Medical bankruptcy and economy

According CNBC, medical expenses are the biggest cause of bankruptcy in the United States. An estimated 2 million people are adversely affected. A popular Facebook member said that 643,000 Americans go bankrupt every year because of medical expenses. In his 2009 State of the Union address, President Obama said that medical bankruptcy occurs every 30 seconds. One million people went bankrupt in a year.
Rising medical costs make these statistics seem credible. But why are they so different? What is the actual impact of medical bankruptcy on the economy? The most important thing is, what is your best way to avoid becoming one of these statistics?


Medical bankruptcy facts


One reason why estimates are so different is that they are done in different years. Those years were after the Great Depression. As a result, various bankruptcy rates have soared. Consumer bankruptcy rose from 775,344 in 2007 to 1.5 million in 2010. By 2017, this number has dropped to 767721. This is one of the reasons why President Obama is so overpriced. In 2009, 1.4 million people went bankrupt. Even so, Obama's calculations are still a bit high. Multiply 1.4 million bankruptcy cases by 62.1% of Harvard University, and you will get bankruptcy cases caused by 877,372 medical bills.


Who do you believe?

Researchers disagree on how much medical expenses will lead to bankruptcy. The biggest question in answering this question is that those who file for bankruptcy do not need to explain why. Therefore, the estimate is based on the survey. Different research methods are different. It depends on the definition of medical debt by researchers and respondents.


Second, a variety of factors lead to bankruptcy. Most people who owe medical benefits have other debts. They may also have low incomes, low savings, and unemployment. This makes it difficult to determine whether bankruptcy is simply due to medical debt. For example, the Kaiser Family Foundation study found that only 3% said their bankruptcy was due to medical debt. But another 8% said it was due to the combined effects of medical and other debt.


It also found that the insured was more likely to declare bankruptcy (3%) than the uninsured (1%). Most people may think that their insurance can protect them from medical expenses. They are not prepared to pay for unexpected deductibles and co-insurance costs. Almost a third of people don't know that a hospital or service is not part of their plan. A quarter of the people found the insurance company rejected their claim.


How do those with insurance have so many bills? After the high deductible, co-insurance payment and annual/lifetime limit, the insurance is used up. Other companies refused claims or just cancelled insurance.


How to avoid medical bankruptcy


It is not a good idea to file for bankruptcy to waive medical expenses. First, the bankruptcy will remain on your record for 10 years. You may not be able to rent an apartment, get a car loan or buy a house. Some employers will therefore reject your job application. In some states, you may lose your home. For example, Nebraska only protects $12,500 in home equity from being confiscated. In general, you may lose $100,968 in assets. The biggest loss is in Delaware, you may lose an average of $125,745.


In addition, the cost of bankruptcy is high. The average cost of filing a Chapter 7 application to a lawyer is between $1,500 and $3,000. Chapter 13 The average cost of lawyers ranges from $3,000 to $4,000. These are the national average costs. The cost of urban areas may be much higher.


The best way to avoid medical bankruptcy is to prevent or manage chronic diseases such as diabetes. The high medical expenses caused by the accident are unavoidable. In these cases, there must be a financial buffer. Deposit three to six months' fees into a savings or money market account. Only one-third of Americans have more than $1,000 in savings.


Studies have shown that health insurance does not completely protect you. Many people go bankrupt because of high deductibles and other out-of-pocket expenses. You should at least have your deductible savings amount.
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