Health Affairs, 25, no. 2 (2006): w89-w92 (Published online 28 February 2006) doi: 10.1377/hlthaff.25.w89 © 2006 by Project HOPE	New Online   McAllen, TX & Beyond: An Expert Roundtable   Geography & Reform   Medicaid or Insurance Exchange?   Siren Song of New GME   Public Plan Option: Pro & Con

This Article Abstract Reprint (PDF) Submit a response to this article Alert me when this article is cited Alert me when Comments are posted Alert me if a correction is posted Services E-mail this article to a friend Similar articles in this journal Similar articles in PubMed Alert me to new issues of the journal Add to My Personal Archive Download to Citation Manager Reprints & Permissions Citing Articles Citing Articles via HighWire Citing Articles via Google Scholar Google Scholar Articles by Seifert, R. W. Articles by Rukavina, M. Search for Related Content PubMed PubMed Citation Articles by Seifert, R. W. Articles by Rukavina, M.

Web Exclusives

PERSPECTIVE

Bankruptcy Is The Tip Of A Medical-Debt Iceberg

Abstract

 
Medical bankruptcy, whatever its actual frequency, is an extreme example of a much broader phenomenon. Medical debt is surprisingly common, affecting about twenty-nine million nonelderly adult Americans, with and without health insurance. The presence of medical debt, even for the insured, appears to create health care access barriers akin to those faced by the uninsured. Policymakers, researchers, and medical providers should consider medical debt a risk factor for reduced health access and poorer health status. Simply reducing the number of uninsured Americans would be a hollow policy victory if the problems arising from medical debt persist.

Bankruptcy is the extreme example of financial overextension, as medical bankruptcy is at the extreme end of the spectrum of medical debt. Whatever the level of medical bankruptcy, the actual problem is much greater because medical debt, as is becoming increasingly apparent, is pervasive and damaging not only to personal finances but to health care access as well.

While health care is an important part of the U.S. economy and a vital service, access to care is by no means universal. For many Americans, health insurance coverage is elusive, making it difficult to access health care services. Between 2000 and 2004, the number of Americans without health insurance increased by six million, reaching 45.8 million in 2004.²

Given health care cost trends, it is likely that the ranks of the uninsured will continue to grow. Health insurance premiums increased 73 percent between 2000 and 2005, while workers’ wages increased 15 percent and the general rate of inflation was approximately 14 percent.³ For Americans with health insurance, the vast majority have employment-based coverage, although the proportion of workers receiving coverage through their employment is falling. Approximately 60 percent of Americans received coverage through the workplace in 2004, a decrease from 64 percent in 2000.⁴

The average worker with employment-based coverage paid premiums of $2,713 for family coverage in 2005, an increase of $1,094 since 2000. As premiums are rising, employees face additional cost burdens from deductibles and copayments for hospitalization, office visits, and prescription drugs.⁵

Health insurance premiums and out-of-pocket costs capture only part of the true cost of health care for many U.S. families, however. The full financial burden of health care must also take into account medical debt or money owed for medical products or services.

Medical debt adds to the financial burden of premiums and cost sharing. Medical debt is surprisingly common. A recent national survey found that one out of six nonelderly adults—about twenty-nine million people—had recent or accrued medical debt.⁶ The risk of medical debt is greater for people without health insurance, but even those who are insured are not immune; 15 percent of those who had insurance for all of the past twelve months reported having medical debt, and 70 percent of all those with debt said that they were insured at the time the debt was incurred.⁷ Many of these people could be characterized as "underinsured"—nominally covered but inadequately protected.⁸

Another national survey found more than fifty-eight million U.S. adults at high risk of incurring medical bills they might not be able to afford.⁹ This figure included more than forty million adults who were uninsured for all or part of the previous year and 17.6 million adults with private insurance reporting substantial problems paying their medical bills.

