Pierro Law Blog

A study released on January 5, 2012 (Medical Bankruptcy in the United States, 2007: Results of a National Study) by the American Journal of Medicine reported a dramatic increase in bankruptcies resulting from illness and medical bills. 62% of all bankruptcies filed in 2007 were tied to medical expenses, despite three-quarters of those who filed for bankruptcies having health insurance. Since 2001, the proportion of all bankruptcies attributable to medical problems has increased by 50%. Most medical debtors were well educated, owned homes, and had middle-class occupations.

In 1981, 8% of families filing for bankruptcy did so in the aftermath of a serious medical problem. A 2001 study in five states found that medical problems contributed to at least 46% of all bankruptcies. As we move into 2012 health costs and the numbers of uninsured and underinsured have increased, and bankruptcy laws have tightened making filing more difficult and expensive. Those with insurance found themselves responsible for thousands of dollars in out-of-pocket costs and others with private coverage lost it when they became too sick to work. The income loss due to illness, coupled with high medical bills, sent families into a tailspin. These numbers do not take into account those that have spent their entire life savings and assets on nursing home care in order to qualify for Medicaid.

Before the most recent economic downturn, an American family filed for bankruptcy resulting from a medical problem every 90 seconds. Since 2007 the number of personal bankruptcies rose to 1.5 million in 2010, according to the American Bankruptcy Institute. An age breakdown of the data for 2009 showed that older people are making up an increasing proportion of the nation’s bankruptcy filers. Seniors, who often live on a fixed income, have turned to credit cards, emptied retirement accounts, and refinanced homes in order to pay for expensive medical treatment, gas, food and other necessities.

This alarming data shows the increased need to properly plan for health care and long-term care expenses. Just having health insurance is not an adequate solution, and private long-term care insurace for Medicaid Trust planning must be considered. Contact a qualified estate planning and elder law attorney at the Pierro Law Group to help protect your family and plan for the unexpected.