Role of medical debt in falling bankruptcy filings

The debate over potential benefits of the Affordable Care Act has continued due to efforts at overturning the law. One of the more contentious arguments has been that the ACA has reduced the need for bankruptcy as a result of medical debt. Two inclusions in the ACA make such an argument tenable. The law expanded health insurance to 20 million more individuals throughout Florida and the rest of the U.S., and it set a cap on maximum yearly and lifetime out-of-pocket costs. Opponents of the bill claimed that the reduction in consumer bankruptcy had little to do with the ACA.

Central to arguments over the effectiveness of the ACA at reducing medical debt was a study published in 2009, which found that consumer bankruptcy could be attributed to medical debt in nearly two-thirds of cases. A 2017 study supported this by looking at bankruptcy proceedings and survey results to show that expanded coverage cut the number of Chapter 13 and Chapter 7 cases in half.

Others argue that the 2009 study was flawed with a broad definition of medical debt. Later research found medical debt was a leading factor for only 18-25 percent of those filing for bankruptcy. Opponents also pointed to other causes for reduction of consumer bankruptcy cases, which include post-2009 improvements in the economy and a 2005 law that made filing for bankruptcy more difficult.

Those who need assistance with overwhelming medical debt, credit card debt and other bills could be facing foreclosure and the loss of other personal possessions in the near term. Filing for bankruptcy may be able to help Miami residents protect their homes and achieve a fresh financial start.