Filing bankruptcy for medical bills accounts for nearly two out of three bankruptcies, even people with health insurance face financial disaster if they experience a serious illness, a new study shows.

The study data likely understates the full scope of the bankruptcy medical debt problem because the data were collected before the current economic crisis. In 2007, filing bankruptcy for medical bills contributed to 62.1 percent of all bankruptcies. Between 2001 and 2007, the proportion of all bankruptcies attributable to bankruptcy medical debt rose by about 50 percent.

“The U.S. health care financing system is broken, and not only for the poor and uninsured,” the study authors wrote. “Middle-class families frequently collapse under the strain of a health care system that treats physical wounds, but often inflicts fiscal ones.”

The data on bankruptcy medical bills, compiled by researchers at Harvard Law School, Harvard Medical School and Ohio University, is based on a survey of 2,314 randomly selected bankruptcy Attorneys filers.

Among families who were bankrupted by illness, those with private insurance reported average medical bills of $17,749 compared to those who were uninsured, who faced an average of $26,971 in medical costs. Those who had health insurance but lost it in the course of their illness reported average medical bills of $22,568.

Hospital costs accounted for about half the expenses (48 percent), followed by prescription drugs (18.6 percent), doctor’s bills (15.1 percent) and insurance premiums (4.1 percent). Medical equipment and nursing home care rounded out the list.
The health problems that left patients with the highest out-of-pocket expenses were ranked as follows:

Neurologic (i.e., multiple sclerosis): $34,167
Diabetes: $26,971
Injuries: 25,096
Stroke: $23,380
Mental illnesses: $23,178
Heart disease: $21,955

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In the United States, there are no medical bankruptcy laws or formal medical bankruptcy rules. However, thousands of Americans are filing bankruptcy attorney for medical bills. Recent studies by Harvard and Ohio State show that just over 60% of personal bankruptcies filed even before the current “financial crisis” were due to medical bills. This finding was widely suspected by those familiar with the country’s bankruptcy system, but never before had it been confirmed.

With there being no medical bankruptcy laws or medical bankruptcy rules, it is important to understand what your options are. The first thing to know is all medical bills are eligible for either a debt discharge or debt restructuring under both Chapter 7 bankruptcy and Chapter 13 bankruptcy laws. Filing bankruptcy for medical bills is a workable and proven way of dealing with excessive medical bills. To many this can be disturbing, but the legal consequences of not being able to pay them can be avoided through bankruptcy. Most people understand the purpose of bankruptcy is to discharge debts and in today’s economy there are no higher and more unattainable charges than the countries out of control medical charges. Until a more permanent solution can be found through Federal legislation, one of the few alternatives of dealing with totally unworkable charges is filing bankruptcy for medical bills. In many ways this is a sad commentary on the state of the country. The US is the only advanced industrial country that puts its population in this difficult position of having no alternative when dealing with medical costs.

Anyone facing serious medical bills needs to be fully aware that filing bankruptcy for medical bills is both a legal and ethical option that is open to them. While the US may not have medical bankruptcy laws, it does have a reasonably functioning bankruptcy system and it should be used by those who need relief by their filing bankruptcy for medical bills.More...