Managing Medical Bills on the Brink of Bankruptcy

Melissa B. Jacoby, University of North Carolina at Chapel Hill
Mirya Holman, Duke University

Abstract

This paper presents original empirical evidence on financial interactions between medical providers and their patients who go bankrupt. We use a nationally representative sample of people who filed for bankruptcy in 2007 to compare two popular but hotly contested methods of measuring medical burden. By applying both methods to the same filers, we find that nearly four out of five respondents had some financial obligation for medical care not covered by insurance in the two years prior to filing, but only about half of the court records contain identifiable medical debt, and of substantially more modest amounts. We test several theories to explain the discrepancy and find we can explain it to a significant extent by filers’ methods of managing medical bills that make many bills undetectable using the court record method. For example, we find the highest rates of mortgage and credit card use for medical bills among respondents with the largest discrepancies between the two measures. Respondents who specifically report medical bills as a reason they filed for bankruptcy mortgaged their homes for medical bills at nearly four times the frequency of other filers, and were about a third more likely to use credit cards for medical bills. We also find disparities by age, sex, race, and housing tenure that skew the court record measure. Our findings offer a window into the success of medical practice management in reducing providers’ financial exposure from patient liabilities. However, one implication of this “success” is that the popular court record method of measuring medical bills should not be used on a standalone basis to measure the impact of medical bills on financially distressed families. The court record method also should not be used to refute survey estimates of medical burden.