Medical Debt Still a Significant Bankruptcy Trigger after the ACA

Since now-Senator Elizabeth Warren turned a spotlight on the connection between medical expenses and bankruptcy filing back in 2005, that link has been studied, scrutinized and debated. “Medical bankruptcy” got a lot of attention in the lead-up to the passage of the Affordable Care Act (ACA). And, initially, it looked as if the wider medical coverage offered under the ACA had made a significant difference.

In 2017, Consumer Reports published a lengthy analysis of post-ACA bankruptcy filings. Overall filings were down about 50% from 2010, when the ACA was signed into law. And, the downward trend was steady. While experts interviewed for the piece pointed out two other contributing factors–the 2005 revisions to bankruptcy law and the improving economy–the consensus seemed to be that the ACA had gone a long way toward eliminating those healthcare-induced filings. But, earlier this year, researchers reached a different conclusion.

⅔ of Bankruptcy Petitioners Sampled Cited Medical Costs or Health-Related Loss of Income

The research team modeled its methods on two widely-cited prior studies conducted by the Consumer Bankruptcy Project. Researchers randomly sampled 200 filers from each quarter in 2013, 2014, 2015, and 2016 and mailed out surveys. The percentage of survey respondents who said medical factors had contributed to their bankruptcy filings before and after ACA implementation was similar. More significantly, these rates were also similar to those derived from the 2007 survey.

Of course, the triggers for a bankruptcy filing can be complicated, which can make it difficult to draw concrete conclusions about what’s behind filing trends. Even in an individual case, there are often multiple contributing factors. However, it’s telling that the percentage of bankruptcy petitioners citing medical causes as a contributing factor is right on track with pre-ACA studies.


  • 37% of respondents said they “very much agreed” that medical expenses contributed to their bankruptcy filings
  • 21.5% said they “somewhat agreed” that medical expenses contributed to their bankruptcies

That’s an aggregate 58.5% of survey respondents saying they somewhat or very much agreed that their bankruptcy cases had been triggered in part by medical expenses. But, that doesn’t tell the whole story. 27.9% of respondents said that they “very much agreed” that loss of work due to medical problems contributed to their bankruptcies, and another 16.5% somewhat agreed.

There was significant overlap between the group citing medical expenses and the group citing medical-related loss of income, but the overlap wasn’t perfect. In total, 66.5% of respondents cited at least one of these two medical-related factors as a contributing cause.

Medical Costs Second-Leading Contributor

Notably, medical expenses were the second-most cited contributing factor in the new study. The most often citing contributing cause was loss of income. And, that category includes health-related loss of work. 

Other Sources Show Continuing Struggles with Medical Costs

The interactive debt map created by the Urban Institute shows that 18% of U.S. households have at least one medical bill in collections. In California, the rate is much lower–the statewide average is 13%. Locally, rates are consistent, at 13% in Los Angeles County and 12% in Orange County. But, many of our neighbors aren’t faring as well. 16% of households in Ventura County have medical debt in collections, 17% in San Bernardino County, and 23% in Kern County.

The Consumer Financial Protection Bureau (CFPB) says medical bills are the underlying debt in more than half of debt collection complaints that organization receives. 

And, data released by the Kaiser Family Foundation in 2018 showed that 26% of adults under the age of 65 reported having had difficulty paying medical bills in the previous year. Those struggling with medical debt weren’t necessarily low-income or uninsured, either. 23% said they had medical insurance, and 14% lived in households with an annual income of $90,000 or more.

The effect on those households was significant. 58% said they used up all or most of their savings attempting to pay off medical debt. More than half reported working extra hours or taking on a second job to pay medical bills, and nearly ¼ said they’d sought help from a charity or non-profit.

The Bottom Line on Medical Debt

Nearly a decade after the passage of the ACA, a significant percentage of Americans are still struggling with medical debt. While the number of overall bankruptcy filings has fallen significantly during that period, the percentage of filers who have been impacted by medical debt and health-related loss of income has not. 

Fortunately, bankruptcy remains an option for many people who find themselves overwhelmed by medical bills, or who are having difficulty rebuilding their foundations after a serious illness or injury. If you’re in the Los Angeles area and would like to learn more about how bankruptcy can help eliminate medical debt and provide a fresh start after a medical crisis, contact us to schedule a free consultation.

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