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U.S. medical bankruptcies a myth; personal bankruptcy rate higher in Canada

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Release Date: July 7, 2009

TORONTO, ON-The idea that large numbers of Americans are declaring bankruptcy due to medical expenses is a myth and the introduction of government-run health insurance in the U.S. will do nothing to reduce personal bankruptcies, concludes a new study from the Fraser Institute, an independent think tank.

The current debate about reforming U.S. health care policy has included suggestions that nearly two-thirds of personal bankruptcies in the U.S. result from uninsured medical expenses or loss of income due to illness. Advocates of socialized medicine argue that this would not occur if the U.S. adopted a government-run health system similar to Canada's.

But Brett Skinner, author of Health Insurance and Bankruptcy Rates in Canada and the United States and Fraser Institute director of bio-pharma, health and insurance policy research, says the evidence doesn't support the bankruptcy claim.

"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. Yet the reverse is true. The personal bankruptcy rate is actually higher in Canada than it is in the U.S.," he said.

Skinner compared bankruptcy data in the U.S. and Canada from 2006 and 2007, and found that personal (non-business) bankruptcy filings as a percentage of the population were 0.2 per cent in the U.S. during 2006 and 0.27 per cent in 2007. In Canada, the numbers are 0.3 per cent in both 2006 and 2007.

"There is no evidence to support the idea that a government-run health care system in the U.S. will reduce personal bankruptcies," Skinner said.

"Bankruptcy and lack of health insurance coverage are both caused by the same thing: insufficient income, which is most often the result of unemployment. The majority of debt among bankrupt consumers in both America and Canada is composed of non-medical expenditures and therefore has little to do with health insurance coverage."



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