June 2009 Archives

June 8, 2009

Linking Healthcare Costs to Bankruptcy -- More Spin Than Truth?

A recent Harvard law school study indicates that health care costs are "behind" roughly 60% of bankruptcy filings. My personal experience gleaned from counseling close to 1,500 bankruptcy debtors since 2005 would suggest a much lower figure, at least under the commonly accepted definition of "behind."  For example, according to my experience, in a typical bankruptcy case the credit card debt load alone comes in around $30,000 whereas the actual medical debt is usually less than $1,000. Does this mean that my clients' medical debt is "behind" their bankruptcies? I wouldn't think so, but add a relatively small portion of the credit card debt that may be pushing their bankruptcies, and the word "behind" becomes somewhat more credible. Still, not counting mortgages, car loans, student loans and tax debts, a large majority of the debt (in my cases at least) has come from purchases and personal loans for living necessities, family vacations, car and home maintenance, "toys" and, not insignificantly, from penalties and interest for late payments and overcharges.

Are my clients healthier than the norm? I don't think so, but almost all of them receive their primary health care through Medicare, Medi-Cal (a state-specific variant of the federal Medicaid program), or employment-related benefit programs. To be sure, some of them have gone without while others have been left with residual debts due to co-payments and the occasional uncovered treatment or prescription -- a relatively insignificant part of their overall debt load. There are, of course, exceptions to this -- an uncovered trip to the emergency room with a $15,000 price tag or the like has provided the bankruptcy filing trigger more than a few times.

So, if I were issuing a report based on my cases, I could honestly say that health care debts have been part of the mix, but I wouldn't want to insinuate that medical costs were the most important factor. Of course, since I only serve California debtors, their experience may be way different than that attributed to bankruptcy debtors in other states -- and the Harvard poll may be perfectly accurate outside of the Golden State.

Still, the timing of the report -- derived as it is from a poll taken some two years earlier -- is suspicious given the fact that the national health care debate is about to begin in Congress. It makes me suspect that the poll is being reported in a manner to serve an agenda -- one that is tilted towards significant health care reform. Simply put, someone is wagging the dog, but don't get me wrong. That's my agenda too. I just wish that polls and the statistics that are drawn from them were not so consistently used to manipulate public opinion in a particular direction rather than to tell "just the facts, ma'am" and let those who read them draw what conclusions they will. Jeez, I know, my naïveté runneth over.