How Health Insurance and Medical Bills Drives Bankruptcy Claims
With the recent assassination of Brian Thompson, the CEO of United Healthcare, and the arrest of Luigi Mangione, the issues of healthcare and the failed health insurance industry are front and center as mounting medical bills push people towards bankruptcy.
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What Led Me to Being a Bankruptcy Lawyer
Before we get into the unaffordability of healthcare, let me talk about myself for a second. When I started practicing law, bankruptcy law was not at the top of my list. I considered bankruptcy law boring. I wanted to be in court, litigating. Bankruptcy law seemed like it was for people who spent too much money, lived above their means, and now wanted to get a free pass by filing for bankruptcy. It didn’t interest me. It’s not why I went to law school.
However, the firm I was at handled bankruptcy cases, and little by little, I started to see a pattern. Most of our clients already had medical bills. Often, they had fought illnesses like cancer and might have been filing for bankruptcy for the second or third time.
You have to understand that I graduated from law school at the age of 26, so I was a little naive about how the world works. I started realizing that people were taking jobs they hated just to have health insurance. I didn’t know this was “a thing.”
With the medical bills, clients were ready to file for bankruptcy immediately after the hospital stay. They didn’t even have a bill yet, but they knew that even with health insurance, they couldn’t afford the medical bill.
That’s when I started to recognize the pattern that bankruptcy is tied to medical bills. The second reason is health-related issues, like missing work or inability to afford co-payments. The third reason is divorce.
Soon, I fell in love with bankruptcy law because I realized I was helping people. It was simple math: a client was drowning in debt, and now they weren’t. I felt I was practicing “happy law.” Every client was happy.
The Main Reasons Bankruptcy is Filed
Then, as I started teaching, came research, and that’s when I could confirm the main reason debtors file for bankruptcy. I came across someone well-known who discovered decades ago that the number one reason people file for bankruptcy is related to healthcare and medical bills.
When I developed the bankruptcy law course where I was teaching law school, of course, the book that I chose was written by no one other than Senator Elizabeth Warren. There are several co-writers, but the other well-known name is Katie Porter, from California, two major advocates for the middle class.
Senator Warren’s research as a law professor concluded it wasn’t debtors living above their means by buying fancy clothes, watches, and TVs that led to bankruptcy, but rather medical debt.
Early on, in the early 2000s, since I graduated from law school in 1999, I started advocating for free insurance. It didn’t make sense then, and it doesn’t make sense now, that someone has to file for bankruptcy because they got sick. I didn’t choose to get sick. I didn’t want to get sick. And by the way, this is often tied to genetics, isn’t it?
That’s when I started to realize that healthcare should be a right. No one should have to work a job they hate simply for healthcare benefits. Do you want someone working for you who hates being there, and the only reason they’re there is because they need health insurance?
No disrespect to the people who have to do that—I get it. But I have to argue that productivity might be down under those circumstances versus if we can work somewhere we love and at the same time have health insurance. Sounds to me like a win-win situation for everybody involved.
But now we’re seeing this issue with healthcare, and people are protesting. Luigi Mangione merchandise is selling on Amazon. The McDonald’s that turned him in got bad press. I think they had to shut down their reviews.
After twenty-five years of practicing law, we finally see healthcare front and center. Now, besides Senator Warren and Bernie Bros with Senator Sanders, apparently, they are ahead of their time since they want citizens to have free healthcare. Do you know who else? Michael Moore.
Michael Moore’s documentary “Sicko” was done about 20 years ago, where he bashed the healthcare system and brought to light all these issues. But again, he was ahead of his time, unfortunately, like Senators Sanders and Warren.
These issues have been going on for decades. This concept isn’t new, and neither is the misinformation. Years ago, when Jeb Bush was governor of Florida, he opposed having casinos in the state. I specifically remember thinking, Wow, imagine if Miami Beach had casinos. Talk about the flood of money that would come in.
Purposeful Misinformation on Bankruptcy
But Jeb Bush said no because people in areas with casinos file for more bankruptcies. I’m pretty sure he just made that up. We have the casino at the Hard Rock Hotel in Broward County, and I don’t think there are more bankruptcies in that area because of it.
Bankruptcy is filed because of medical bills, health-related issues, and divorce. There are other reasons, of course. Many times, it was clients who lost their jobs or their spouses did, or they were earning less at their jobs. So they start to depend on credit cards to pay their bills, and unfortunately, at that point, they can’t catch up.
If anything positive came out of this situation, it’s the fact that now health insurance is front and center and hopefully stays that way. However, where this issue will be with the new administration, your guess is as good as mine.
