July 24, 2020

Whitehouse & Colleagues Introduce Medical Bankruptcy Bill After Millions Lose Health Insurance During Pandemic

Updated legislation covers bankruptcies triggered by medical debt or financial hardship caused by public health-related shutdowns

Washington, D.C. – With millions of Americans newly kicked off their health insurance in the middle of a raging pandemic, U.S. Senators Sheldon Whitehouse (D-RI), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), Dick Durbin (D-IL), and Tammy Baldwin (D-WI) today introduced legislation designed to ease the burden on those forced into bankruptcy because of unforeseen medical expenses or public health-related shutdowns.  The Medical Bankruptcy Fairness Act of 2020, based on legislation Whitehouse last introduced in 2016, has been updated to address the potential for an influx of bankruptcies stemming from the COVID-19 pandemic.

“Our employment-based health insurance system is simply not cut out for a pandemic,” said Whitehouse.  “Even while millions of people lose their incomes and get kicked off health insurance, they’re at increased risk of racking up huge medical bills if they contract the virus.  We need to soften the landing for families pushed off a financial cliff by COVID-19.”

“Ohioans are already struggling amidst a once-in-a-generation pandemic.  The last thing people should have to worry about is losing their home or having to file for bankruptcy because of an unforeseen medical expense,” said Brown.  “The burden of medical debt, which is often a driver of foreclosure, falls disproportionately on Black Americans.  It’s shameful that President Trump and the GOP are still actively working to kick families off of their health insurance and roll back pre-existing condition protections, as we’re seeing record numbers of Ohioans losing their jobs and their health insurance at the same time.  We should be making it easier, not harder, for Ohioans to make ends meet during this crisis and access the health coverage they need.”

“During this public health crisis, millions of Americans lost their jobs and health insurance and have been forced to choose between their physical health and their financial health.  No one should be left drowning in medical debt, especially during the COVID-19 pandemic,” said Durbin.  “This commonsense legislation will offer families some relief from the financial hardships this virus has brought on.”

Unlike other debts, medical debt is involuntary, unexpected, and can grow at a rapid rate.  The current bankruptcy system does not distinguish between those bankrupted through no fault of their own by medical crises and those who made unwise business or personal decisions. 

The Medical Bankruptcy Fairness Act would create a more accommodating bankruptcy process for Americans forced into bankruptcy because of medical debt or because they lost their job due to a public health-related shutdown.  Specifically, the bill would:

  • Permit the discharge of student loans, which currently cannot be erased in bankruptcy for most debtors;
  • Waive procedural hurdles like credit counseling that make little sense for those pushed into bankruptcy through no fault of their own; and
  • Provide families a greater chance of keeping their homes in states that have weak debtor protections by allowing the retention of at least $250,000 of home equity.

According to bankruptcy experts, medical debt has been a leading cause of personal bankruptcy filings in the United States.  The number of personal bankruptcies was reduced by half within six years of the passage of the Affordable Care Act.  However, over five million Americans have lost their health insurance during the coronavirus recession, and experts are bracing for a flood of personal bankruptcies in the coming months and years as medical bills begin to pile up. 




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Meaghan McCabe, (202) 224-2921