The wealth of healthcare facilities, technology, and therapies in the United States are unavailable to most of the world. But for most Americans in need of medical care, our nation’s unparalleled resources are fast becoming a bane. It’s no secret that the US healthcare system often leaves its patients unwieldy co-payments. And for those lacking the financial means to do so, these costs can quickly add up to medical debt. But what is the true extent of medical debt in the US? How is it affecting individuals and communities? And how can those lucky enough not to suffer from medical debt work to alleviate the problem for those who do?
The more likely you are to need medical care, the more likely you are to suffer from medical debt. Unlike other types of debt that come from things like buying a house, buying a car, or even going to college, medical debt is not entered into voluntarily. People in higher income brackets are better able to pay unexpected bills, while for those with limited financial resources, even the smallest unforeseen medical expenses can be unmanageable. As such, medical debt is highest in low-income ZIP codes, disproportionately affecting areas that often already suffer the brunt of systemic oppression.
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Healthcare costs have skyrocketed over the past fifteen years. According to a 2018 report by the Health Care Cost Institute, health care costs increased 16 percent from 2012 to 2016 — excessive growth compared to the 4.5 percent inflation rate over the same period. In cities like New York and Tampa, medical care prices rose nearly 22 percent. In a 2021 annual employer survey, the Henry J. Kaiser Family Foundation (KFF) found that the average annual deductible for a single person is $1,669, four times the average deductible cost in 2006. The combined weight of escalating medical prices and rapidly increasing insurance Interest rates have exploded into a debt crisis for Americans on a daily basis.
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A study by JAMA, released in 2021 and published by the American Medical Association, found that nearly 18 percent of Americans owed debt collectors $140 billion in medical debt — a figure that lacks data from the pandemic and yet almost double the $81 billion that JAMA estimated Americans owed in 2016. Another study conducted by KFF that examined various federal data from the 2020 Income and Program Participation Survey concluded that Americans owed more than $195 billion in medical debt in 2019.
The Burden of Medical Debt, photo via Peterson-KFF Health System Tracker
One of the most damaging effects of medical debt is its cyclical nature, in which it simultaneously traps patients and prevents them from getting the care they need. For fear of not being able to pay for care due to excessive deductibles or other factors, individuals are discouraged from seeking preventive treatments – treatments that may help avert emergency situations. However, when emergencies arise, this lack of preparedness often results in extreme costs and resulting debt that patients are trying to avoid in the first place. George Halvorson, former CEO of Kaiser Permanente, explained in a study conducted by Kaiser Health News (KHN) that “people go bankrupt when they get care, even if they have insurance.”
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The US healthcare system not only keeps people from getting the care and treatments they need, but also actively denies care to those who have already accumulated medical debt. According to KHN’s study, 1 in 7 people with medical debt say they have been denied access to care because of unpaid bills. The study also found that major healthcare systems such as Northwell Health, Trinity Health, Mayo Clinic and Kaiser Permanente will take legal action against insolvent patients. In fact, over two-thirds of hospitals have policies that allow them to sue patients or even garnish their wages.
The burden of medical debt is felt not only in the lives of individuals but also in all communities, deepening systemic inequalities. According to the KFF analysis, Hispanic adults are 35 percent more likely and Black adults 50 percent more likely to have outstanding health care bills than white adults. Women also report more medical debt than men due to childbirth-related costs combined with lower median incomes. Additionally, adults under the age of 30 are almost twice as likely to suffer from medical debt as those aged 65 and over. By exacerbating and reinforcing long-standing, pervasive social inequalities, medical guilt is, at its core, a discriminatory practice.
Medical Debt by Demographics, photo via Peterson-KFF Health System Tracker
Despite the insidious nature of medical debt, efforts to lower rates in recent years have shown both improvements in access to healthcare and economic benefits. The 2013 expansion of Medicaid under the Affordable Care Act proved to be one of the most effective fighters against medical debt in the US. In fact, Medicaid expansion has been so effective that as of 2020, medical debt levels in the 11 states that declined to participate were over 30 percent higher than participating states. Because population well-being is a concern closely tied to the nation’s economic well-being, a KFF review of numerous studies found that Medicaid not only benefited patients, but also had “overwhelmingly positive effects of expansion on [healthcare] Providers.” The same detailed analysis found that the financial impact of Medicaid expansion on states had additional “beneficial impacts, including budget savings, revenue increases, and overall economic growth.”
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Along with Medicaid’s expansion in 2013, from startups to nonprofits, there are a number of independent companies and organizations working to both cancel medical debt and make the process of paying for health care more transparent. Ribbon Health, a startup and API data platform, is working to aggregate data to help patients find quality and affordable care. Turquoise Health, a similar company, has collected over a billion records of pricing data from over 4,000 hospitals. On its website, it also offers an easy and convenient search engine for patients to find out what the costs might be at their local hospitals. On the nonprofit side, RIP Medical Debt is an impressive 501 charity that simply buys medical debt from the collections market and then promptly forgives it. As of August 2022, the group has cleared 3.6 million people of $6.7 billion in medical debt.
The ever-rising rates of medical debt – which even conservative estimates consider alarming – show that healthcare costs in the United States are spiraling out of control. Despite the obvious benefits of debt relief, cost transparency, and expanded Medicaid coverage, the underlying cost issue remains, making the future of medical debt a worrying issue.
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