Can The Affordable Care Act Prevent Medical Debt-Related Bankruptcies?

There is still debate about whether the Affordable Care Act will reduce the number of bankruptcies resulting from excessive medical debt.

The passage of the landmark Patient Protection and Affordable Care Act (commonly known as the ACA or colloquially as "Obamacare") caused jubilation in some and anger in others. Some have celebrated the law as a way for all Americans to finally get affordable health insurance without annual payment caps, denials for pre-existing conditions and the loss of coverage for children when they turn 19. Opponents of the legislation view it much differently, as being cost-prohibitive for small businesses, unfair in a free-market society and even a hallmark of Socialism.

Regardless of how you personally feel about the ACA, there will likely be pros and cons for years to come. After all, you can't please all of the people all of the time, right? Aside from being split on whether the new system will ultimately be successful, pundits and experts are also divided on another key issue where the ACA could have an impact: the number of bankruptcies caused by medical bills.

The past

In recent years, the majority of people filing for Chapter 7 or Chapter 13 personal bankruptcy have reported that medical debt is a contributing factor in their decision to file. An estimated 75 percent of those same people - for whom medical expenses tipped the scales and led them to seek debt relief through bankruptcy - have year-round health insurance.

Clearly, simply being insured has not been adequate once the high cost of treatment is tallied. For example, treatment for something as basic as a broken bone can result in thousands of dollars in bills. Treatment for even this "simple" ailment involves a wide array of expenses, many of which aren't adequately covered by a number of insurance plans, including:

  • Emergency room fees (particularly if the facility is outside the patient's provider "network")
  • Imaging costs for X-rays or other diagnostic tests
  • Expenses for physician/nurse salaries
  • Medical equipment charges (such as crutches, a removable "boot" or walking cast, a sling/brace, etc.)
  • Prescription drug costs
  • Specialist fees for a radiologist or orthopedist

The present

According to some proponents, the ACA will stem the tide of medical bankruptcies by providing access to lower-cost comprehensive health insurance. They feel that having health insurance will lead to overall lower out-of-pocket medical expenses across the board.

Opponents of this legislation have argued that, based on historical precedent (and the hundreds of thousands of bankruptcies that have resulted from excess medical expenses), this simply won't be the case. Even though many Americans will qualify for subsidies to offset the cost of premiums under the ACA, it does nothing to lower the other out-of-pocket expenses like deductibles (which typically run anywhere from $500 to a few thousand dollars), prescription medications, out-of-network treatment fees, uncovered services like chiropractic care or physical therapy and more, all of which could still lead to a necessary Chapter 13 or Chapter 7 bankruptcy.

The future?

Only time will tell what the true impact of the ACA will be on both the physical -

and financial - health of all Americans. Regardless of what the future holds, though, if you are currently dealing with insurmountable medical debt, speak with a bankruptcy attorney in your area to learn more about how bankruptcy could help give you a financial fresh start.

Keywords: bankruptcy, Chapter 7, Chapter 13, medical debt