Medical Debt Has Strong Link to Foreclosures

As lawmakers debate a health care bill in Congress, one key factor they may want to keep in mind is the connection between higher medical costs for individuals and the likelihood of bankruptcies and foreclosures, Curbed reports.

Much of this year’s heated healthcare debate has focused on the successes and shortcomings of the Affordable Care Act (ACA). One of the lesser-discussed benefits of ACA has been a decline in sudden medical debt, which has a cascading effect on mortgage payments, foreclosures, and real estate.

According to a Money article from May, bankruptcy filings in the United States dropped by half between 2010 and 2016, falling from 1,536,799 to 770,846. According to experts, many factors contributed to the decline in personal bankruptcy during that period, including an improving economy and changes to bankruptcy laws in 2005. But “almost all agreed that expanded health coverage played a major role in the marked, recent decline.” While not every filing was directly connected to medical expenses, financial experts say that medical bills—often unexpected and large—are a large factor in U.S. bankruptcy filings.

It’s clear the Affordable Care Act played a role in cutting sudden and potentially catastrophic medical debt. But not often discussed is how this medical debt impacts so many other areas of a person’s financial life.

A 2007 study of consumer bankruptcy filings found that 62% of those who filed for bankruptcy did so due to medical debt. A 2008 Harvard Study found that half of all foreclosures had a medical cause, and that “medical crises put 1.5 million Americans in jeopardy of losing their homes last year.”

Though the debate is Congress is supposed to be about health care, the ramifications on the financial health of Americans is nearly as important.

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