Will Obamacare Reduce the Need for "Medical Bankruptcies" in Michigan?

One of the main talking points of health care reform and the Affordable Care Act, often referred to as "Obamacare," was that increasing healthcare coverage would prevent people from falling into bankruptcy due to medical bills they could not afford to pay.  Studies suggest that medical bills are the number one reason for filing bankruptcy, outpacing other common factors such as credit card bills or unpaid mortgages.  Studies link 3 out of every 5 bankruptcy filings to overwhelming medical bills, coined a "medical bankruptcy." From the research we found, it depends on what criteria are used to determine a "medical bankruptcy."  In one study, respondents had to cite on of the following reasons for filing bankruptcy to be considered a "Major Medical Bankruptcy:"

• Illness or injury;
• Uncovered medical bills exceeding $1,000 in the past year;
• Loss of a least 2 weeks of income due to illness or injury;
• Mortgaged a home to pay for medical bills;
• Addiction;
• Uncontrolled gambling;
• Birth or death of a family member.

By these definitions, the study includes bankruptcies where medical bills are not a primary cause of the bankruptcy, even though some of the debts in the bankruptcy were medically related.  All unsecured debts are included in either a Chapter 13 or Chapter 7 bankruptcy regardless of whether they are problematic or not. As you can also see, many of these factors will not be improved or controlled by Obamacare. If we look at the healthcare reform law in Massachusetts after "RomneyCare" was enacted, here are the startling facts:

"Despite a marked declined in the uninsurance rate in Massachusetts since the implementation of health reform, the proportion of bankruptcies that occurred in the wake of medical problems has not decreased signi?cantly, and the absolute number of medical bankruptcies has actually increased by one third. The deep recession beginning in 2008 surely played an important role in increasing the bankruptcy rate and left many families more vulnerable to ?nancial shocks from illness. However, our ?ndings are incompatible with claims that health reform has cut medical bankruptcy ?lings signi?cantly."

Will increased healthcare coverage eliminate medical bills and therefore reduce the need for bankruptcy?

We think not, especially using the overly broad definitions as outlined above.  Here are the reasons why:

• The increase of high deductible plans.  Many people are being forced into higher deductible plans in order to keep their monthly insurance payment within budget.  This means that if they seek medical care or hospitalization, they will have a higher out-of-pocket expense than before.
• Many near-poor and middle income people will be left "underinsured" through the exchanges.  Underinsurance is people who have insurance but still can't afford care.  This has a lot to do with the type of plans that insurers sell on the health insurance exchanges.  Many people are expected to choose a plan that covers a lesser percentage of the enrollee's cost because of the smaller premiums.
• Severe medical problems will most likely cause severe income loss as well.  A sudden illness or accident may create a short-term income loss or a long term disability.  This makes it even more difficult, if not impossible, to maintain bills and service debt, medical and otherwise.
• Overall, most Americans do not have enough "surplus" in their budgets to account for unexpected bills.  Healthcare insurance still requires varying out-of-pocket expenses for the consumer.  Most people do not have "unplanned expenses" covered in their budgets, creating debt when those expenses occur.

What to do if you are struggling with medical bills or other debt you cannot afford?

Don't let your debt consume your life or cause undue stress.  There are solutions to help you reduce or eliminate debt that you can no longer afford to pay.  Call us today at 866-261-8282to schedule a free phone or in-office consultation to discuss your debt resolution options:

• Chapter 13 Debt Consolidation
• Chapter 7 Debt Elimination
• Non-bankruptcy Debt Settlement

We can help you eliminate or reduce not only outstanding medical bills but also other debt that is may be keeping your budget out of balance such as:

• High vehicle payment;
• Second mortgage or home equity loan(s);
• Personal loans;
• Credit cards;
• Medical bills.
• Loan deficiency debt;
• Old utility bills, etc.

The first step in taking control of your circumstances may be calling us.  We are here to help.  Call us today at 866-261-8282 or click for a consultation request.