02.03.21

Baldwin, Colleagues Introduce Medical Bankruptcy Bill Amid Raging Pandemic

Legislation covers bankruptcies triggered by medical debt or financial hardship related to the public health and economic crisis

WASHINGTON, D.C. – With millions of Americans kicked off their health insurance in the middle of a raging pandemic, U.S. Senators Tammy Baldwin (D-WI), Sheldon Whitehouse (D-RI), Sherrod Brown (D-OH), Elizabeth Warren (D-MA), and Richard Blumenthal (D-CT) are introducing legislation to ease the burden on those forced into bankruptcy because of unforeseen medical expenses or the economic impacts of the public health emergency. The Medical Bankruptcy Fairness Act of 2021 addresses the potential for an influx of bankruptcies stemming from the financial strain that workers and families are experiencing during the COVID-19 pandemic. 

“Millions of Americans have lost their jobs and health insurance during this public health crisis and the Trump administration worked to sabotage our health system instead of working to provide support for those struggling. More Americans are uninsured today than when Trump took office, with many facing medical debt and being forced into bankruptcy,” said Senator Baldwin. “This legislation provides much needed relief and will help families who have fallen on hard times during this pandemic through no fault of their own.” 

“Our employment-based health insurance system is ill-suited for a pandemic,” said Senator Whitehouse. “Many of the millions of Americans who are out of work lost their health insurance along with their income, and they’re at increased risk of racking up huge medical bills if they come down with COVID-19. We need to ease the burden on families dealing with the health and financial fallout from this pandemic.”

“Ohioans are already struggling amidst a once-in-a-generation pandemic. The last thing people should have to worry about is having to file for bankruptcy because of an unforeseen medical expense,” said Senator Brown. “The burden of medical debt, which is often a driver of home foreclosures, falls disproportionately on Black Americans. It’s shameful that former 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.”  

“This public health crisis is pushing families to the brink, especially those with hospital bills piling up,” Senator Warren said. “Now more than ever, we need to reform our bankruptcy system to help struggling individuals and families regain their financial footing.  That's why I’m cosponsoring the Medical Bankruptcy Fairness Act, legislation to give financially-strapped families and individuals facing crushing medical debt a chance to get back on their feet.”

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 by medical crises and those who have experienced other financial difficulties.

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 during the COVID-19 pandemic. Specifically, the bill would:

  • Waive procedural hurdles like credit counseling that make little sense for those pushed into bankruptcy due to medical debt;
  • Permit the discharge of student loans, which currently cannot be erased in bankruptcy for most debtors; 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 (ACA). However, more than 14 million Americans lost their health insurance during the pandemic, and experts say there could be a flood of personal bankruptcies in the coming months and years as medical bills begin to pile up. The pandemic is putting incredible financial strain on Americans who contract the disease and families who lose their jobs as a result of the public health crisis.

President Joe Biden has announced a special health insurance enrollment period on the federal health insurance marketplace because of the pandemic. The special enrollment period for comprehensive, ACA-compliant health coverage begins February 15, 2021 and goes through May 15, 2021.