Health costs a leading cause of bankruptcy filings

Experts say that costs resulting from medical bills can be the most crippling to personal finances, leading to bankruptcy and a cycle of debt.

Americans accrue debt in a host of ways, from overdue utility payments to overdependence on credit cards. However, experts say that costs resulting from medical bills can be the most crippling to personal finances, leading to bankruptcy and a cycle of debt. 

One of the leading reasons for this is that medical care is unforeseen. Unlike a cable package, car payment or mortgage, individuals who incur medical debt can do so as the result of an accident or sudden, unpredictable health event. With little foresight into the costs that can mount from treatment, it's challenging for patients to plan effectively. 

Daniel Austin of Northwestern University wrote in Quartz that when debt amounts to more than half of an individual's income, it's likely that medical expenses are a leading factor that causes bankruptcy. 

"Around 18% of debtors in my sample had medical debt greater than half of their total unsecured debt or annual income, so we can conclude that medical debt was the predominant factor in 18% of the bankruptcies in my sample," Austin explained. That percentage could be as high as 26 percent, his report stated. 

Another factor that makes medical debt such an insidious strain on personal finance is that it can be protracted. This means that conditions like cancer or heart disease require maintenance and continuous attention. A single appointment or treatment rarely satisfies the medical needs of a patient, so follow-up attention, additional treatments and tests can frequently cause costs to compound over time. 

For healthcare management administrators, these conditions create challenging circumstances for collecting outstanding payments. When care facilities outsource receivables management, they can focus on the most high-priority cases and reduce backlog.