| August 30 2010
Prior to the enactment of The Affordable Care Act (sometimes known as ObamaCare) the President said that one of the greatest effects of this law will be a reduction in medical bankruptcies. There has been long running debates over how much of an extent is medical bills in causing bankruptcy filings in general. Anecdotal evidence gives ranges from 17% to 62% of bankruptcy filings are because of medical bills. The difficulty is that much of this medical debt is charged on credit cards, and bankruptcy courts may or may not have a breakdown of how much of these credit card balances are for medical bills versus other debts.Other statistics are more alarming and have more empirical evidence: 48% of collection agencies business is the collecting of medical bills, largely from persons with health insurance. Because of rising co-pays and deductibles, which the Affordable Care Act does not address and may in fact, encourage, many people after a short hospital stay may have out of pocket expenses of $1,500 or greater. Also, because of Medical Savings Accounts, more health insurance plans have larger (over $5,000) deductibles before anything is actually paid for by the insurance plan. If your Medical Savings Account does not have enough money in it to pay the deductible and co pays, then you will be paying this in after tax dollars, or worse, with your credit card or other savings accounts.
There are no statistics empirically that tell us which diseases result in the most medical debt. Anecdotally, Cancer and Arthritis seem to show up most as out of pocket expenses for experimental drugs and treatments are not covered by health insurance, or health insurance has a maximum of how much it will pay for some drugs and treatments, thus leaving you with more of the bill to pay. Borrowed money for home care services, hospital beds and equipment not paid for by health insurance can leave large medical bills on the credit card after a person passes away. And if the person passing away is married, then the surviving spouse can be and is often stuck with the bills.
The word bankruptcy it and in itself congers up thoughts of debtors prisons, loss of home and property and embarrassment. Actually, none of these things happen, as bankruptcy done under court supervision and with a competent attorney by your side, could be the best solution to a very tough situation.
Filing for bankruptcy isn’t the only solution. Negotiating settlements with credit cards for less than what is owed and other debt relief may help make an improvement in financial position without the public filing of bankruptcy. There are income tax implications to this, which you may not have under bankruptcy so you need competent tax advice as well when considering these approaches.
Also, before using your credit card to pay for medical bills, call the provider of the service and see if you can negotiate a lower payment for your bill. Many health care providers will gladly reduce what you owe if you explain the situation you have and the health care provider would rather get some revenue than the risk of not collecting anything at all. And, unlike credit card settlements and bankruptcy, this does not affect your credit scores! (of course, a big problem with this for the health care providers is that if too many people do this, they may eventually not want to do it at all.)
Under the changes in bankruptcy laws enacted in 2007, credit counseling is mandatory to determine whether an individual can and should move forward with bankruptcy filing. This time intensive method has a drawback in the fact that your debt and interest on it will continue to grow until you have filed your bankruptcy petition or settled the debt for less than owed.
Any family that has medical related bills and debts should consult with a bankruptcy attorney so that you do not overlook any rights you or your family member may have to debt relief. Other financial and personal resources need to be preserved to provide long term care and other health care services for the family and survivors. Only an attorney can give you this advice and protect your privacy in this sensitive matter.
Will the Affordable Care Act reduce the number of Medical Bankruptcies? It’s doubtful, as insurance plans will still not pay for all medical care, including dental and eye care.
