In the United States, medical debt is the most common reason for filing for bankruptcy. There are a variety of factors that can lead to medical debt, but the most common causes are inadequate insurance coverage or unforeseen medical conditions and emergencies. Many people are hoping that this trend will stop with the Affordable Care Act, but it is still a very real and pressing issue for millions of Americans, many of whom are overwhelmed by debt and don’t know where to turn.
Reasons for Medical Debt According to a recent study, 62% of households with major debt cited medical debt as a major issue. These debts arise from unanticipated trips to the emergency room, which can be prohibitively expensive even for individuals with health insurance. Additionally, they come in the form of dental work, which is a separate type of insurance that is typically not covered by basic health plans. Dental work is the kind of work that needs to be done right away and can easily cost thousands of dollars.
The out-of-pocket costs associated with prescription medications are yet another significant contributor to outstanding medical debt that prompts individuals to consider declaring bankruptcy. Prescription drugs are notoriously difficult to get covered by standard health insurance plans and can cost a fortune.
Obesity and the effects of aging are typically associated with health conditions that result in skyrocketing debt, and those with these conditions and the debts they entail are increasingly filing for bankruptcy.
The study’s other troubling statistic is that households already burdened with medical debt are less likely to seek treatment when it is required in order to avoid incurring additional debt and declaring bankruptcy.
In addition, despite the fact that declaring bankruptcy can wipe out a significant amount of unsecured debt, many people are reluctant to seek new treatment because they may not have adequate insurance and may not be able to pay off existing medical bills for several years.
The study projects that medical debt will cause 1.7 million people to file for bankruptcy this year. The larger issue is that poor health and accidents are a fact of life, and it feels like something is inherently wrong when a system fails to meaningfully account for these realities. Fortunately, the protections provided by filing for bankruptcy are strong and able to discharge most of the debts incurred by those suffering from poor health or accidents.