Medical Bills Make Up Half of Bankruptcies

AP/MSNBC ^ | 02/02/2005 | AP

[GraceCoolidge]

Illness and medical bills were cited as the cause, at least in part, for 46.2 percent of the personal bankruptcies in the study. Himmelstein said the figure rose to 54.5 percent when three other factors were counted as medical-related triggers for bankruptcies: births, deaths and pathological gambling addiction.

I wondered about how exactly the study was done. The language of "at least in part," for example. If someone had $80K in credit card bills, but also had $5K in medical bills, were they included in the count? After all, in bankruptcy, I believe generally you discharge all debts, no matter the amount. What if they were discharging medical bills, but it wasn't the medical bills that drove them into bankruptcy? I also wonder what is included as a "medical bill"? For example, some elective medical procedures (cosmetic surgery, fertility treatment) can be pretty expensive, I'm sure. What about drug abuse? Let's face it, a lot of people addicted to drugs probably aren't too reliable on the job or responsible with money. The article didn't give a real thorough breakdown on how these figures were determined.....

[drt1]

The study was sketchy about the details.

As you suggest, bankruptcy is complicated from an accounting sense and the actual 'Trigger' that causes it may be a combination of adverse events. A family skating too close to the financial edge will likely be pushed over it if a sudden medical problem arises that acts as the triggering event even though the financial footing giving rise to it existed in decisions made long before the actual event. The study indicates that the Medical event was THE primary problem but a closer examination would likely show a pattern of inadequate recognition of this possibility and, hence, inadequate savings for that possibility.

The Article says we are 'Just a medical problem away from bankruptcy' and, while this is probably true, we are close to all sorts of unpleasant things every time we get out of bed in the morning. In the absence of a good plan to deal with these unknowns we are that much closer to not being able to deal with them and financially survive.