WASHINGTON, D.C. — During a Senate hearing today on bankruptcy reform, Sen. Al Franken strongly backed a proposal that would make it easier for people with high levels of medical debt to have their unpaid bills expunged through the much-debated legal process.
The junior Democratic senator from Minnesota stressed that despite the statistics people might throw around to point out the faults of the European health care systems, those countries do not share the problems that the United States has with bankruptcy related to medical debt.
“You can cherry-pick stuff to find one little place where somebody says our system works better than the French or the Germans, but we are talking about bankruptcy here today,” Franken said during his round of questioning.
Franken and his Democratic colleagues on the Senate Judiciary subcommittee said that a large number of U.S. bankruptcies are filed each year because of medical debt and that those numbers are increasing because of rising health care costs and the recession. They argued that medical debts should be treated differently than those accrued through such things as divorce or credit card bills.
“Unfortunately, the Bankruptcy Code does not distinguish between debtors driven into bankruptcy by medical bills and those who became insolvent through poor planning or reckless spending,” said Sen. Sheldon Whitehouse, D-R.I., who chairs the subcommittee.
Sheldon has introduced legislation, which Franken has co-sponsored, that would waive procedural hurdles for filers with high levels of medical debt, including the means test and credit counseling requirements. It would also provide medical debtors with a $250,000 exemption to help them keep their homes.
Other co-sponsors of the bill include Sens. John Kerry, D-Mass., and Bernie Sanders, I-Vt.
Underscoring the Democratic senators arguments today were three witnesses, including a Rhode Island woman who was financially devastated after trying to save her four-and-a-half-year old son from cystic fibrosis and Elizabeth Edwards, a cancer patient and wife of former presidential candidate John Edwards.
Edwards, who is a senior fellow at the Center for American Progress Action fund, said that the notion that there are thousands of people trying to defraud the bankruptcy system with their medical expenses is wrong.
“They are not planning ahead,” Edwards said. “Most people are planning not to go into bankruptcy.”
Still, Sen. Jeff Sessions, R-Ala., said that the bill could have unintended consequences and that the current law already accounts for individuals who are extremely poor.
���If a person has extraordinary medical bills and is unable to work, they would clearly qualify for Chapter 7 and wipe out all their debts and in no way be obligated to file under Chapter 13 and pay a certain portion of them,” said Sessions, who is the top Republican on Judiciary Committee. “But, if they do have high income, why shouldn’t they pay their hospital.”
“I am open to the concerns,” he continued. “But, I don’t believe that we should start reversing the means tests, which I absolutely believe is a healthy thing.”
Witnesses who testified against the legislation also said that people whose financial problems were only partly related to medical issues might be able to take advantage of the law.
The possible increased burden on creditors could have a negative affect on the whole system, said Aparna Mathur, a research fellow at the American Enterprise Institute.
But, in his round of questioning, Franken focused on why people with medical debt might deserve special protection under the law.
John A. E. Pottow, a professor of law from the University of Michigan, said that the 2005 bankruptcy law was designed with the thought that “there was rampant incidences of abuse” in the system.
“And, it seems that the antithesis of that is someone who has filed for medical bankruptcy through no fault of their own,” he said.
