Medical Debt Bankruptcy Statistics
The Shocking Numbers

When you examine medical debt bankruptcy statistics, the numbers are staggering. Bankruptcy rates in America are pretty shocking and have seen a dramatic rise in the last few decades. In fact, Congress was forced recently to address this issue by enacting legislation which makes it more difficult for people to qualify for bankruptcy.

When you're looking at medical debt related bankruptcy filings, it's important to note that a recent Harvard University study showed that medical bills are one of the largest causes of bankruptcy. In fact, they represent 62% of all personal bankruptcies.

Some people are shocked to find out that the study also revealed that 78% of those who filed for bankruptcy did have some sort of health insurance. This clearly busts the myth that medical bills and big medical debt burdens are only a problem of uninsured people.

Medical Debt Can Pile Up Fast

Anyone who's ever experienced a rare or serious disease, or major injury knows that the medical bills can end up running into the hundreds of thousands of dollars. That kind of debt can quickly wipe out a families' entire savings, college education funds, home equity, and retirement accounts. After all your sources of money are exhausted many people are left almost destitute. This forces many to file for bankruptcy just to get out from under their medical debt so they have at least a chance to get back on steady ground again.

What About Health Insurance?

Even though most people have medical insurance, some of the policies may be woefully inadequate when it comes to a catastrophic medical event. Other kinds of health insurance plans offer only worst-case catastrophic coverage, but don't really give the insured and financial help or security for less serious illnesses. Either can lead to accumulating an out of control medical debt.

Some of the experts also commented that unless you're extremely wealthy, most people are one serious illness away from being bankrupt. It is a scary place to be for hundreds of millions of people who are paying their monthly health insurance premium thinking the insurance will protect them in times of serious illness.

This should be a wake-up call for most to do a thorough review of all aspects of their health insurance coverage to make sure they are on firm footing should a serious medical issue rear up.

What Did The Study Show?

The Harvard University study distributed questionnaires to 1,771 bankruptcy filers in the year 2001 in Tennessee, Texas, Illinois, Pennsylvania and California. During that same year, over a million personal bankruptcies occurred in the United States. To dig deeper into the bankruptcy causes over 900 of the study participants had a more detailed interview regarding their medical and financial circumstances.

The authors of the study said this was the first in-depth research of medical causes of personal bankruptcy. Medical bills and illness were shown to be the cause of nearly half of the personal bankruptcies involved in the study. The figure went up to 54.5% when they added three other factors that were considered to be triggers for medical related bankruptcies: deaths, births and pathological gambling addiction.

The study also showed that these medical bankruptcies affect about 2 million Americans every year. This counts the debtors as well as their dependents which includes 700,000 children.

Most Had Health Insurance

More than three quarters of the study participants had health insurance coverage at the beginning of their illness. However, 38% lost their coverage, at least temporarily, by the time they had filed for bankruptcy. Illness also led to the loss of a job and insurance in many cases.

Many of the participants in the study pointed to out-of-pocket medical expenses as one source of financial stress. This would include things like deductibles, uncovered health services and co-payments. Bankruptcy filers with insurance had an average of $13,460 of fees as compared with $10,893 for those without medical insurance coverage.

When you look at medical debt bankruptcy statistics, the numbers are often shocking to many. Some experts believe that there is a strong need to think about health care reform while others say that it really doesn't make a difference in the overall bankruptcy statistics.

An interesting thing to note when reviewing medical debt bankruptcy statistics is that the middle-class seems to be hit the hardest when it comes to medical related bankruptcies. Around 56% of those who filed for medical bankruptcy owned a home and had attended college.