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A New Form of Medical Debt (and Jacoby's Final Post)

posted by Melissa Jacoby

This is my final contribution to the Credit Slips blog.  I thank Bob, the other contributors, and the readers for the opportunity to participate the past few months.    

I will sign off with a quick mention of an emerging form of medical-related debt.  This debt will not arise from the receipt of medical care, but rather from the failure to buy health insurance in contravention of the new individual mandate in the Massachusetts health plan now getting underway.  Oversimplifying greatly, uninsured people (at least those who can be identified through tax returns) will be legally required to buy insurance, and the government eventually will impose steep financial penalties for non-compliance and collect those penalties through the tax system and other enforcement methods.  In other words, a person may owe many thousands of dollars in penalties to the government because she didn't buy an insurance policy that the government deemed affordable for her, even if she has paid every medical bill she has ever received (and if she files for bankruptcy, I assume the government will argue that the penalties are nondischargeable -- unlike most debts owed for actual medical care to providers).  As the prior sentence suggested, the requirement is triggered on the availability of affordable insurance products.  Other facets of the Massachusetts plan aim to ensure that cheaper insurance products are offered (e.g., through subsidies and the Connector). But cheaper and affordable are not synonymous.  And we learn from personal bankruptcy and the debates over means testing (in both concept and in detail) that affordability often is in the eye of the beholder.  The able people charged with developing the various affordability determinations have a complex and consequential task.


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