Medical-debt caused bankruptcy on the rise: Another sign that working families need health care reform

Posted by: Steve Spires

One out of every five people filing for bankruptcy in the last two years listed medical debt as a “primary cause,” according to CredAbility, a non-profit credit counseling based in Atlanta. Two years ago that number was around 12 percent.

The rising cost of health care is partly to blame for the increase in medical debt, but the recession is making the problem much worse. Because most people get health insurance through their employer, losing a job means not just losing a paycheck, but losing health insurance as well. For those who have health insurance, the cost of that insurance has been skyrocketing, with employees being forced to bear an ever increasing share of the cost of that insurance. In addition, at the same time families are paying more for their health insurance, they are getting less—less generous benefits and less financial protection from staggering medical bills. If an illness or injury strikes, this one-two punch is just too much for many working families to bear.

The result: medical debt is becoming a greater financial burden, and “medical bankruptcy” is on the rise.

Fortunately, the health care reform law passed last year by Congress should offer some relief. For low-income adults, Medicaid will be expanded, providing coverage to many for the first time. For middle-class families who don’t have employer-provided health insurance and for small businesses, state-based “Health Insurance Exchanges” will act as a marketplace where consumers can “comparison shop” for health insurance. Tax credits to help pay for premiums will make sure coverage is affordable. Finally, new consumer protections will strengthen the health insurance already provided by employers.

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