majority of them, they managed to hold on to private insurance throughout the bankrupting illness, but were bankrupted anyway by gaps in their coverage like co-payments, deductibles, and uncovered services.
In our studies, we found that well over half of all bankruptcies were due, at least in part, to medical illness or medical bills. In 2007, for instance, about 62% of all personal bankruptcies were related to medical causes. Bankruptcy is extremely common in this country. When the economy is doing well, there’s about a million bankruptcies a year. When it does poorly, the numbers rise closer to one and a half million.
So in the United States for a woman, bankruptcy is about as common as graduating from college, so it’s a very, very common experience and well over half of the time it’s due to medical illness or medical bills, at least in part.
The new administration and Congress [are] taking a lot of steps that are going to raise co-payments and raise deductibles and make health insurance even skimpier than it is today. So we would certainly expect to see many more people driven into bankruptcy by healthcare costs, including many people with insurance, only their insurance is so partial that it doesn’t protect them when they have a serious or prolonged illness.
We finished up our studies in 2009, but the Consumer Financial Protection Bureau has been following the problem of people getting medical debts referred to collection agencies, and it turns out that medical bills are by far the most common item that are sent to collection agencies and end up on credit reports because of unpaid bills. Medical bills are about six to eight times more common than other items like cellphone bills, cable TV, utilities, retail.
So well over half of all the black marks that people have on their credit reports that worsen your credit are due to medical bills. So that has a lot of consequences because if your credit score goes down, that can make it more expensive to purchase insurance, difficult or impossible to buy a home or rent a home, maybe even affect your ability to get a much needed job if your potential employer checks your credit scores and sees that it’s low. So medical bills are having a very serious impact on family finances and family credit all the time, and in many cases, they do result in a personal bankruptcy.
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