Medical Bills And Bankruptcy especially among Older Americans

A widespread belief is that medical bills cause a large number of bankruptcies, especially among older Americans. That belief is based on some studies that have been widely criticized. Here’s a review of a new study that comes to a very different conclusion. The key distinction between the studies is how many bankruptcies had medical bills in the bankrupt’s estate versus whether the medical bills caused the bankruptcy.

The answer they came up with will surprise even critics of Warren et al.: The fraction of bankruptcies caused by medical events is just 4 percent. And even among those bankruptcies, it seems that medical bills may be less of a problem than the other things associated with an illness, such as lost labor income.

In other words: Medical bankruptcy probably wasn’t nearly as big a problem as people thought when we were passing our giant new health-care program. And to the extent that it was a problem, Obamacare probably didn’t do much to fix it.

That jibes with what we’ve seen in the bankruptcy data since Obamacare passed. If medical bills really were driving so many people into bankruptcy, then we would have expected filings to plummet after 2013, when millions of people gained health insurance coverage. Instead we see a smooth decline from the recession-era peak.