Obamacare kept people out of bankruptcy. Trumpcare wouldn’t.
As House Republicans continue to scramble for votes to repeal and replace the Affordable Care Act, new findings from Consumer Reports show one of the little-heralded but important outcomes of the law — a lot fewer people went bankrupt because they couldn’t pay medical bills. Fifty percent fewer, in fact.
Because the ACA removed lifetime benefit limits and pre-existing coverage bans, many who otherwise might have gone bankrupt trying to pay ever-increasing and ever-piling up medical bills were able to avoid bankruptcy.
As the story reports, pinpointing the exact causes of bankruptcy is difficult, and an improved economy and change in bankruptcy laws made it less likely and harder for people to file for personal bankruptcy. But a 2014 study from Daniel Austin, a bankruptcy attorney who taught at the Northeastern University School of Law, gave some in-depth details of why people still declared bankruptcy.
Austin and his team selected a nationwide group of 100 bankruptcy filers meant to represent a cross-section of the U.S. population, studied their paperwork, then followed up with a survey asking filers, basically, “Why?”
His team’s research found that medical debt is the single largest factor in personal bankruptcy. First, Austin analyzed the paperwork of individual case files, which suggested that medical bills were a factor in 18 percent of filings. But when he directly asked the same filers, in a survey, the number was even higher, with 25 percent citing medical bills as a factor in their decision to file bankruptcy.
Austin and his team also isolated 100 bankruptcy filers from Massachusetts, whose residents have been covered by an ACA-like plan since 2006. He found that people in Massachusetts filing bankruptcy had less than half the amount of medical debt as those in other parts of the country.
“The average medical debt in Massachusetts in 2013 was relatively low at just $3,041 (6 percent of total unsecured debt) compared to $8,594 (20 percent of total unsecured debt) nationwide,” Austin writes in his 2014 study, portions of which were published in the Maine Law Review.
“Only about 9 percent of Massachusetts debtors felt their bankruptcy filing was a result of medical bills,” Austin explains. “This compares to 25 percent for debtors from [other] jurisdictions.” Austin’s research found that comprehensive medical coverage in Massachusetts had all but eliminated medical bills as a cause for bankruptcy.
In addition, an annual survey from the Centers for Disease Control and Prevention showed that the number of people who reported having trouble paying medical bills dropped from 56.5 percent in 2011 to 43.8 percent in 2016.
Here are some stories from bankruptcy lawyers in the Consumer Reports story:
“It’s absolutely remarkable,” says Jim Molleur, a Maine-based bankruptcy attorney with 20 years of experience. “We’re not getting people with big medical bills, chronically sick people who would hit those lifetime caps or be denied because of pre-existing conditions. They seemed to disappear almost overnight once ACA kicked in.” …
For more than 20 years [Susan Grossberg, a Springfield, Mass., attorney] has helped consumers push the financial reset button when debt triggered by divorce, unemployment, or a costly illness or medical episode became too much to handle. “Medical debt can get really big really quickly,” Grossberg says. “When you’re in the emergency room they’re not checking your credit score while they’re caring for you.”
With the advent of the ACA — and before that, expanded state healthcare in Massachusetts — she says fewer clients with large medical debts walked through her door.
As Republicans in Congress continue to push members to pass the American Health Care Act, or Trumpcare, a majority of people — 55 percent — surveyed by Consumer Reports in January 2017 said they worried that they wouldn’t be able to afford health insurance under the GOP-proposed system. As it currently stands, the law offers states waivers on requirements that insurers must offer coverage that covers “essential health benefits.” Even as Republicans try to sweeten the bill with billions of dollars to fund so-called “high-risk pools” in those states, many remain skeptical that insurance premiums for high-risk pool insurance would be affordable.
More than 2,000 people answered an online questionnaire from the consumer testing group about their experiences with the ACA. Here’s what Katie Weber of Seattle, who was diagnosed with medulloblastoma, a fast-growing cancerous brain tumor, reported. Her coverage first came from her teaching job at AmeriCorps, then her parents’ policy, and finally through Apple Health, Washington state’s version of Medicaid.
Weber says she now spends more time discussing treatment options and less time worrying how she’ll pay for MRIs and drugs. These are covered in full under her Apple Health policy.
“Cancer is really expensive,” she says. “My insurance saved my life.”