Report Examines Medical Debt among Insured Individuals

As many as 1 in 3 Americans report having difficulty paying their medical bills—defined as individuals having trouble affording medical bills within the past year, or they are gradually paying past bills over time, or they have bills they cannot afford. A recently published Kaiser Family Foundation report explored the factors leading to medical debt through case studies of 23 insured individuals. The participants’ circumstances were consistent with the findings of other studies of medical debt, according to the researchers.

The report titled Medicare Debt among People with Insurance identified common causes and consequences of medical debt and discussed how provisions of the Patient Protection and Affordable Care Act (ACA) may influence the factors that contribute to medical debt. The study found that health plan cost-sharing is the primary reason for medical debt among this patient population.

To gain more insight into the problems and causes of medical debt, researchers from the Kaiser Family Foundation and Georgetown University Health Policy Institute collaborated with Atlanta-based CredAbility—a nonprofit consumer credit counseling agency—to identify individuals struggling with medical bills and study their experiences. The researchers developed an online screening survey to send to clients who recently had trouble paying medical bills. The survey requested information including insurance status and coverage changes, the total amount and types of medical bills, and whether illness triggered other problems. Of the 123 respondents identified to take the screener survey, 23 completed 60-minute interviews providing detailed information about their medical bills, insurance coverage, and financial status.

The participants ranged in age from 20 to ≥60 years and lived in various states. Their annual incomes ranged from <$10,000 to >$100,000. A majority (n=13) was insured continuously in job-based group plans; 2 were covered in nongroup policies; 2 were insured at the outset of illness, and then lost coverage; and 3 were uninsured the entire time. For most of the study participants, this instance of medical debt was the first time they had experienced serious financial or credit problems. Expenses incurred due to the onset of illness, accident, or pregnancy were not anticipated and the respondents were unable to pay. Nine respondents faced medical debt ranging from $20,001 to $50,000.

Contributors to Medical Debt

The researchers’ analysis of the 2012 National Health Interview Survey data, used as context for the report’s case studies, found that the problem of medical debt is widespread (Figure). The main contributor to medical debt was cost-sharing for care covered by their insurance, according to study findings. Of the 23 respondents, 17 reported high-cost sharing burdens (ie, ≥$10,000 per person, per year). Some respondents had limited incomes and/or cash savings that made paying even a few thousand dollars a challenge. This was compounded by factors such as out-of-network expenses. Many hospitalized individuals were inadvertently placed with an out-of-network provider, adding significantly to the cost of care.

Coverage limits and exclusions and costly premiums also caused problems. For example, several individuals were left to pay health expenses their policy did not cover. Other participants fell into debt trying to pay health insurance premiums they could not afford.

Loss of income due to illness also exacerbated medical debt. In 18 of the 23 case studies, a significant reduction in household income occurred when a medical event left them unable to work or prompted a family member to quit or reduce hours to be a caregiver. Fifteen of the respondents used credit cards to pay at least some of their medical bills, which also contributed to the size and scope of their debt.

Consequences of Medical Debt

All survey respondents reported that medical debt triggered other hardships and financial instability. Nearly all respondents experienced considerable damage to their credit rating, and many had not experienced credit problems before the medical bills. Emotional distress was also reported. Respondents expressed feeling shame or embarrassment about medical debt. Most experienced economic deprivation and drastically reined in household spending in the face of debt. They did without heating oil, groceries, and glasses for their children.

Furthermore, 8 people interviewed depleted long-term assets to pay medical bills. Medical debt has also been shown to contribute to housing instability. The findings indicated that several respondents found their homes threatened by medical bills, while some fell behind on rent or mortgage payments for a few months. Although some of the respondents were able to get caught up, others never recovered and lost their homes.

Medical bills are a leading cause of personal bankruptcy in the United States, contributing to 62% of personal bankruptcies in 2007, according to the report. Of the 23 participants, 15 had filed for bankruptcy.

The ACA will bring considerable improvements in the health system coverage that may prevent or reduce some of the medical debt problems experienced by the respondents and others. These include subsidies and market reforms for nongroup coverage, cost-sharing limits under private health plans, end of annual dollar limits, essential health benefits standards, and consumer access.

However, the ACA will not address all the underlying causes of medical debt. For example, high-cost sharing will persist under many plans. “The ACA establishes an affordability standard for health insurance premiums, but not for out-of-pocket medical expenses,” the researchers noted. “Even with limits on cost-sharing established under the ACA, deductibles and other cost-sharing will continue at a level above what many people could afford if a significant illness or injury strikes.”