Medical Bankruptcy ? The Myth - Health Guide

by Kenneth N on February 2, 2012

President Obama has pointed to the number of people that file bankruptcy due to medical bills, stating that these people were either under insured or uninsured. This was one of the reasons he gave for the need for a standardized national health care system similar to Canada?s. He used data that he probably considered accurate, so he can?t actually be faulted, but new data shows that the original 2005 medical bankruptcy study was in error. Critiques published by David Dranove and Michael Millenson and a working paper by Aparna Mathur, with the American Enterprise Institute, have refuted this study and basically agree that the idea that large numbers of Americans are declaring bankruptcy due to medical expenses is a myth. The truth is that only about 17% of filers have medical bills as a contributing factor and if asked, somewhere around 12 to 13% would state that medical bills were a ?reason? for filing bankruptcy.

What this says is that the study that Mr. Obama used was flawed and that a standardized national health care system will have little to no impact on the number of bankruptcies being filed. The majority of bankruptcies will be filed for poor financial practices in the way of credit card debt and living beyond their means. Of course, in today?s economy, that has also changed. It may have been true in 2005, but is not true now. People become unemployed and can?t get another job or must accept a job paying much less and?here comes another bankruptcy. This year alone we are approaching one million homes being repossessed. Many of these same people will file bankruptcy. If they can?t keep a roof over their head then they certainly cannot pay off miscellaneous debt.

In fact, Canada, being held up as an example for Mr. Obama?s healthcare plan, saw personal bankruptcy rates higher than in the U.S. for both 2006 and 2007. This covers the time after the bankruptcy reform laws but prior to the onset of the 2008 economic recession. This is particularly important, since prior to the 2005 bankruptcy reform the differences between Canada and the U.S. were so different as to make comparisons between the two a moot point. Now, however, Canada?s and the U.S.?s bankruptcy laws are similar enough to allow reasonable cross-border comparisons. It is also now true that after 2008 the comparisons cannot be valid because bankruptcy statistics are being skewed by other policies that are totally unrelated to healthcare.

One other point that is worth looking at, is that a large number of the 17% of bankruptcies filed for medical expenses were the result of experimental or cutting-edge treatments that were not covered by private insurance and that would not be covered by government insurance and are also not covered under Canada?s healthcare program. In fact, research shows that Canada?s numbers are very close to the U.S. in that about 15% of bankruptcies (filed by seniors 55 years and older) are for medical debt.

So, you can disregard the bogus information about medical bankruptcies when it comes to your feelings about a nationalized healthcare system. Of course, the first steps are already in place, but maybe we should also look to our northern neighbor, Canada, and learn from her experiences. Her residents don?t necessarily feel that the national healthcare system is a good thing. And there is only one way to shove back at the government that has force-fed us this nationalized healthcare plan-VOTE!

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