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Will ObamaCare Reduce the Number of Personal Bankruptcy Filings?

The Wall Street Journal recently published a very thought-provoking piece in the wake of the U.S. Supreme Court decision over ObamaCare. The article entitled The Future of Personal Bankruptcy in a Post-Obamacare World hypothesizes that a mandatory health care system designed to give people access to affordable health insurance will reduce the number of personal bankruptcy cases.

The article focuses on the research of Northeastern University law professor Daniel Austin, who studied the effects of mandatory health insurance in Massachusetts on personal bankruptcy filings within that state. Professor Austin found that Massachusetts residents who filed bankruptcy in 2013 had $3,041 in medical debt, well below the national average of $8,594 in medical debt.

The conclusion of the article is that mandatory nationwide health insurance will make families more financially stable and keep them out of bankruptcy. President Obama himself has pointed out that 62.1% of consumer bankruptcies are medical bankruptcies, citing a study Sen. Elizabeth Warren (D., Mass.) co-wrote as a Harvard law professor. However, Professor Austin’s study found that only 18% to 25% of personal bankruptcies filed in the U.S. were instigated by medical debt; except in Massachusetts where 3% to 9% of bankruptcy cases were filed because of medical debt.

While this article and the related research are hopeful, there is no magic bullet to avoid bankruptcy. A 2013 study analyzing data from the U.S. Census, Centers for Disease Control, the federal court system, and other health-care system information found that 56 million Americans struggle to pay medical bills – 20% of the population between the ages of 19 and 64. This study concluded that medical insurance is not an answer. The study estimates that nearly 10 million adults with medical coverage will incur medical bills this year that they cannot pay.

Mandatory health insurance has not saved Massachusetts residents from bankruptcy filings. Massachusetts ranked 10th best bankruptcy filing rate in the United States, 11th if the District of Columbia is counted. During 2014, Massachusetts residents filed at a rate of 154 bankruptcy cases per 100,000 people. That is slightly better than New York at 162 cases and well ahead of the national average of 292.

The real conclusion here is that a personal bankruptcy is generally caused by a multitude of factors. It is rare that medical bills alone will cause a bankruptcy filing; just as the absence of medical debt will guard against financial ruin. ObamaCare may save a few individuals from bankruptcy, or prolong filing, or may have no effect at all.

If you are considering filing for bankruptcy please call the experienced attorneys at Fears Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to