Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005

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Mrs. CLINTON. Mr. President, I rise to encourage my colleagues to support two amendments that seek to provide some protections to families who face the devastation of medical bankruptcy.

I thank Senator KENNEDY for offering these amendments that I am proud to be a cosponsor of. The first would exempt from the means test debtors whose severe medical expenses have caused their financial hardship and forced them to file for bankruptcy, and the second would provide a homestead exemption to medically distressed debtors of $150,000 in equity in their primary residence.

These amendments are critical and will help ensure that families do not have to declare bankruptcy and lose their homes just because they get sick.

Medical bankruptcy has skyrocketed in recent decades. In 1981, only 8 percent of personal bankruptcy filings were due to a serious medical problem. In contrast, a recent study by researchers from Harvard Law School and Harvard Medical School found that half of personal bankruptcies filed in this country are now due to medical expenses. And what is most astonishing about this is that three-quarters of the medically-bankrupt had health insurance at the onset of their illness.

This means that each year, 2 million families endure the double disaster of illness and bankruptcy. In my State of New York, more than 38,000 of the almost 77,000 personal bankruptcies in 2004 were caused by medical expenses, impacting more than 100,000 New Yorkers.

On average, those bankrupted by medical expenses are middle-class Americans with children who owned their own homes, held jobs, and have completed some college education. Medical debtors are typical Americans who got sick. Their out-of-pocket costs, starting from the onset of illness, averaged almost $12,000, and in the year leading up to bankruptcy their out-of-pocket expenses averaged more than $3,500.

These are families who desperately tried to avoid bankruptcy: more than 20 percent reported going without food; more than 30 percent had a utility shut off, more than 50 percent reported skipping needed doctor visits; and more than 40 percent failed to fill prescriptions in the 2 years leading up to their A bankruptcy filing.

The Harvard study also found that those driven into bankruptcy by medical expenses differ in an important way from other filers: they were more likely to have experienced a lapse in health coverage leading up to their bankruptcy filing. In fact, a lapse in health coverage at some point in the 2 years before filing was a strong predictor of bankruptcy, with almost 40 percent of medical debtors experiencing a lapse in coverage, compared to 27 percent of other filers.

For those bankrupt by medical costs, illness caused financial hardship not just because of medical expenses, but also because the illness forced them to work less or lose their employment entirely. In fact, 35 percent had to work less because of illness, and in many cases to care for someone else. And it is likely reduced work and even the loss of a job because of medical problems that resulted in a lapse in healthcare coverage.

It's easy to see how the face of medical bankruptcy is the typical American worker. An unexpected illness or accident leaves you unable to work or unable to maintain your job full-time, which in turn leaves you with less income to pay your medical expenses. Over time your access to care is diminished because you can't afford the cost-sharing, are not seeking needed care to avoid expenses, or have lost coverage because of reduced work hours or job loss, and ultimately your health insurance coverage lapses. Now you have no assistance with medical expenses and little or no income to pay the bills. It's a vicious cycle. And all because you or a member of your family got sick.

Unfortunately, rapidly rising health care costs will only exacerbate this problem going forward. The number of Americans spending more than a quarter of their income on medical costs climbed from 11.6 million in 2000 to 14.3 million in 2004. And the pressure on employers to reduce benefits and increase cost-sharing as a result of rising health costs is no less.

The solution to this problem is not to punish hard working men and women who on a different day, with different luck, wouldn't be just a typical American who got sick. These Americans are already confronting difficulties because of circumstances beyond their control. Let's not make their situations even worse. We need to adopt these amendments and begin the hard work of addressing the causes of medical bankruptcy and the serious problems that face this nation's health care system.

Again, I thank Senator KENNEDY for his work on these amendments and urge their adoption.

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