I can’t imagine there will be free healthcare, but we did experience that during the COVID-19 pandemic. But what if another pandemic like COVID-19 happens and the government isn’t picking up the tab? What happens if you’ve been hospitalized for a week or two? Can you afford that? Chances are, most people, even with insurance, cannot afford to pay these outrageous medical bills on top of copays and everything else.
It’s not Only Health Insurance
On social media, specifically Blue Sky, I retweeted a post about health insurance, stating it’s not just health insurance but insurance that denies claims. Here are two things to consider:
If your house increases in value, it makes sense that your insurance has to increase. If your home was worth $200,000 and now it’s $215,000, the insurance company wants the policy at the market price. But has your car insurance gone down?
If you paid $30,000 for your car, suppose today it’s worth $20,000; why has the insurance stayed the same? I’ve never been able to figure that one out. My car insurance doesn’t go down even though it is worth less, but it goes up if my house increases in value. What am I missing?
With home insurance, the denial of claims is no different. Just ask anyone in Florida or Georgia after Hurricane Helene or Milton. I consider myself an expert on this issue because I’ve been through it.
When I went through Hurricanes Katrina and Wilma, which caused me to lose my home, I quickly learned that insurance companies are not in the business of cutting checks. That would defeat the whole purpose of owning an insurance company, a for-profit business.
Let’s go a step further: medical claims. Doctors can work for insurance companies and are paid well to deny claims, the same in the dental profession. As a lawyer, I’ve had clients involved in motorcycle accidents. I’ve told my clients I’ll see them tomorrow, only to find out they have been released. “Let me guess, you don’t have insurance, do you?” You know how they answered.
The flip side of that was when I was dealing with my father, who was dealing with dementia and Parkinson’s disease. The last thing I wanted to do was take him to the hospital. A headache could mean four or five days of tests to figure out why he had a headache. He was 80 years old and, of course, completely covered. So he gets an overnight stay.
Of course, they keep you there until they know claims will start being denied. Then they kick you out the door. That is the reality of the medical and insurance industry. It is a for-profit business model.
When I had Hurricane Katrina and Wilma damage my home, the home insurance company, without even looking at the house, said, “The wind did not damage your home. It was damaged by improper construction.” This was said via a phone call.
How could they know that without an investigation? That defies all logic and reason, but that was their answer. Let’s backtrack a little bit. How did I get approved for insurance in the first place? They would have done an inspection, and if the house wasn’t properly built, wouldn’t they have denied the insurance? Of course, they would have. If cables were coming out of the electrical box, they’d say, “We can’t approve this house. It’s a fire waiting to happen.” Yet, they approved it.
But when it came time to cut me a check to fix my roof and everything else, they said, “No, the house was not built properly. You need to sue the developer.” That’s what I got, and that’s what most people get. Most people only realize this once they’ve been in that situation.
This issue was just a house. I loved my house, but it was just a house. Now imagine what happens when we’re talking about your health, and they’re denying claims for the most ridiculous reasons, further squeezing you financially. But it’s even worse when it’s a situation beyond your control.
It’s About Making a Profit
I’ve represented countless clients in accidents. Here’s an example: If you crash into me and you don’t have insurance, and I do, is my insurance enough to cover a serious injury and a lengthy hospital stay? Absolutely not. Even a $100,000 policy isn’t going to be enough. So what are my choices?
I know I can sue the driver who has no insurance or minimal coverage, but realistically, there’s no money to pursue a lawsuit. So what happens if you do? That person will file for bankruptcy, wiping out that debt.
Meanwhile, I’m the one with back problems and physical injuries, and in return, there’s zero compensation. Plus, I would owe the hospital money I don’t have. So now, I end up filing for bankruptcy as well. One car accident can likely result in two bankruptcies. Put that in perspective: you didn’t ask to get involved in a car accident, yet you’re the one losing everything.
And if you want to extrapolate this as you get older, chances are, we have more assets like a home. Not every state offers the benefit of Florida’s unlimited homestead exemption. Some states have very low exemptions, like Kentucky, which has $5,000. So what happens if you’re in a situation where you get sick or are in a car accident? Is bankruptcy an option with only $5,000 in homestead protection? Absolutely not.
So if you get sick, or have a car accident, or both, you’re facing the possibility of losing your home. Put that in perspective when it comes to health insurance. The silver lining with United Healthcare is that maybe we are beginning to wake up and realize this is a serious problem in our country, especially as we age and live longer.
That’s why it’s common for parents to transfer assets to their children, set up trusts, or do anything to protect their homes. It’s not fair that you worked hard for your home and paid your mortgage religiously every month for 20-30 years to have it all disappear just like that because of one car accident, one illness, or a pandemic.
So, everyone, stay healthy. Many blessings to you all when it comes to health and wealth.
You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link.
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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.
This transcript was edited for purposes of clarity.
Updated on May 11, 2025.
Updated on September 24, 2025 with new links.
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