The Access Project has done community-based research around the country; its findings are similar to these national survey data. A 2000 study conducted in twenty-four communities found that almost half of the nearly 7,000 uninsured respondents had unpaid bills or were in debt to a particular safety-net facility in their community.¹⁰ The Access Project’s 2005 study of low-income taxpayers in seven communities again found that 46 percent had medical debt.¹¹ The problem of medical debt also plagues middle-income Americans. Fully half of those with private insurance and medical debt had household incomes of more than $40,000; among this group, one-third were college graduates or had postgraduate educations.¹²

Medical debt is a barrier to access. Analyses of access to care often compare insured and uninsured groups; however, it appears that the care-seeking behavior of privately insured adults with medical debt is much more like that of uninsured people. On a number of standard access measures, respondents to a national survey reported that medical debt, even among insured people with a "medical home," presents nearly as high a barrier to access as having no insurance at all.¹³

People with medical debt—both uninsured and those with private insurance—are much less likely than those without debt to fill a prescription, see a specialist when needed, or visit a doctor or clinic for a medical problem, and they are more likely to skip a needed test, treatment, or follow-up.¹⁴ In a recent study, just over one-quarter of those with medical debt said that they changed primary care doctors because of the money they owed for care.¹⁵ Among uninsured people who owed money to a safety-net provider, one-quarter said that they would be deterred from seeking care at that facility in the future.¹⁶

Many of the reasons for forgoing needed care because of debt are self-imposed: pride, embarrassment, or simply the reluctance to add to one’s debt burden. Other reasons, though, are imposed from outside. Providers, for example, might require a deposit or full payment in advance from patients who owe for past services. Some have policies to refuse services outright—sometimes to all family members—until past-due bills are paid.¹⁷ And many hospitals use aggressive, punitive debt collection practices, including outside collection agencies and lawsuits, that might serve to deter patients from seeking further care if they are unable to pay promptly.¹⁸

Financial consequences of medical debt. The consequences of medical debt ripple far beyond health care access. Medical debt undermines families’ economic security in various ways. Often, families exhaust savings trying to pay off medical debt. One national survey found that 44 percent of those with medical debt used all or most of their savings to pay outstanding medical bills. Families also trade medical debt off for other types of debt. In the same survey, one in five medical debtors took on large credit card debt or a loan against their home to pay medical bills.¹⁹ These debts can also be contagious. About two in five people with medical debt in an Access Project study in Kansas borrowed money from friends or family to pay their medical bills.²⁰

People with medical debt are often subject to legal judgments, wage garnishment, attachment of assets including bank accounts, or liens on their homes, which can lead to foreclosure.²¹ It is typical for people with medical debt to be contacted by collection agencies, experience employment problems, and have difficulties accessing loans or credit.²² It is clear that even before it pushes some families to the crisis of bankruptcy, medical debt destabilizes the finances of a sizable number of Americans and thus creates strong incentives not to seek needed medical care.

Implications and recommendations. The annual estimate of uninsured Americans has long been seen as a reliable proxy for the state of health care access. This simple measure would allow us to claim victory when (and if) new policies succeed in reducing the number of uninsured Americans. That victory will be a meaningless one, however, if we disregard the access barriers faced by the underinsured and those with medical debt.

Recent research findings cry out for new our country is addressing the health care access issue. It is now documented that medical debt resulting from being uninsured or having inadequate insurance reduces access to care and undermines the financial security of American families. Thus, this debt is, in itself, a risk factor for reduced access and poorer health status.

Policymakers, researchers, and medical providers should all be encouraged to focus attention on this risk factor. Financial protection must be a tenet of health insurance. Insurance products that require patients to pay more and more of the cost of their care through higher deductibles and copayments must take into account the income of patients in setting cost-sharing limits. Requiring additional costs to be borne by the patient will likely have a detrimental effect on access, particularly for those with chronic illnesses, although low-wage workers and even middle-income families may be at risk as well.

To truly improve health care access for Americans, it is time to expand our policy vocabulary beyond insurance coverage and begin to examine the adequacy of that coverage in ensuring health access and improving health status and financial security.

Editor's Notes

 
Robert Seifert (rseifert{at}accessproject.org) is the policy director of the Access Project in Boston, Massachusetts. Mark Rukavina is its executive director. The Access Project is a resource center for local communities working to improve health and health care access.

