New Jersey residents may be interested in the findings of a 2013 report about the causes of bankruptcy in the United States. According to the report, the single leading cause of bankruptcy filings is medical debt. A large portion of medical expenses are for prescription drugs, and while the Affordable care Act is giving more people access to health insurance, costs for prescriptions remain high for many.
Although more people are getting insured under the ACA, co-payments for prescriptions can still remain high. According to a survey conducted by the Centers for Disease Control, 21 percent of people who have health insurance said that they have gone without their prescription medications because of the cost. The rate was approximately twice that among people who are not insured.
Many people use credit cards to pay at the pharmacy, which increases their personal debt. A health care financial expert said that people tend to put top priority on paying their medical bills, believing that if they do not pay they will be denied treatment. Paying doctors first leaves empty bank accounts, so people use credit cards to pay for medications and non-medical expenses. People who skip taking their medications to save money risk increased health problems. A Commonwealth Fund analyst notes that this winds up increasing the overall cost of the country’s health system.
Bankruptcy can be a way to clear all or most debt and have a fresh start financially. Under a Chapter 13 bankruptcy, some debt is paid off under a restructured payment plan. Chapter 7 bankruptcy is a liquidation bankruptcy that discharges most debt by selling off assets. Filing for bankruptcy brings immediate debt relief by stopping collection efforts immediately.
Source: CNBC, “Medication costs fuel painful medical debt, bankruptcies“, Dan Mangan, May 28, 2014