Health Care and Medical Bankruptcy

Medical bills can pile up quickly if you have a catastrophic health care event, such as a heart attack, stroke, major accident, or need an organ transplant. Even the costs for common procedures can add up fast, especially if you’re uninsured or underinsured. These days, due to the changes in the health insurance game, many people have switched to a high deductible plan that requires first dollar payment until you reach your deductible. If that amount is high, like $5,000 or $10,000 or higher, you may struggle to make those payments to the medical facility.

What if you’re diagnosed with a form of cancer or another debilitating disease? What if you’re in a car accident or get hurt in some type of major injury requiring a trip to the hospital emergency room. Those dollars escalate in a hurry, and you are left to deal with the financial burden of payment to the hospital and attending medical staff, and some of those may be out of network for your insurance plan if you have one in place.

Regardless of percentages and political leanings, some people are going to have to use up all their savings to pay off their medical bills. Many will be unable to pay for basic necessities like rent, food and utilities. Some of them have children. A lot of them even have medical insurance. To save money, some will cut corners with their treatments, not taking their prescription drugs as indicated, skipping doses, taking less medicine than prescribed or delaying a refill.

Here are a few interesting stats about medical bankrutpcy:
--“Medical Bills Are the Biggest Cause of U.S. Bankruptcies” – 2013 NerdWallet Health study.
-- “56M Americans under age 65 will have trouble paying medical bills [in 2013]” – 2013 NerdWallet Health study.
-- “The percentage of people under age 65 in families having problems paying medical bills decreased from 21.7 percent in the first six months of 2011 to 20.3 percent in the first six months of 2012” – 2013 Center for Disease Control study.

Although passage of the Affordable Care Act has shown that there is a slow decline in personal bankruptcies due to medical debt, many families are still struggling to afford to pay their bills from medical care. It’s understandable that so many Americans are being compelled to think about bankruptcy and medical bills as a potential answer to severe medical debt. But unfortunately, the downsides to bankruptcy are so severe and end up affecting individuals for years beyond making the decision to file.

According to USA Today, But the Affordable Care Act hasn't eliminated the problem. In 2013, medical debt was the largest cause of personal bankruptcy — 1.7 million people lived in households experiencing bankruptcy because of health costs. Many states haven't expanded Medicaid and even those with insurance can rack up big bills, a problem exacerbated by the growing number of plans with high deductibles.

The health law brought regulations that limited for the first time the cost-sharing in plans. An individual plan sold on an exchange can't include out-of-pocket costs greater than $6,600. In practice, the average deductible, or portion a consumer must pay before insurance kicks in, varies based on how expensive a plan is. But the regulation still only applies to providers and specialists specified by the plan as "in-network." The narrower the network, the more vulnerable consumers are to incurring medical debt by visiting unapproved doctors or hospitals.

Some numbers suggest a decline in people facing medical debt. About 64 million Americans struggled to pay medical bills in 2014, according to a survey by the Commonwealth Fund — that's a drop of about 10 million since 2012. Experts have celebrated the decline but cautioned that high-deductible insurance plans could put a damper on those gains.  Of the 64 million the authors said were struggling to pay for care, 38 million, or 59%, were insured the whole year.

There's been some improvement: The same report found 29% of the insured had medical debt or difficulty with medical bills, a drop from 33% in 2012 — while the pool of insured adults grows larger. But analysts caution that absent a significant change in industry or policy, even this group will likely continue to face the prospect of medical debt. More details can be found at this website:  http://www.usatoday.com/story/news/2015/02/01/consumers-still-struggling-with-medical-debt/22587749/#.

The New York Times reported earlier this year that among those who reported having problems paying their bills despite having insurance, 63 percent said they used up all or most of their savings; 42 percent took on an extra job or more work hours; 14 percent moved or took in roommates; and 11 percent turned to charity. In partnership with the Kaiser Family Foundation, the study found that roughly 20 percent of people under age 65 with health insurance reported having problems paying their medical bills over the last year. By comparison, 53 percent of people without insurance said the same.

Unlike other polls, which have focused on the ways that insurance affects health care, the new Times-Kaiser survey explored the effects of medical bills on people’s daily lives well beyond the medical system. We found that medical bills don’t just keep people from filling prescriptions and scheduling visits to the doctor. They can also prompt deep financial and personal sacrifices, affecting their housing, employment, credit and daily lives.

 People without health insurance, of course, are more vulnerable to medical bills than those with health coverage. The study found that the people most likely to report bill problems were uninsured, poor or disabled. However, the majority of people struggling with bills are insured. Of the people in the survey reporting difficulty with their medical bills, 34 percent lacked health insurance, 39 percent had insurance through work, 14 percent were covered through public programs and 7 percent had purchased their own health plans. More info is located at this website: http://www.nytimes.com/2016/01/06/upshot/lost-jobs-houses-savings-even-insured-often-face-crushing-medical-debt.html?_r=0.

According to the American Journal of Medicine, out-of-pocket medical costs averaged $17,943 for all medically bankrupt families: $26,971 for uninsured patients, $17,749 for those with private insurance at the outset, $14,633 for those with Medicaid, $12,021 for those with Medicare, and $6545 for those with Veterans Affairs/military coverage. For patients who initially had private coverage but lost it, the family’s out-of-pocket expenses averaged $22,568.

Among common diagnoses, non-stroke neurologic illnesses such as multiple sclerosis were associated with the highest out-of-pocket expenditures (mean $34,167), followed by diabetes ($26,971), injuries ($25,096), stroke ($23,380), mental illnesses ($23,178), and heart disease ($21,955).

Hospital bills were the largest single out-of-pocket expense for 48.0% of patients, prescription drugs for 18.6%, doctors’ bills for 15.1%, and premiums for 4.1%. The remainder cited expenses such as medical equipment and nursing homes. While hospital costs loomed largest for all diagnostic groups, for about one third of patients with pulmonary, cardiac, or psychiatric illnesses, prescription drugs were the largest expense.

The AJM interviews indicated the severity of job problems caused by illness. In 37.9% of patients’ families, someone had lost or quit a job because of the medical event; 24.4% had been fired, and 37.1% subsequently regained employment. In 19.9% of families suffering a job loss, the job loser was a caregiver. More details are found here: http://amjmed.org/under-aca-medical-bankruptcy-continues/ 

Due to higher medical expenses and fluctuations in insurance coverage, many families are forced to max out credit cards and chip away at their savings or retirement accounts, and once these funds have been wiped out, the only option left may be bankruptcy. An illness or medical emergency shouldn’t have to become a financial nightmare or lead to so many financial sacrifices. 

With the right resources and information, there are ways you can deal with your medical bills effectively to prevent yourself from falling into medical bankruptcy, according to YouCaring.com. They offer some great tips how to deal with medical bankruptcy at their website: https://www.youcaring.com/blog/2016/how-to-avoid-medical-bankruptcy.

Bankruptcy was designed to resolve debt and get people that second chance they deserve. Ask a local bankruptcy lawyer if filing Chapter 7 or Chapter 13 bankruptcy could eliminate your debts. An attorney that is versed in bankruptcy laws would be able to provide counsel to you based on your personal situation. Be careful in your choice, and do your research before you choose a law firm that insists they can help alleviate your financial pain and suffering due to an overdose of medical bills. The quick fix may not always be the best answer for you. Everyone’s situation is different based on the amount they owe and their personal financial situation.

Until next time.