NCPA - National Center for Policy Analysis


July 8, 2009

The idea that large numbers of Americans are declaring bankruptcy due to medical expenses is a myth.  Therefore, the introduction of government-run health insurance in the United States will do nothing to reduce personal bankruptcies, concludes a new study by the Fraser Institute.

The current debate about reforming U.S. health care policy has included suggestions that nearly two-thirds of personal bankruptcies in the United States result from uninsured medical expenses or loss of income due to illness.  Advocates of socialized medicine argue that this would not occur if the United States adopted a government-run health system similar to Canada's.  However, if socialized medicine played a role in reducing personal bankruptcies, we would expect to see a lower rate of personal bankruptcy in Canada compared to the United States. 

To the contrary, says Fraser:

  • The personal bankruptcy rate was actually higher in Canada in 2006 and 2007 (0.30 percent for both years) than in the United States (0.20 percent and .27 percent).
  • Medical spending was only one of several contributing factors in 17 percent of U.S. bankruptcies -- medical debts accounted for only 12 to 13 percent of the total debts among American bankruptcy filers who cited medical debt as one of their reasons for bankruptcy.
  • Medical reasons were cited as the primary cause of bankruptcy by approximately 15 percent of bankrupt Canadian seniors (55 years of age and older).
  • Non-medical expenditures comprise the majority of debt among bankrupt consumers in both Canada and the United States; the inability to earn sufficient income to cover these costs -- not exposure to uninsured medical costs -- is the real explanation for almost all bankruptcies in either country.

Thus, bankruptcy statistics do not support arguments for a government-run, single-payer, socialized health insurance system, says Fraser.

Source: Brett J. Skinner and Mark Rovere, "U.S. Medical Bankruptcies a Myth; Personal Bankruptcy Rate Higher in Canada," Fraser Institute, July 7, 2009.


Browse more articles on Health Issues