Monday was the
deadline for signing up for health insurance through the Affordable Care Act’s
insurance exchange. I was talking to my dad about the impending deadline over
the weekend. I was trying to impress him with my legal knowledge and said: “Yo
dad! Did you know that Obamacare will be the end of personal bankruptcies as we
know it?” He did not know that. Yes! Score one for Hannah. I then realized that
while I had heard about the link between healthcare reform and Bankruptcy, I
did not know if Obamacare really would bring the end to personal bankruptcy. In reality, I was simply blowing smoke by offering the bankruptcy factoid
to my dad.
So I set out to
research the topic of my puffery. Here is what I found:
Most
people file bankruptcy for one of three reasons: job loss, divorce, or medical
expenses. In 2007, medical debt accounted for over 60% of all bankruptcies. However, according to the data, three
quarters of those who filed for bankruptcy in 2007 had health insurance. Given
this data, Obamacare is unlikely to decrease the amount of filings because it
seems like people with insurance, still need bankruptcy protection to help
manage the debt created by medical bills that insurance does not cover.
From
most of what I read, its true, Obamacare will not fix the medical bankruptcy
problem entirely. While Obamacare reduces the number of people who would have
been uninsured, the
new private coverage offered to many middle-income Americans through the health
insurance exchanges will leave many of them underinsured.
That means, even if people are covered, they still may go into debt paying the
uninsured portions.
Massachusetts
is an interesting case study. Did you know that Mitt Romney brought
near-universal health insurance access to Massachusetts back in 2008? Didn’t he
advocate for repealing Obamacare in the last election? Interesting. One researcher
tallied the number of medical bankruptcies in Massachusetts in 2007 and
compared them to the number in 2009, two years after heath care reform was
enacted in the state. In 2007, 59% of personal debtors attributed their
bankruptcy filings to medical-related debt. In 2009, 52% of personal debtors
blamed their problem on medical bills. Still, a different Massachusetts study
saw a more significant drop. They say that the incidence of medical
bankruptcies has dropped by 20%.
On
the other hand, at least in theory, Obamacare could lower the number of
bankruptcy filings for certain groups of people. Particularly for those people
at or near the poverty line. With Obamacare’s expansion of Medicaid, many
people who were previously not eligible for Medicaid, will now receive comprehensive
benefits. However, the effect on the incidence of medical related bankruptcies
across the country will differ depending on whether an individual’s home state
has agreed to or opted out of Obamacare’s Medicaid expansion. In states like
Alabama, where the state government refuses to expand Medicaid, the law’s
effect on the number of bankruptcies will be significantly reduced.
So,
this doesn’t exactly sound like “the end of personal bankruptcy as we know it.”
Sorry dad L
Sources:
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