Crushed by COVID-19 Medical Bills, Coronavirus Victims Need Debt Relief Under the Bankruptcy Code and Workers’ Compensation Laws
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Crushed by COVID-19 Medical Bills, Coronavirus Victims Need Debt Relief Under the Bankruptcy Code and Workers’ Compensation Laws Creola Johnson* ABSTRACT After the U.S. declared COVID-19 a pandemic, cracks in the U.S.’s fragile privatized healthcare system were exposed. At the start of the pandemic, 74 million U.S. residents were already uninsured or underinsured. To date, over 7.7 million recently terminated employees have lost their employer-provided health insurance, while over 24.6 million individuals have been infected with COVID-19 and 800,000 have been hospitalized. As a result, coronavirus survival often comes with astronomical medical bills like the $1.1 million hospital bill received by Michael Flor, a 70-year-old survivor who spent 62 days in the hospital for treatment. This Article examines how the U.S.’s flawed healthcare system and federal bankruptcy law may work together to unfairly penalize debtors burdened with medical debts arising from treatment for an infectious disease, like COVID-19. The financial fate of many burdened with infectious-disease medical bills will depend on whether a court characterizes such bills as “consumer” debts. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, individuals with “primarily consumer debts” are subject to a complex calculation known as the “Means Test.” Debtors who have their massive medical bills characterized as non-consumer debts are allowed to wipe out those bills quickly in a Chapter 7 case. Debtors who have such bills characterized as consumer debts and who fail the Means Test are forced into a five-year repayment plan in a Chapter 13 case, where they pay down their unsecured debts, including medical bills. As a result, courts * Creola Johnson ([email protected]), Presidents’ Club Professor of Law, The Ohio State University, Michael E. Moritz College of Law. Thanks to my mentors, Professor Patrick Bauer and retired Magistrate Judge Nadine Ballard, and my research assistant Meghan McDonnell. 453 454 PENN STATE LAW REVIEW [Vol. 125:2 are effectively penalizing debtors who lack adequate health insurance and who involuntarily contract a contagious disease. To prevent such perverse results, this Article proposes that bankruptcy law be amended to exclude infectious-disease medical bills from the definition of consumer debt. Also, to obviate the need for some individuals to file for bankruptcy relief, this Article proposes that workers’ compensation (“workers’ comp”) laws be amended to include COVID-19 as an occupational disease for any “essential worker,” as defined in each state, so that infected essential workers can have their medical bills paid from workers’ comp funds. If a former U.S. president infected with COVID-19 was considered essential for the nation’s survival and, therefore, entitled to taxpayer-funded medical care in state- of-the-art facilities, then front-line employees—who are required to work for the benefit and survival of us all—should absolutely receive COVID- 19 treatment at no cost to them. Legislative action is especially needed due to the current spread of new, highly contagious mutations of COVID-19 in the U.S. With the proposed legislative amendments in place, the U.S. would ensure that survivors are protected from financial devastation due to involuntarily contracting an infectious disease. 2021] CRUSHED BY COVID-19 MEDICAL BILLS 455 Table of Contents INTRODUCTION ................................................................................................. 455 I. THE COVID-19 VIRUS, A BROKEN HEALTHCARE SYSTEM, AND A FLAWED BANKRUPTCY REFORM........................................................... 461 A. COVID-19 Is the Perfect Example of a Pathogen That Can Lead to Enormous Medical Debts ................................................ 462 B. A Flawed Bankruptcy System Leaves Certain Debtors Burdened with Enormous Infectious-Disease Medical Debt ....... 475 II. BANKRUPTCY COURTS ARE SPLIT ON THEIR CHARACTERIZATION OF MEDICAL DEBTS ................................................................................... 479 A. Case Law That Holds Medical Debt Is Consumer Debt Can Effectively Derail a Debtor’s Fresh Start in a Chapter 7 Case ..... 480 B. Case Law That Holds Medical Debt Is Not Consumer Debt Affords High-Income Debtors a Debt Discharge and, Therefore, a Fresh Start ................................................................ 481 C. Resolving Differences in the Sijan and Zgonina Cases in Light of the Current Coronavirus Pandemic .......................................... 482 III. PROPOSED SOLUTIONS TO PROVIDE RELIEF TO CONSUMERS BURDENED WITH INFECTIOUS-DISEASE MEDICAL DEBTS ....................................... 490 A. Amend Workers’ Compensation Law to Include a COVID-19 Infection as an Occupational Disease for Consumers Employed in Essential Jobs .......................................................... 