Fewer US Bankruptcies after the Affordable Care Act? Probably Not.

Speculation abounds that the Affordable Care Act – commonly referred to as Obamacare – will have a significant impact on the number of bankruptcies in the United States. Many experts think that as a result of healthcare being more affordable and accessible, fewer people will declare bankruptcy as a result of medical bills. However, the issue isn’t as clear cut in this regard as it may seem, and there’s compelling evidence to suggest that the ACA will have little to no impact whatsoever on the number of bankruptcy filings.

The Affordable Care Act is speculated to reduce the number of bankruptcies because it will significantly lower the total medical debt of many people. The Act is theorized to accomplish this feat via the following provisions:

*Medicaid is to be expanded at the state level, offering more people care at higher income levels

*People at certain income levels will have their health insurance costs subsidized by the federal government

*The same rates will be available to people regardless of age and location. The same coverage will also be available

*More people will be able to get approved for coverage despite pre-existing conditions

All of these benefits will reduce the rate of bankruptcy filings because they will reduce the amount of medical debt that many Americans are saddled with. In thousands of cases filers often quote medical bills as being a primary reason for declaring bankruptcy. In fact, a 2007 research study published in the American Journal of Medicine stated:

“Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills.” (1)

So at first glance it’s easy to see why some people might rush to the easy conclusion that the Affordable Care Act will alleviate a large number of bankruptcies considering that the number one cause of filings is related to overwhelming medical bills. However, this doesn’t appear to be the case, and the very same study offers up its own evidence to the contrary.

In direct continuation from the above referenced passage:

“Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance.”

In reality, the study tells us that even though medical bills were cited as the primary cause of bankruptcy, 75% of those who filed already had medical insurance. Therefore, it’s not exactly prudent to argue that the ACA will reduce the US bankruptcy burden. In fact, the issue seems to go much deeper than just medical bills. And considering that people who could not afford healthcare before won’t be in much of an improved position to afford it now, it’s difficult to imagine exactly how the ACA is going to affect bankruptcy filings in the years to come.

However, the effects of the Act won’t be seen for some time, and before they can be reasonably measured it’s possible that the Act will be repealed or drastically revised. In the meantime, bankruptcy remains a powerful consumer protection regardless of the types of debts involved.

To learn more about your personal financial options and to find out if bankruptcy or reorganization is right for you, call the number at the top of your screen now for an immediate bankruptcy consultation, or use our simple contact form and we’ll get back to you straight away.



(1) David U. Himmelstein, MD, Deborah Thorne, PhD, Elizabeth Warren, JD, Steffie Woolhandler, MD, MPH, Department of Medicine, Cambridge Hospital/Harvard Medical School, Cambridge, Mass;Department of Sociology, Ohio University, Athens; and Harvard Law School, Cambridge, Mass. Medical Bankruptcy in the United States, 2007: Results of a National Study

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