Health expenditures and personal bankruptcies

Abstract

Using household-level data from the Panel Study of Income Dynamics, we estimate the extent to which medical expenses are responsible for driving households to bankruptcy. Our results suggest that an increase of 10 percent in medical debts would cause a 27 percent increase in the filing propensity of households with primarily medical debt, and an approximately 36 percent increase in filing propensity of households where medical debts co-exist with primarily credit card debts. Studying the post-bankruptcy scenario, we find that filers are 19 percent less likely to own a home even several years after the filing, compared to non-filers. However, the consequences are less adverse for medical filers i.e. those who filed due to high medical bills compared to other filers.

Share and Cite:

Mathur, A. (2012) Health expenditures and personal bankruptcies. Health, 4, 1305-1316. doi: 10.4236/health.2012.412192.

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1] Himmelstein, D.U., Warren, E., Thorne, D. and Woolhandler, S. (2005) Illness and injury as contributors to bankruptcy. Health Affairs, 2 Feb 2005, in press.
[2] Health Care Costs Survey (2005) Kaiser family foundation (KFF). Harvard School of Public Health. http://www.kff.org/newsmedia/upload/7371.pdf
[3] Domowitz, I. and Sartain, R. (1999) Determinants of the consumer bankruptcy decision. Journal of Finance, 54, 403-420. doi:10.1111/0022-1082.00110
[4] (1995) Current population reports, health insurance coverage, 60-195. http://www.census.gov/prod/2/pop/p60/p60-195.pdf
[5] American Hospital Association (1996) Recent trends in employer health insurance coverage and benefits. American Hospital Association. http://www.lewin.com/NR/rdonlyres/egugxizk7qh4dvcnszrg2rtx5atxny3okbw3oem33etampl3hcjciyaluowmvqn3s6e6x7botmryfrio6kyg5qarexb/AHA_Insurance_Report.pdf
[6] Fay, S., Hurst, E. and White, M. (2002) The household bankruptcy decision. American Economic Review, 92, 706-718. doi:10.1257/00028280260136327
[7] Musto, D.K. (2002) What happens when information leaves the market? Evidence from post-bankruptcy consumers. Journal of Business, unpublished paper.
[8] Long, C. (2005) Negative effects of personal bankruptcy filings for home owners: Reduced credit access and lost option value. Proceedings, Federal Reserve Bank of Chicago, Chicago.
[9] Han, S. and Li, W.L. (2004) Fresh start or head start? The effect of filing for personal bankruptcy on the labor supply. Working Paper 04-5, Federal Reserve Bank of Philadelphia, Philadelphia.

Copyright © 2024 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.