Bankruptcy from Medical Bills – The Next Economic Crisis

Pop Quiz: Try to name at least two industrialized nations in the world where people have to declare bankruptcy because of their health care costs. Do you give up? That’s because it’s a trick question. There’s only one industrialized nation in the entire world that falls into this category … the United States.

“Medical bankruptcy” is starting to become a household phrase in the United States, and that really scares me. When you look at the numbers and apply a bit of common sense, you can easily see the writing on the wall. Medical debt will be the cause of our next economic meltdown.

Subprime mortgages wrecked our economy in 2008 and 2009. Next time, the catalyst will be bankruptcy from medical debt. This is not a hypothesis. It’s a prediction based on facts and common sense. It is going to happen. Period. Unless, of course, we do something significant to overhaul the malicious health care system in this country.

Medical Debt = Bankruptcy Fuel

You don’t have to be a economist to see the connection between medical debt, bankruptcy and economic crisis. I’m certainly not an economist. In fact, it’s hard not to see the connection — unless you have your head in the sand.

Consider the following:

• Consumer spending makes up more than two-thirds of economic activity in the United States. What else do we have? Exports? That’s a laugh.
• So without consumer spending, our economy grinds to a halt.
• Each year, more and more consumers go through bankruptcy as a direct result of medical bills that have piled up.
• In 2008, nearly 70% of all personal bankruptcies were the result of medical debt — even among people with health insurance.
• There are two primary reasons these people go bankrupt. They either can’t get health insurance, or they can’t get their insurance company to cover their medical bills.
• A 2009 Harvard study showed a 50% rise in medical bankruptcy (bankruptcies linked to illness and medical bills) between 2001 and 2009. More often than not, the peopled who filed for personal bankruptcy actually had health insurance — but it wouldn’t cover their bills.
• As more people go bankrupt from medical debt, consumer spending will continue to drop.
• In the near future, we will see record-breaking numbers of bankruptcy filings, most of them resulting from medical debts and skyrocketing health insurance costs. We are paying more but getting covered less.

See the connection? People get less coverage. People pay more for health insurance but get less coverage. People have to pay an ever-growing portion of their medical bills and expenses. Consumer spending goes down. The economy shrinks.

Ignorance Prevents Reform

No other country in the world has a health care system that punishes sick people. In that regard, the United States stands alone — and not in a good way. Our health care system lets people die and go bankrupt by the millions, simply because they lack insurance. In mot countries, health care is a given. In the United States, health care is a privilege afforded to some but denied to others. Health insurance providers penalize the sick (the very people they are supposed to be helping). Like I said, the United States stands alone in this regard.

We could easily reform this system, but for decades we have not. Why? Because of ignorance and fear. Fox “News” tells people that any kind of health care reform would be akin to socialized medicine (a scare tactic created by a PR firm in the 1940s). Intelligent people simply laugh at these socialistic claims, but the ill-informed majority swallow them right up. As a result, our nation is too scared and too ignorant to see what’s really happening. So we will perpetuate this problem until it wrecks our economy again. I predict that will happen within the next decade.

Ignorance wrecked our economy in 2008, and it will happen again within the next ten years or so. We are too ignorant to address the biggest economic drain on U.S. consumers (medical debt), so it will inevitably come back to bite us. Hopefully, China will be willing to bail us out of that one too.