Medical bills have brought hardship on millions of U.S. families. It isn't just hurting those who have no health insurance, it is creating hardship for the insured as well. Exclusions and pre-existing medical conditions regularly mean that insured people don't receive coverage and have no alternative but to use their personal savings, make repayments over many months, develop credit card debt or even declare medical bankruptcy.
Statistical Evidence of the Effect of Medical Bills
- Almost two-thirds of Americans (116 million) who are under the age of age 65 had debts that were caused in-full or part by medical bills.
- 39% used all their personal saving to pay their medical debts.
- One-third of working-age Americans currently spend in excess of 10% of their income on paying health insurance or other medical expenses.
- 30% accrued credit card debt to pay their medical bills.
- 28% of those with medical debts are trying to pay them off with monthly repayments.
- 27% had a problem with, or were unable to pay, their medical expenses.
* The above figures were provided by the commonwealthfund.org in August 2008.
Paying Medical Bills with a Credit Card
Choosing to pay medical bills with a charge card is considered unwise because the rate of interest is higher than other sources of borrowing. The Consumer Action credit card survey in July 2008 stated that the median interest rate on an outstanding card balance was 13.54%. If a balance isn't cleared in-full at month end it can lead to high APR credit card debt that is difficult to escape.
Medical Bankruptcy Soars
A report by Harvard Medical School stated that 62% of all personal insolvencies occurred as a result of health problems. In 1981, this figure was just 8%. What was more surprising was that 78% of those filing for medical bankruptcy had health coverage. No health insurance was not the issue.
- Individuals filing for medical bankruptcy with health insurance in-place had a median healthcare-related debt of $17,749.
- Those with no health insurance at all had a median medical bill of $26,971.
* Figures provided by Harvard Medical School.
The Link Between Credit Card Debt and Medical Bankruptcy
The Common Wealth Fund report estimated that as many as 21 million Americans accrued credit card debt due to medical bills. Whilst there is no evidence to suggest that medical bankruptcy is less likely due to having no health insurance, more people experience financial difficulties as a direct result.The process is as follows:
- Medical debts are dealt with by a collection agency.
- The healthcare provider takes out a court judgement with respect to the amount owed.
- The balance owed to the healthcare provider is cleared with a charge card. Instead of medical debt, high APR credit card debt is now the issue.
- Financial difficulties set-in and the debtor is unable to make repayment. In order to escape unaffordable credit card debt, they file for medical bankruptcy.
How to Deal with Medical Bills
- Review healthcare bills as many have errors that favor the hospital. Should the figures not be accurate, dispute them as early as possible.
- Ask if there is any charitable assistance.
- Try to avoid clearing the cost of healthcare with a credit card.
- Work out a monthly repayment plan to clear medical bills at an affordable rate.
Credit card debt and medical bankruptcy are the outcome of unaffordable medical bills. Whilst having no health insurance doesn't help matter, this isn't the only group that is affected. Try to take reasonable steps to deal with the debt. Always review hospital bills, ask if charitable help is available and try to reach a monthly repayment plan in order to clear any outstanding medical debts.
Sources
Girion, Lisa. (4 June, 2009). "Medical bills pay a role in 62% of bankruptcies, study says." Los Angeles Times.
Prescription for paying your medical bills - mycesi.org
creditcards.com
commonwealthfund.org - August 2008
Consumer Action credit card survey - July 2008
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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