How is Bankruptcy Linked to Medical Debt?
The assertion that medical debt is the top cause of Bankruptcy is mainly based on a 2009 study by Harvard researchers, which found that medical bills accounted for the causes of 64% of bankruptcy cases. Later research and socioeconomic evaluations have challenged this claim.
Whether medical expenses in the United States are excessive is a question that remains politically contentious and economically ambiguous.
An American study undertaken recently by the American Bankruptcy Institute reveals that while medical debt is a contributor, it is seldom – if ever – the sole contributor to Bankruptcy. More often than not, it adds to a more extensive set of problems, including unemployment, enormous credit card bills, mortgage payment issues, or other deteriorating financial conditions. More often than not, many factors sap away one’s resources, with medical spending as the “last nail in the coffin.”
A 2019 study published in the New England Journal of Medicine revealed that no more than 4% of bankruptcies can be directly traced back to medical expenditures. This study was not based on surveys filled out by subjects but on credit reports and financial information, hinting that many previous studies could have given more credit to medical debt for Bankruptcy than is due.
Other Factors That Cause Bankruptcy
Even though medical debt adds to financial difficulties, other contributors often have an equal or even more significant impact on Bankruptcy. One of the leading causes is losing one’s job, which raises out-of-pocket medical costs since it causes financial instability and the loss of employer-sponsored health insurance. Another critical issue is high credit card debt. Since many Americans depend on credit to pay for everyday expenses, they usually accrue high-interest debt that soon becomes unmanageable.
Family problems and divorce also play a role since they strain finances due to asset splits, alimony, child support, and legal bills. Furthermore, foreclosures and housing prices can force people into Bankruptcy, particularly when mortgage payments become unaffordable during recessions. These financial obligations, either separately or in combination, typically result in bankruptcy petitions, proving that there are often several interrelated variables rather than just one factor behind a financial crisis.
