Unemployment and Catastrophic Medical Expenses Not Factors for Active Duty Military Personnel

The 23.6 percent increase in personal bankruptcy filings for the U.S. population may not result in a similar increase in bankruptcies for active duty military personnel because (1) an increase in civilian unemployment for fiscal years 1999 through 2003 was not a factor for active duty military personnel and (2) all active duty military personnel and their families have medical coverage. Unemployment and medical expenses have been shown to be related to bankruptcy filing.

The relationship between filing for bankruptcy and unemployment is illustrated by the findings from one study in which over two-thirds of the individuals filing for bankruptcy had job-related financial stress, with layoffs being identified as a major factor.[Footnote 7] For each of the fiscal years from 1999 through 2003, an increase or a decrease in the total number of U.S. personal bankruptcy filings was accompanied by an increase or a decrease in the unemployment rate for the same fiscal year (see table 1). In contrast to the changing unemployment picture for civilians, active duty military members--by definition-- were employed for each of the 5 years, in the sense that each military member received a regular salary while on active duty.[Footnote 8]

Table 1: Changes in Bankruptcy Filings and Overall Unemployment in the U.S. Population for Fiscal Years 1999-2003:

Sources: Administrative Office of the U.S. Courts for number of bankruptcy filings; GAO's analysis of court data for the percent change in bankruptcies; and GAO's analysis of unemployment rates from the U.S. Department of Labor, Bureau of Labor Statistics.

DOD provides employee benefits that include health coverage to more than 1.3 million active duty service members and their nearly 2 million spouses and other dependents. The health care for active duty service members and their dependents costs the federal government about $9 billion per year. For active duty service members, this benefit offers care in military treatment facilities and does not require enrollment fees or co-payments for care or drugs obtained from military treatment facilities.[Footnote 9] In addition, legislation in 2000 eliminated co- payments for the families of many active duty military personnel. Medical coverage for all DOD active duty personnel and dependents is unlike the coverage for the population in a study that found approximately one household in five citing medical-related problems (e.g., medical costs and loss of income during illness or accident) as a reason for filing bankruptcy.[Footnote 10] Given that health coverage can be a benefit offered as part of employment compensation, a higher unemployment rate may indicate that more of the U.S. population was placed at risk for medical expenses.

[7] See Teresa A. Sullivan, Elizabeth Warren, and Jay Lawrence Westbrook, The Fragile Middle Class: Americans in Debt (New Haven, Conn.: Yale University Press, 2000). The authors noted that job-related financial stress was implicated in over two-thirds of the more than 2,400 bankruptcy filings they examined. They also noted that while layoffs were a major factor in the decision to file for bankruptcy, other serious job-related trouble could result even if workers had a job, because the job may change and both income and benefits may erode.

[8] Active duty military families may, however, be influenced by civilian unemployment trends if spouses of military personnel become unemployed.

[9] If military treatment facilities are not available or if service member families choose to use civilian doctors or medical facilities, two other health care programs provide service member families with extensive coverage for medical costs, including a $1,000 annual catastrophic cost cap.

[10] See Sullivan et al., The Fragile Middle Class: Americans in Debt.

Last reviewed October 2022