Medical Bills Leading Cause of Bankruptcy

A March 30, 2011, article in the Murfreesboro Post from Tennessee, carried the headline above. The article’s author, Laura Thornquist, was making the point that cuts in healthcare to attempt to balance state’s budgets could have the reverse effect by creating more bankruptcies.

In support of her contention, Ms. Thornquist cites the work of David Himmelstein, professor of public health at City University in New York, and associate professor of medicine at Harvard Medical School, who has researched medical-related bankruptcies for the past decade. His research showed that between the years 2002 and 2007 the number of bankruptcies due to medical bills went up significantly.

According to the Murfreesboro Post article, and two Himmelstein research papers published in The American Journal of Medicine in 2011 and 2009, more than half of all bankruptcies filed in the United States today are due to medical bills. The research states that in 1981 bankruptcies due to medical bills accounted for only 8 percent of those being filed.

Currently the studies estimate that 62.1 percent of all bankruptcies in 2007 were due to medical bills. This figure is even before the most recent recession and is also considering the fact that bankruptcy laws have made it tougher to file for bankruptcy. What may be most surprising is that according to the studies, most of these people who filed for bankruptcy were well educated, owned homes, and had middle-class occupations. Possibly even more frightening is that three quarters of these had health insurance.

Several attempts to help this situation have met with less than successful results. The studies show that in Massachusetts, inadequate coverage was offered to a larger number of people resulting in a large increase in bankruptcy filings, even as more people had insurance. Himmelstein explained this by saying, “What Massachusetts did was to give people really inadequate coverage. It traded uninsurance for underinsurance. That really didn’t work. When people were seriously ill, they ended up with such huge medical bills that they really didn’t have coverage that could keep them out of the bankruptcy court.”

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