Medical bills are the leading cause of bankruptcy in the U.S., causing more than two-thirds of all bankruptcies. The potential for medical bankruptcy is a growing cause of stress and worry for many families. U.S. Census Bureau data shows that almost one-fifth of American households carried medical debt, “defined as medical costs people were unable to pay up front or when they received care. Among households with medical debt, the median amount owed was $2,000.”
What Are the Sources of Medical Debt?
Medical debt in the U.S. has two main causes:
- Unexpected medical bills. Surprise medical bills — unexpected charges from an out-of-network provider, facility, or air ambulance provider — can exacerbate medical debt. Last summer, the US Department of Health and Human Services announced a new rule to restrict these excessive out-of-pocket bills. HHS estimates that one in six ER visits and inpatient hospital stays involve care from at least one out-of-network provider. (You may can get a surprise bill for non-emergency services, too.) Under the rule, providers must bill emergency services as in-network, regardless of where they occur. And it also bans out-of-network charges for ancillary care (such as an anesthesiologist) provided at in-network facilities.
- Lack of supplemental healthcare. In general, annual rates of new medical debt are declining in the U.S. States that chose not to expand Medicaid under the Affordable Care Act (ACA) are a key exception. According to Census data, 22.1% of households in the South and 20.1% in the Midwest reported medical debt. Compare that with 15.2% of households in the West and 15.6% in the Northeast. The Council of Economic Advisors recently cited multiple research studies that confirm Medicaid expansion reduces medical debt, “which, in turn, substantially reduced financial distress as measured by a reduction in the number of severe (credit/loan) delinquencies and improvement in credit scores.”
Can You Declare Medical Bankruptcy?
If you find yourself facing bankruptcy because of medical debt, hiring a lawyer can help you protect your assets and credit.
Since medical debt is considered non-priority unsecured debt, you can — under certain circumstances — get some or all the debt forgiven under chapter 7. This medical bankruptcy option is only available if your income is below the median for your state. The medical bankruptcy process usually takes 4 to 6 months and can be complex, so it’s best to hire an experienced attorney to help you. It’s also important to remember that a bankruptcy remains on your credit report for 10 years and can make it difficult to get approved for loans.
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Peter Andersen is the Seattle-based lead writer and editor of The Word Factory, a content marketing agency serving healthcare, technology and media companies. He's a general assignment brand journalist, a technical documentation specialist, and an organizational communications trainer. Pete also is the author of an upcoming collection of essays, Damn Good Things. LinkedIn: linkedin.com/in/peter-andersen-74780524/