Medical Bills a Key Cause of Consumer Bankruptcy
In 2003, medical costs made up more than 15% of the U.S. Gross Domestic Product (GDP). If this continues as expected, by 2040 it will be around 33%. Medical expenses are a problem for so many Americans as we find our incomes decreasing and our expenses increasing.
A comprative study conducted as early as 1987 found that more than 9 million families were spending more than 20% of their income on medical expenses. These numbers continue to grow in this economy, and middle-class Americans are no longer feeling as sure as they once did that they would be able to afford necessary medical care should a serious illness or other medical problem arise. In essence, we no longer have the satefy net we once did.
Most Americans are afforded medical insurance through their employer. If an illness or other serious medical condition makes it impossible for you to work, such insurance could disappear. COBRA laws allow an employee to extend their coverage by assuming the payments, but that solution fails to help many. The payments are often extremely high, and without a steady income, not affordable. Also, COBRA is only for a short period of time; an illness or injury that is long-term will most likely outlast the benefits.
Even if you do have insurance that is active, you may often find co-pays and out of pocket expenses add up and start to become overwhelming. Even if your policy includes "catastrophic" provisions, the cut offs are generally so high that policyholders are bankrupted by the medical expenses that fall within such provisions.
In 2000, Melissa B. Jacoby, Teresa A. Sullivan and Elizabeth Warren reported that an estimated 326,441 personal bankruptcy petitions in 1999 were triggered by illness or injury involving the filer or a member of his household. In addition to this finding, more than a quarter of a million additional filers had exorbitant medical bills.
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The second-most common factor in bankruptcy is medical problems, according to 2003 data. The data also indicated that medical problems are possibly the root of as many as half of all consumer bankruptcy filings. Lost incomes, mounting medical bills and a lack of insurance coverage has led to a threat in financial security for many American families. These are not the laregly ficitonal "deadbeats" described by the credit industry but rather hard-working people who are struggling to make payments, taking second and third mortgages on their homes and other drastic measures necessary to cover their mounting medical and daily living expenses.
Until America provides a solution to the paralyzing level of medical debt the average American now faces, no bankruptcy reform can or will extinguish the crises that drive these victims into bankruptcy.