Government intervention in healthcare has unexpected ramifications, among which is the increasing trend of individuals and families declaring bankruptcy due to towering medical bills. In 2020, healthcare expenditure in the United States escalated to a staggering $4.1 trillion. This equates to an average of $12,530 spent on medical care per person, according to the Centers for Medicare and Medicaid Services.
Government Intervention in Healthcare
The Role of Federal Government
The Medicare and Medicaid programs, initiated in the 1960s, alongside the Affordable Care Act (Obamacare) established in March 2010, are prominent illustrations of federal intrusion in the economic operations and functions of the medical sector.
The Impact of Federal Subsidies
Federal subsidies paid to medical practitioners and institutions over time inadvertently eliminate the motivation to operate efficiently and profitably. The subsidies are perceived as taxpayers’ money, not the recipients’, reducing the drive to utilize these funds judiciously.
Increased Healthcare Costs
These subsidies have inadvertently contributed to escalating healthcare costs over the past few decades, obstructing the natural functioning of a free market that could potentially reduce costs.
Reasons for Medical Bankruptcy
Many circumstances drive individuals to file for bankruptcy due to unpaid medical bills. These include a lack of health insurance coverage through employers, unaffordability of health insurance as a small business owner or independent contractor, ineligibility for federal entitlement programs like Medicaid due to high income, or ineligibility for Obamacare health insurance policies.
The Role of Obamacare
Rising Personal Health Insurance Costs
Since 2010, federal subsidies have been inflating the cost of personal health insurance. As a result, many find health insurance unaffordable and choose to forego it. This has led to the accumulation of substantial out-of-pocket medical expenses, particularly in emergency situations.
Shrinking Benefits
Over time, the cost of providing healthcare benefits to employees has risen, while the actual benefits have declined. Obamacare, for example, necessitated standard health insurance policies to include tests and procedures for all age groups, regardless of the insured person’s age.
Medicaid and Its Implications
Medicaid offers a federal grant to states, covering a significant proportion of program costs. However, the costs of Medicaid have been steadily increasing each year, with no federal statutory limit on state expenditure.
The Widespread Impact of Medical Debt
A Census Bureau study in 2021 discovered that 19% of households were unable to afford necessary medical care. Further, the Consumer Financial Protection Bureau reported that medical debt was the most common reason for consumers being contacted by debt collectors in 2022.
Medical Debt and Bankruptcy
Poor health and financial struggles go hand in hand, often leading to bankruptcy. A study in 2000 concluded that medical bills accounted for 40% of federal bankruptcy filings in 1999. A 2019 study published by the National Institutes of Health found that medical debt was a leading cause of bankruptcy, cited in 66.5% of federal bankruptcy cases.
The Failure of Obamacare
Despite the implementation of Obamacare in 2010, medical bankruptcy remains a common occurrence. The expansion of health insurance coverage under Obamacare since 2010 has not reduced personal bankruptcy filings.
The Bankruptcy Protection Mechanism
Chapter 7 Bankruptcy
Under chapter 7, a liquidation bankruptcy, struggling borrowers can shed debts, including medical debts. However, this may result in the forfeiture of property, including homes in some cases.
Chapter 13 Bankruptcy
Chapter 13, often referred to as wage-earner’s bankruptcy, allows those with stable jobs and sufficient income to repay creditors to create a repayment plan over three to five years.
Debts in Bankruptcy
In bankruptcy, debts are classified as secured versus unsecured and priority versus non-priority. Unsecured debts, like medical bills, are not backed by an asset and are the most likely to be discharged or wiped clean in a bankruptcy.
Long-Term Solutions
The Need for Healthcare Reform
To reduce medical bankruptcy, proposed solutions include a complete repeal of Obamacare regulations, subsidies, and taxes; a massive reduction in federal Medicaid; blocking grants to states; addressing the impending bankruptcy of Medicaid and Medicare programs; and eliminating federal funding and regulation of medical procedures.
Conclusion
The increase in personal medical bankruptcy filings is a clear indication of the failure of federal oversight and regulation in the healthcare sector. It’s imperative that we move towards a system that allows the free market and human choice to determine the real price of insurance and healthcare services.
The rise of personal medical bankruptcy is an unintended consequence of government intervention in healthcare.