Medical Debt Still Prompting Personal Bankruptcy Filings
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Medical Debt Still Prompting Personal Bankruptcy Filings

February 28, 2012


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A report in the Bellingham Herald notes that while Washington, like most of the country, saw an overall decrease in bankruptcy cases in 2011, the percentage of personal bankruptcy filings that were triggered by unmanageable medical debt remained troublingly high.

Some analysts have suggested that 2011 bankruptcy filings decreased in part because of tightened credit over the past several years: because Americans have had fewer opportunities to take on debt, they have had less of a need to eliminate that debt with help from the bankruptcy court.

But a limit on credit would be unlikely to affect those who seek personal bankruptcy protection to deal with unmanageable bills connected to healthcare costs. And as unemployment remains high throughout the country, fewer and fewer Americans have the financial support of medical insurance.

A Washington bankruptcy attorney offered one example to illustrate the severity of the problem of medical debt: a procedure that cost her insured son only a $20 co-pay cost an uninsured client of hers $28,000. Given the state of the economy, very few Americans are able to afford such bills, especially if they’re uninsured because of job loss or under-employment.

Medical debts, which are unsecured, are generally considered dischargeable in Chapter 7 bankruptcy, and are non-priority debts in Chapter 13 bankruptcy cases.

Fighting Medical Bills in Colorado & New York

Elsewhere in the country, the fight over medical bills (and the need for personal bankruptcy protection those bills often trigger) is rearing its head as well. Colorado’s state legislature heard arguments from patients, consumer advocates, and hospitals regarding price regulations for medical care in the state.

While all parties involved apparently support improved transparency in pricing for hospital care, officials from hospitals reportedly noted that government intervention that went as far as price fixing would make their business models untenable.

In a comment that reflected just how high tensions were running regarding the problems of medical debts in Colorado, one hospital official reportedly accused some uninsured patients of “ignoring” their bills entirely, while spending money on luxuries such as cable TV and costly cars.

Meanwhile, New York recently got attention for improper handling of its medical charity fund, which is designed to cover the hospital costs of those who are unable to pay their bills. A New York Times report last week indicated that many of the state’s hospitals had failed to inform patients that financial aid was available to them, and even improperly collected money from the charity fund for treating these patients.

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