Thomas F. Miles, Attorney and Counselor at Law
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Will Obamacare lead to a decrease in personal bankruptcy rates?

As many Americans sign on for health insurance through the Affordable Care Act (ACA,) individuals and families in California hope that the changes in the availability and affordability of health care coverage will help control the cost of medical care. For many who are in the midst of financial hardship, medical debt is a primary cause of their current lack of financial stability. While the ACA will not have an effect on existing medical debt, the initiative could help reduce the cost of health care in the years to come, and may even help many avoid personal bankruptcy.

Medical debt is a significant factor in as many as 57 percent of personal bankruptcy filings. Some within the medical and financial industries suggest that the ACA could lower those rates. As evidence for this conclusion, many look to the example set by one northeastern state, where a similar health care program was put into place in 2006. Data from that state suggests that expanded health care coverage led to a significant drop in bankruptcy filings.

Specifically, bankruptcies directly attributed to medical debt fell from 59.3 percent to 52.9 percent over the course of two years. Additionally, the rate of overall bankruptcy cases also declined 18 percent between the years 2006 and 2013. If these same outcomes were to occur at the national level, the ACA could be credited for a major reduction in the need to seek personal bankruptcy resulting from high medical bills.

It is far too early to predict how the Affordable Care Act might influence personal bankruptcy filings in California or elsewhere. However, as the program gets underway, many are watching to see if expanded health coverage can lead to a wide range of positive effects. Reducing the risk of debilitating medical debt could be one of those positive outcomes.

Source: The Motley Fool, "Medical Bankruptcies: How the ACA Stands to Reduce Them, How States Are Blocking the Way", James O'Brien, March 22, 2014

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