Medical bills in the United States are one of the leading causes of bankruptcies. According to the Kaiser Family Foundation, 100 million adults in the United States owe healthcare debts. 50% of Americans can’t afford to pay healthcare bills without incurring debts, and even when they do, it takes a big hit on their finances.
In this content piece, we’ll be looking at the state of healthcare debts, forms, and how the government is helping to reduce these debts.
State of Healthcare Debt in America
In a report made by Kaiser and NPR, healthcare debt in the U.S in 2019 was more than $195 billion. CNBC reported that 55% of American adults owe healthcare debt. Let’s see how they broke down healthcare debt into different forms:
- 10% borrowed money from family and friends
- 17% have healthcare debts on their credit cards
- 17% owe banks, collection agencies, and lenders
- 21% are on payment plans with their health-providers
- 24% are unable to pay off, or their bills are overdue
11 Most Common Bills that Lead to Healthcare Debts
According to Kaiser Foundation, these are the most common medical bills leading to healthcare debts:
- Lab fees and diagnostic tests: 59% of lab fees and diagnostic tests lead to people owing healthcare debts in the United States. These bills are expensive that they eat deep into the pockets of many American, which lands them in healthcare debts.
- Doctor Visits: In the U.S, doctor visits sit at the second spot, with 56% of bills leading to healthcare debts. It shows that many Americans can’t instantly pay bills incurred when visiting doctors.
- Emergency care: 50% of emergency care bills led to healthcare debts. People who suddenly required emergency care became indebted since they couldn’t offset their debts.
- Dental care: Dental care bills of 49% are why people who got dental care owe.
- Hospitalization: 35% of hospitalization bills account for why many Americans are indebted to health providers.
- Prescription drugs: Prescription drug bills of 30% are why people who medications are owing to healthcare debts.
- Outpatient surgery: 27% of the bills incurred after outpatient surgery accumulated in health-care-related debts.
- Ambulance services: 20% of ambulance service bills led to people owing healthcare debts.
- Mental health: People incurred bills caring for their mental health. 20% of these health care bills turned out to be healthcare debt.
- Pregnancy and childbirth: 12% of the bills incurred during and after pregnancy made up healthcare debts.
- Long-term care services and support: 8% of the people who used health providers for long-term benefits couldn’t clear payments, which turned into healthcare debts.
What is the U.S Government Doing to Help Reduce Healthcare Debt?
You are probably wondering what the U.S. government is doing to help reduce medical bills to curtail healthcare debt. In April 2022, the Biden-Harris administration announced that they would ensure some measures were in place to reduce medical bills and improve the living conditions of Americans.
Here are four of those measures:
- Consumer rights education
Consumer rights education has been in place before. But this time, the Consumer Financial Protection Bureau (CFPB) will take it upon themselves to ensure that consumers understand these medical bills.
They will provide tools and materials to help consumers understand their rights and responsibilities in the simplest terms to reduce complexities. The CFPB will also ensure that they look into healthcare providers’ threats and ill-treatment of consumers.
- Help over half a million veterans in financial hardship
Veterans who prove they are facing financial difficulties will have their medical debts forgiven. Veteran Affairs is in charge of making these medical debts incurred by low-income veterans go away. VA reported having refunded and canceled close to $1 billion copayments from/to 1.5 million veterans since the pandemic began.
Additionally, unlike before, VA ensures seamless applications for veterans with financial debts. Consumer reporting agencies will no longer receive VA reports on unfavorable medical debts.
- Reducing the effect of medical debt on accessing credit
Medical debt on credit reports is used to reduce the creditworthiness of consumers. Even when patients pay off these debts, their credit scores can reduce by 22 points.
The Biden-Harris administration wants private and government credit reporting agencies to reduce the effects of medical debts on credit scores. It is vital because when Americans can’t get loans due to low credit scores, life becomes more complex, especially during the pandemic.
In March, the three largest credit reporting agencies — TransUnion, Experian, and Equifax announced that they would stop adding certain forms of medical debts to consumer credit reports.
The government is leading by example by making it possible for Americans to secure FHA-backed mortgages even if they owe medical debt.
- Demand accountability from healthcare providers and collection agencies
When healthcare providers and collectors aren’t held accountable, it leads to maltreatment of the consumers (patients). One of these wrongs is predatory lending and payment plans that put consumers into debt.
Some healthcare providers sell these medical bills to third-party collectors, making life unbearable for consumers. And also, reports have it that lawsuits against consumers from healthcare providers are increasing by the day.
The federal government is charging CFPB to curb illegal collection practices by these healthcare providers. CFPB also ensures that credit reporting agencies or collectors don’t trample on consumers’ rights during debt collection processes.
Healthcare providers are said to complicate access to federal healthcare funds from the federal government.