Bankruptcies continue despite more people being insured
The Affordable Care Act, now widely known as “Obamacare,” is a law that attempts to provide universal health care coverage for every American. The law expands Medicaid at the state level so that more low-income people are covered, allows people with pre-existing conditions the right to obtain insurance, eliminates annual and lifetime limits on coverage, and eliminates caps on out-of-pocket spending.
These provisions allow many people the opportunity to obtain insurance who would otherwise remain uninsured. Unfortunately, that is not the end of the story. For many, the underlying reasons for medical bankruptcy will remain.
Many insured people still file bankruptcy
In 2013, nearly 2 million people filed for bankruptcy in part because of medical debt, according to a study from NerdWallet Health, a price comparison website. While the uninsured do, of course, suffer financially when needing medical treatment, even those with health insurance may struggle. NerdWallet estimates that in 2013 nearly 10 million adults with health insurance still accrued medical bills that they could not pay off by the end of the year.
The news is not all bleak. According to Fitch Ratings, personal bankruptcies are expected to decline for the fourth consecutive year in 2014. And the number of bankruptcies involving unpaid medical bills did slightly lower in 2013. A study of Massachusetts’ health care law, sometimes known as “Romneycare,” revealed that personal bankruptcies dropped 20 percent and credit scores improved after its implementation in Massachusetts in 2006. The Affordable Care Act is largely based on Massachusetts’ law.
Medical costs rising
Still, according to Fitch’s analysis, three out of every five bankruptcies primarily involve unpaid healthcare expenses.
Certain medical illnesses, such as cancer, increase the risk of bankruptcy. One study, conducted by the Fred Hutchinson Cancer Center in Seattle, the University of Utah School of Medicine and a U.S. Bankruptcy Court judge, found that cancer patients are 2.65 times more likely to file for bankruptcy than patients with other illnesses. Unfortunately, the cost of treating cancer is only likely to increase, reports the Lancet Oncology Commission, which estimated cancer treatment costs will increase by 50 percent by 2020. According to that estimate, Americans will spend $158 billion per year on cancer treatment by the end of the decade.
Obamacare’s effect on medical bankruptcies
The study that looked at Massachusetts law on healthcare also contained some caveats. Obamacare will likely benefit lower-income people who now qualify for Medicaid more than middle-income Americans. Public Health Professor Stephanie Woolhandler, of Hunter College in New York, recently told Marketwatch that for people who are above the poverty line, “the effect of Obamacare on medical bankruptcies is likely to be minimal. Even insured people may end up with ruinous out-of-pocket costs if they experience a prolonged or expensive illness.”
Twenty-four states have opted not to expand Medicaid despite the new federal law, which will also determine the ACA’s impact on bankruptcy. In New Jersey, Governor Chris Christie did expand Medicare, explaining on ABC’s “This Week” that New Jersey already had a large Medicaid program, meaning its Medicaid expansion was relatively small compared to other states.
Ultimately, whether bankruptcy is the best option depends on individual circumstances, including the laws of the state in which one lives.
Bankruptcy is still the best option for some patients
Medical treatment is expensive even with insurance coverage. A severe illness may also lead to job loss or decreased income. People concerned about medical debt should contact a skilled bankruptcy attorney to discuss their individual circumstances and best financial options moving forward.