Medical debt & bankruptcy after traumatic injury in Michigan: Study shows who’s most vulnerable

Adapted from a University of Washington Medicine story – original available here

People in the United States who are hospitalized for traumatic injuries often face increased medical debt and bankruptcy, new research shows.  

The study, published in Health Affairs by a team from the University of Washington and the University of Michigan Institute for Healthcare Policy and Innovation, also exposes a striking imbalance: Public insurance programs like Medicaid and Medicare appear to effectively protect patients from the lasting financial impacts of a traumatic injury. 

In contrast, private insurance, which covers most working Americans, leaves many trauma survivors vulnerable to significant and lasting financial consequences, the study finds. The authors of the new study say this is likely because of the high deductibles and copayments that many people now face with employer-sponsored or self-purchased private insurance plans. 

The study also shows that people who remain uninsured also face a higher risk of medical debt in collections and bankruptcy after trauma-related hospitalization. The percentage of American adults without insurance is expected to increase starting this year due to changes in Medicaid funding and requirements, and in federal subsidies for self-purchased insurance.

"What do we have health insurance for? If your car gets T-boned or you step into the street and get hit by a bus, you shouldn't go bankrupt. But we saw that people who faced a medical emergency they did not choose and could not prevent were often financially devastated,” said John W. Scott, M.D., M.P.H., the paper’s lead author. Formerly a member of the U-M Medical School faculty and of IHPI, he is now a trauma surgeon at Harborview Medical Center and associate professor of surgery at the UW School of Medicine. 

The study combined two unique sources of data: A statewide registry of patients treated in Michigan’s level 1 and 2 trauma centers, and credit report data for these patients and a set of comparison patients. The trauma registry is run by the Michigan Trauma Quality Improvement Program, a collaborative quality initiative based at IHPI and funded by Blue Cross Blue Shield of Michigan.

The team analyzed MTQIP data on more than 12,000 injured patients who were hospitalized in Michigan in 2019 and 2020. They analyzed the patients' financial situations before and after injury by using data from the state’s trauma registry that had been linked to consumer credit reports with patients’ names and other identification removed. 

The researchers compared these patients’ financial starting points with about 25,000 similar individuals from the trauma registry whose traumatic injuries occurred slightly later. This control group helped the researchers distinguish the financial impacts of unplanned hospitalizations and minimize potential conflating effects of broader economic forces. 

The study’s authors include Nora Becker, M.D., Ph.D., a U-M Medical School physician and health economist who has developed methods for studying the financial impacts of health care by marrying clinical data with credit reporting data. 

Key findings on medical debt and bankruptcy: 

•    18 months after hospitalization, the proportion of patients carrying medical debt in collections had jumped by 24%.  
•    18 months after hospitalization, the average medical debt had increased by $290 per patient, or 76%.  
•    15 months after hospitalization, bankruptcy filings had risen by 6%. 

Traumatic injuries — from car crashes to falls to assaults — are unpredictable and can happen to anyone, the researchers note. These events often require expensive emergency surgery, intensive care and lengthy rehabilitation. Medical bills can soar into the tens of thousands of dollars or more. Because many patients are unable to quickly return to work, their financial strain is compounded. 

Michigan was one of 26 states that expanded Medicaid eligibility in 2014 under the Affordable Care Act, Scott noted, so the vast majority of adults in the study had some form of healthcare coverage. 

Yet patients’ bottom-line losses were widespread, with noticeably higher burdens among people younger than 65, the uninsured, the privately insured and those with low incomes. 

Private insurance fares poorly compared with Medicare, Medicaid 

In this study, “the hardship experienced by privately insured patients contrasts sharply with the stronger protection provided by Medicare and Medicaid,” the authors wrote.  

Medicare enrollees experienced only small increases in medical debt and no change in bankruptcy. Low-income patients under age 65 who were covered by Medicaid experienced no statistically significant increase in medical debt or bankruptcy after their injury. Meanwhile, patients with private coverage were the only insured group who experienced significant increases in both medical debt and bankruptcy. 

That finding echoed a recent JAMA Surgery study of patients’ perceptions of financial hardship after undergoing surgery: People with private, mostly employer-provided insurance reported a greater increase in financial vulnerability than those with public coverage. 

The problem stems from several factors, including high out-of-pocket deductibles, often exceeding $1,700 to $2,500 annually, and out-of-network charges common in emergency situations. 

“This is a uniquely American problem,” said Scott, who was senior author of the JAMA Surgery paper, as well. “People get injured all over the world, but in other high income countries they almost never end up in medical debt or file for bankruptcy because of those injuries.”  

The explicit purpose of insurance, he added, “is to protect policyholders from overwhelming debt and bankruptcy. It’s the same reason people buy any kind of insurance.”  

The researchers received funding from the Agency for Healthcare Research and Quality (K08 HS28672, K08 HS028817). 

In addition to Scott and Becker, the study’s authors include Mark Hemmila, M.D., MTQIP Director and U-M Professor of Surgery; Nicholas Kunnath, M.S., a Senior Statistician at the U-M Center for Healthcare Outcomes and Policy; John Z. Ayanian, M.D., M.P.P., IHPI director and U-M Professor of medicine, public policy and public health; A. Mark Fendrick, M.D., U-M Professor of internal medicine and director of the U-M Center for Value Based Insurance Design; and Justin Dimick, M.D., M.P.H., Chair of the U-M Department of Surgery. Andy Ryan, Ph.D., a former U-M faculty member and IHPI member now at Brown University, is also an author.

Changes In Medical Debt And Bankruptcy After Acute Traumatic Injuries, 2019–21, Health Affairs, DOI:10.1377/hlthaff.2025.00847