Medical bankruptcies occur when consumers are forced to declare bankruptcy because of the cost of medical treatments. However, there is no single definition of a “medical bankruptcy.”
In a 2009 study of all bankruptcies in 2007, researchers classified a “medical bankruptcy” as one where persons had mortgaged a home to pay medical bills, had medical bills greater than $1,000, or had lost at least two weeks of work due to illness. According to that definition, 62.1 percent of all bankruptcies in the United States were “medical bankruptcies.” A 2015 study by the Kaiser Family Foundation found that medical bills caused 1 million U.S. adults to declare bankruptcy every year and that 26 percent of Americans age 18 to 64 struggled to pay medical bills. The most common cause of medical debt, according to this study, was an unexpected refusal by insurance companies to pay for a medical procedure.
As it turns out, medical bankruptcy is almost unheard of outside of the United States. Other developed economies (except China) have single-payer health care systems where medical costs are financed by taxes, not by premium-financed insurance. In these countries, there are no out-of-pocket costs for medical care and thus no bankruptcy caused by medical debts. In countries without single-payer systems besides the United States, there is generally no requirement that medical procedures be provided without payment, and thus procedures are paid for prior to treatment being rendered.