Medical debt has long been pointed to as a major contributor to Americans' personal financial woes and personal bankruptcy filings. While some try to counter that contention, evidence keeps emerging to fuel the debate.
A recent analysis from the Kaiser Family Foundation examined the issue and found that simply having insurance is no guarantee that medical debt will not become burdensome for individuals.
Cost-sharing mechanisms such as deductibles were often the beginning of the story, said Karen Pollitz, a senior fellow at the Kaiser Family Foundation. High deductibles, copayments and coinsurance have made health insurance premiums more affordable, but put people at risk to pay bills that exceed their emergency savings. This scenario is compounded by wages stagnating across the country. Out-of-network charges were also problematic, Pollitz and others at Kaiser found.
“Most of the people we talked to didn't really feel they were underinsured,” Pollitz said. “They felt they were pretty well protected.”
Kaiser officials conducted a series of case studies interviewing people who had trouble paying their medical bills. They found that many people in that subset actually had what they believed were pretty mainstream, job-based health plans.
Last month, the newly formed Consumer Financial Protection Bureau found that nearly 43 million Americans have unpaid medical bills. The average medical debt is $1,766.
The situation could pose serious problems for consumers. Unpaid medical bills lead to collections agencies, and “once you're turned over to collections, it could hurt you for years,” Pollitz said. Consumers then find it's harder to apply for a credit card or refinance their home mortgage. “It's really the gift that keeps on giving,” she said. “And it's not a very nice one.”
However, some healthcare policymakers have said the relationship between medical debt and bankruptcy has been overstated. A 2005 study said more than half of all personal bankruptcies were due to medical bills. But economists David Dranove and Michael Millenson countered that widely publicized finding in a study in 2006, arguing that they could find only a “causal link in only 17% of personal bankruptcies.”
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