Is Medical Illness driving people to Bankruptcy?

A study in the American Journal of Medicine recently reported that approximately two-thirds of bankruptcies in the United States were related to medical problems.  What they found surprising in this article was the fact that the majority of those who filed for bankruptcy had health insurance.  In fact, they found that almost 80% were insured, including some 60% who had private health insurance.  Before filing for bankruptcy, these people were solid mid class citizens and then financial disaster hit.  Of these people, about two-thirds owned homes and around 66% attended college.  Unfortunately, increasing medical bills were met with loss of work hours and lower pay, or loss of job totally.

In many instances loss of employment also results in loss of health insurance and soon the families are paying medical expenses out of their pockets, which can often result in the quick disbursement of savings accounts, bonds, and other investments, leaving the family with no way out but to declare bankruptcy.

For many families, bankruptcy is a shameful thing and this leads to bouts of depression, and often more medical expenses.  Before long, that same family that worked hard for so many years to put away enough savings to get them through a rainy day, is just a few weeks away from being broke, homeless, and on the streets, leaving them with little choice but to declare bankruptcy.  Unfortunately, once medical expenses start to mount they have a tendency to spiral out of control like a fast moving locomotive, adding additional expenses in the form of late payment penalties and interest carrying charges.  For many, this is the only way they can see to get out from under their mounting medical expenses.

Realistically, most mid-class Americans have very little protection, as their health insurance policies leaving gaping holes in cover, high deductibles for illness can make you poor quickly, and many have additional co-payments.  Even those with additional disability coverage’s don’t always escape the problems that arise due to illnesses.

Before filing for bankruptcy, many families could benefit from sitting down with someone from their health insurance company and asking what type of coverage is available for people in their situation.  Most good health insurance companies will take a little time to assist these families and help point them to someone who can assist them to get additional cover.  One of the biggest problems these families face is not knowing where to turn to find the help they require, before they reach the point of “no return”.