490 B. Amend the Bankruptcy Code to Exclude Infectious-Disease Medical Debt from the Definition of Consumer Debt.................. 494 CONCLUSION .................................................................................................... 498 INTRODUCTION On a cold January day, William Sijan, suffering from a fever and struggling to breathe, went to the local emergency room (“ER”).1 The ER doctors diagnosed him with severe pneumonia and told him that he needed to be admitted immediately.2 Mr. Sijan initially objected but relented after the doctors said that he would be dead within hours if he refused treatment.3 Thereafter, he was intubated and put on a ventilator machine for two weeks.4 He received treatment in the hospital for an additional four weeks to be cleared of pneumonia.5 He then underwent physical therapy for ten weeks to regain sufficient strength to return to 1. See In re Sijan, 611 B.R. 850, 852 (Bankr. S.D. Ohio 2020). 2. See id. 3. See id. 4. See id. at 852–53. 5. See id. (stating that he was treated in the intensive care unit (ICU) for three more weeks and, subsequently, isolated in the hospital for another week before being released). 456 PENN STATE LAW REVIEW [Vol. 125:2 work.6 He ended up owing over $324,600 in medical debts.7 Of that amount, Broward Health Medical Center was by far his largest creditor, sending Mr. Sijan a bill for $300,550.99.8 Because Mr. Sijan could not pay his six-figure medical debts,9 he ended up filing for Chapter 7 bankruptcy relief.10 His medical bills comprised nearly 90% of all his unsecured debts.11 In other words, enormous medical bills drove Mr. Sijan into bankruptcy, not excessive consumer spending. Prior to 2005, Mr. Sijan’s Chapter 7 bankruptcy case would have been simple and unremarkable; that is, it would have been closed within a matter of a few months, and Mr. Sijan’s enormous medical debt would have been wiped out—discharged.12 However, in 2005, President George W. Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA),13 intending to force more individual debtors out of Chapter 7 cases and into Chapter 13 cases, where they have to pay back a portion of their unsecured debts through a mandatory five-year plan.14 The United States Trustee (the “Trustee”), after scrutinizing Mr. Sijan’s documents, concluded that Mr. Sijan had $1,408 in monthly disposable income15 and that, over a five-year plan, he could make 60 monthly payments yielding a total payout of $84,480 to 6. See id. at 853. 7. See id. 8. See id. 9. See Official Form 106A/B: Schedule A/B: Property of William H. Sijan at 3, In re Sijan, 611 B.R. 850 (Bankr. S.D. Ohio 2020) (No. 19-53347). 10. See In re Sijan, 611 B.R. at 853. 11. See id. 12. See THOMSON REUTERS, BANKR. PRACTICE HANDBOOK § 4:2 (2d ed. 2020) (stating that “a Chapter 7 debtor will receive a discharge after a few months, and in most cases without doing anything after the requisite documents are filed other than attending a meeting of creditors”). 13. See Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 102, 119 Stat. 23 (codified as amended at 11 U.S.C. § 707 (2014)). 14. The BAPCPA has been widely criticized as a flawed reform law for numerous reasons. See, e.g., Jean Braucher, Bankruptcy 2.0(05) Chapters, Changes, and Challenges: A Fresh Start for Personal Bankruptcy Reform: The Need for Simplification and a Single Portal, 55 AM. U. L. REV. 1295, 1319–20, 1322 (2006); Sara Sternberg Greene, The Failed Reform: Congressional Crackdown on Repeat Chapter 13 Bankruptcy Filers, 89 AM. BANKR. L.J. 241, 248 (2015). 15. Under the BAPCPA, if a debtor’s income is above median and if his debts are primarily consumer debts, the debtor is forced to complete the “Means Test,” a complex mathematical formula that determines whether the debtor has sufficient disposable income to pay towards unsecured debt. See 11 U.S.C. § 707(b)(2)(A)(i) (2018) (indicating that the Means Test creates a presumption of abuse to be rebutted by the debtor); Morse v. Rudler (In re Rudler), 576 F.3d 37, 50 (1st Cir. 2009) (“A number of courts have in fact concluded that a specific intent to limit the bankruptcy court’s discretion underlies the means test and accounts for Congress’s adoption of a ‘mechanical formula’ for presuming abuse of Chapter 7.”). 2021] CRUSHED BY COVID-19 MEDICAL BILLS 457 unsecured creditors.16 Therefore, the Trustee asked the bankruptcy court to characterize Mr. Sijan’s medical debts as “consumer” debt and to dismiss his Chapter 7 case unless Mr. Sijan agreed to convert it to a Chapter 13 case and use all his disposable income to pay down his unsecured debt, almost all of which was medical debt.17 Unfortunately, other debtors in Mr. Sijan’s position may face similar legal challenges from the Trustee, who seeks to have their enormous medical debts characterized as consumer debts and attempts to require them to spend five years in Chapter 13 bankruptcy paying off those debts.18 This Article contends that medical bills arising from a debtor’s treatment for an infectious disease, including the novel coronavirus, COVID-19, should be considered “non-consumer” debt because the debtor’s contracting of an infectious pathogen is involuntary, the debtor’s medical treatment is not an elective service, and the debtor’s treatment benefits all U.S.