The authors thank the W.K. Kellogg Foundation, the Quantum Foundation, the Annie E. Casey Foundation, the Missouri Foundation for Health, and the United Methodist Health Ministries Fund for their support of the Access Project’s work on medical debt. Carol Pryor offered helpful comments. The views expressed are solely those of the authors.

NOTES

Top NOTES

 

1. D. Dranove and M.L. Millenson, "Medical Bankruptcy: Myth versus Fact," Health Affairs 25 (2006): w74–w83 (published online 28 February 2006; 10.1377/hlthaff.25.w74).[Abstract/Free Full Text]
2. C. DeNavas-Walt, B.D. Proctor, and C.H. Lee, Income, Poverty, and Health Insurance Coverage in the United States: 2004, Pub. no. P60–229 (Washington: U.S. Census Bureau, 2005).
3. G. Claxton et al., Employer Health Benefits: 2005 Annual Survey (Menlo Park, Calif.: Henry J. Kaiser Family Foundation, 2005).
4. DeNavas-Walt et al., Income, Poverty, and Health Insurance Coverage.
5. Claxton et al., Employer Health Benefits.
6. M.M. Doty, J.N. Edwards, and A.L. Holmgren, "Seeing Red: Americans Driven into Debt by Medical Bills," Issue Brief (New York: Commonwealth Fund, August 2005).
7. Ibid.
8. A study based on the Commonwealth Fund’s health insurance survey estimated that about sixteen million adults were underinsured in 2003. C. Schoen et al., "Insured but Not Protected: How Many Adults Are Underinsured?" Health Affairs 24 (2005): w289–w302 (published online 14 June 2005; 10.1377/hlthaff.w5.289).
9. C. Hoffman, D. Rowland, and E.C. Hamel, Medical Debt and Access to Health Care (Washington: Kaiser Commission on Medicaid and the Uninsured, 2005).
10. D. Andrulis et al., Paying for Health Care When You’re Uninsured: How Much Support Does the Safety Net Offer? (Boston: Access Project, 2003).
11. R.W. Seifert, Homesick: How Medical Debt Undermines Housing Security (Boston: Access Project, 2005).
12. Hoffman et al., Medical Debt.
13. Ibid.
14. Doty et al., "Seeing Red."
15. C. Pryor and J. Prottas, Playing by the Rules but Losing: How Medical Debt Threatens Kansans’ Healthcare Access and Financial Security (Boston: Access Project, 2006).
16. Andrulis et al., Paying for Health Care.
17. Ibid.; and Pryor and Prottas, Playing by the Rules.
18. T.P. O’Toole et al., "Medical Debt and Aggressive Debt Restitution Practices: Predatory Billing among the Urban Poor," Journal of General Internal Medicine 19, no. 7 (2004): 772–778.[Medline]
19. S.R. Collins et al., "The Affordability Crisis in U.S. Health Care: Findings from the Commonwealth Fund Biennial Health Insurance Survey" (New York: Commonwealth Fund, 2004).
20. Pryor and Prottas, Playing by the Rules.
21. G. Rollins, Uncharitable Care: Yale–New Haven Hospital’s Charity Care and Collections Practices (New Haven: Connecticut Center for a New Economy, 2003); and L. Lagnado, "Twenty Years and Still Paying," Wall Street Journal, 13 March 2003.
22. Schoen et al., "Insured but Not Protected"; Seifert, Homesick; and Pryor and Prottas, Playing by the Rules.

                      What's this?

This article has been cited by other articles:

				D. M. Bernard, J. S. Banthin, and W. E. Encinosa Wealth, Income, And The Affordability Of Health Insurance Health Aff., May 1, 2009; 28(3): 887 - 896. [Abstract] [Full Text] [PDF]

				M. F. Newton, C. C. Keirns, R. Cunningham, R. A. Hayward, and R. Stanley Uninsured Adults Presenting to US Emergency Departments: Assumptions vs Data JAMA, October 22, 2008; 300(16): 1914 - 1924. [Abstract] [Full Text] [PDF]