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Approaching the Problem From the Wrong Angle

ยป NYT: From the Hospital to Bankruptcy Court

An interesting sidenote of the health care debate ...

In the campaign to broaden support for the overhaul of American health care, few arguments have packed as much rhetorical punch as the there-but-for-the-grace-of-God notion that average families, through no fault of their own, are going bankrupt because of medical debt.

President Obama, in addressing a joint session of Congress in September, called on lawmakers to protect those "who live every day just one accident or illness away from bankruptcy." He added: "These are not primarily people on welfare. These are middle-class Americans."

The Senate majority leader, Harry Reid of Nevada, made a similar case on Saturday in a floor speech calling for passage of a measure to open debate on his chamber's health care bill.

The legislation moving through Congress would attack the problem in numerous ways.

Bills in both houses would expand eligibility for Medicaid and provide health insurance subsidies for those making up to four times the federal poverty level. Insurers would be prohibited from denying coverage to those with pre-existing health conditions. Out-of-pocket medical costs would be capped annually.

I'm sure the various approaches that come out of the sausage factory will play a role in cutting down the number of health care-related bankruptcies, but each one strikes me as small ball. I mean, if you really wanted to deal with the problem head-on, you'd simply write a new chapter of bankruptcy law that allows people to designate a health care-related bankruptcy. You could write it such that it wouldn't register on your credit score in the manner that other bankruptcies do. You would still be able to meet your obligations for the remainder of your finances and it would have no affect whatsoever.

The problem? Insurance companies wouldn't like it and it would also bump up rates to allow for bankruptcies and defaults. But I'm not sure the rate bump would be significant since a) people are already filing *a* form of bankruptcy already, and b) there would be no theoretical increase in the likelihood of default. But good luck selling that to the insurance lobby.

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