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Medical debt's 'underreported' toll

by Astrid Fiano, DOTmed News Writer | September 13, 2010

Congressional investigation

The House Committee on the Judiciary, Subcommittee on Commercial and Administrative Law held a hearing this year concerning the Medical Bankruptcy Fairness Act. Witness Hon. Cecelia G. Morris, U.S. Bankruptcy Judge, Southern District of New York, testified regarding the rise of medical debt-related bankruptcies. Morris felt that the effect of serious medical problems on bankruptcy has actually been understated in research because, in part, medical debt is "pervasive and often disguised as other types of debt including credit card debt, mortgage debt or judicial judgments."

"My ten years on the bench as a bankruptcy judge in a largely consumer court has shown that debtors will do anything to pay medical bills for themselves, their spouse, children or member of their household. Their need for care outstrips any financial caution," Morris stated.

However, Aparna Mathur, resident scholar and Jacobs Associate of the American Enterprise Institute, testified that a recent Survey of Consumer Finances actually shows that medical indebtedness has not changed significantly over the past decade. While bankruptcy filings have increased by 25 percent since around 2000, Mathur said, medical debts have not changed significantly as a share of total debt over this period and are not a significant factor in raising consumer bankruptcies. Mathur also said that the legislation could "create perverse incentives for debtors to accumulate non-medical debts prior to a filing, as long as they can file as medically distressed debtors."

Peter S. Wright, Jr., professor of law in the Franklin Pierce Law Center of Concord, N.H., was the third witness for the hearing. He felt that medical debt was closely related to bankruptcy. Wright testified that from his perspective of assisting low-income debtors in bankruptcy court, the incidence of medical debt and impact upon income caused by illness or injury has "a cumulative effect which often propel[s] the debtor and family to seek bankruptcy protection. Because so many families are living paycheck to paycheck on the edge of financial calamity, any significant interruption in income pushes them over the edge."

Experts weigh in

Two experts who are familiar with medical debt issues are Dr. Steffie Woolhandler and Karen Davenport. Woolhandler was co-author of a study on medical debt-related bankruptcies and a professor of medicine at Harvard Medical School at the time the study was done. Davenport is director of health policy for the Center for American Progress. Both spoke to DOTmed about the gravity of the medical debt situation for consumers.