Bankruptcy: Health insurance for the desperate

Andrew Van Dam

About Andrew Van Dam

Andrew Van Dam of The Wall Street Journal previously worked at the AHCJ offices while earning his master’s degree at the Missouri School of Journalism, and he has blogged for Covering Health ever since.

In The New York Times, reporter Kevin Sack visits Nashville, Tenn. to tell stories from the front lines of health bankruptcy, stories which he folds into larger discussions about health care reform. Apart from compelling anecdotes, Sack’s most interesting angle was that bankruptcy is equivalent to a painful insurance safety net for many Americans.

nashville
The old Davidson County courthouse in Nashville, Tenn. Photo by Brent and MariLynn via Flickr.

“This has really become the insurance system for the country,” said Susan R. Limor, a bankruptcy trustee who calculated that 13 of the 48 Chapter 7 liquidation cases on her docket one recent afternoon included medical debts of more than $1,000.
Under Chapter 7, a debtor’s assets are liquidated and the proceeds are used to pay creditors; any remaining debts are discharged, and filers are left with a 10-year stain on their credit ratings.
“You can’t believe how many people discharge medical debts,” Ms. Limor said. “It’s a kind of trailing indicator of who’s suffering in this economy.”

Sack writes that proposed health care reform bills in both houses seek to solve the medical bankruptcy epidemic by expanding Medicaid eligibility, subsidizing health insurance and capping annual out-of-pocket medical costs.

AHCJ Immediate Past President Trudy Lieberman adds another anecdote to the mix in a post on CJR.org, this one based on an engineer from rural Illinois. Despite a relatively good health plan from his employer and the relatively good health of his wife and children, he was forced to declare medical bankruptcy earlier this decade and now the bills are mounting again. Lieberman carefully chronicles the man’s expenses, teasing apart premiums, deductibles and everything else, then comes to the conclusion that proposed health care reforms won’t do him much good.

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