A Significant Chunk of Americans Is Still Facing Harsh Medical Debt

Wasn’t the Affordable Care Act supposed to put an end to this?

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Can’t afford to take a vacation this year? Wondering where your savings went? Don’t blame bad financial management. The culprit might be your medical bills.

That’s the distressing finding of a new survey by the New York Times and the Kaiser Family Foundation, which found that about 20 percent of men and women under 65 with health insurance last year still claimed the cost of health care caused them significant financial strain. How so? As Drew Altman, the president of the Kaiser Family Foundation, put it, “The major impact is actually a pocketbook or economic impact: their ability to pay the rent or the mortgage or buy food.”

Wasn’t the Affordable Care Act, which has dramatically increased the number of insured Americans, supposed to put an end to this?

Well, yes. And no.  

The Affordable Care Act guarantees access to health insurance for working-age Americans. It requires insurance plans to cover preventive services. It has led to a decrease in the number of Americans between the ages of 18 and 64 living in families experiencing issues paying medical bills, from 20.6 percent in 2011 to 17.3 percent in 2014. Yet for at least a significant minority of people, it is increasingly obvious that it has not made the cost of seeing doctors and other medical professionals affordable.

The problem goes back to the idea that people need to have “skin in the game” to help control medical costs. The theory is that people who are forced to pay a part of their medical coverage will turn into hyperinformed consumers and aggressively shop for medical care.

Unfortunately, it turns out health care, even when people try to cut their bills, doesn’t really work that way. Pricing is opaque. People need to see a doctor when they need to see a doctor—no one plans to get a serious illness, after all. Medical care in the United States is expensive.

And there are any number of ways to stick people with doctor bills. The most obvious are the increasingly common high-deductible plans, where the amount a consumer needs to come up with before insurance kicks in is in the four figures. That increases someone’s chances of health care financial woes by more than 50 percent, according to the Kaiser report on the survey. And we’re increasingly likely to have high-deductible plans. According to a report released last year by the Health Research Institute at PricewaterhouseCoopers, 1 in 4 employers only offered a high-deductible plan last year.

But other costs are for things people thought would be covered and discover after the fact that they are not. Increasingly narrow doctor and medical-provider networks leave people more likely to find themselves on the receiving end of a surprise medical bill that goes uncovered. Limited pharmaceutical formularies cause woes, too. As one person told the surveyors, “Cancer. Current treatment is not FDA approved for certain cancers, so even though the treatment is working, it is no longer covered by insurance and costs approximately $11,000 a month.”

But small—or smaller—bills play a roll too. “Eyeglasses not covered. Orthotics not covered,” claimed another. “I had a tooth that went bad and had to have it pulled. I now need another tooth in its place. The dentist wants all the money for the procedure up front. I do not have thousands of dollars to give.”

The result? Over a 12-month period, more than 1 in 3 insured and uninsured households where total income was less than $50,000 reported struggling with the burden of medical bills. That shrinks to an only slightly less astonishing 1 in 4 households for those earning between $50,000 and $100,000 annually. The problem was so pervasive that 14 percent of households with six-figure incomes also claimed they couldn’t keep up with their health care bills.

The impact on household finances is often disastrous. More than three-quarters of people with insurance experiencing problems paying for medical care said they “put off vacations or other major purchases” because of medical bills. Seventy percent of the group said they cut back on food, clothing, and other basic items. Just under 60 percent said they went through all or almost all of their savings. More than a third said they borrowed money from friends, or increased credit card debt. A little more than a quarter of the group withdrew money from retirement, college, or other savings accounts. Thirteen percent of those turned to a payday lender.

Less of surprise, the numbers were high for those without insurance too, with 64 percent of uninsured people with medical bills that overwhelmed their financial resources saying they had cut back on major purchases and 62 percent cutting back on food or clothing. Moreover, 34 percent of people with insurance and 39 percent of those without who experienced medical-related financial woes reported not being able to pay for food, heat, or housing. 

If all this sounds too dry, these people put it in more evocative words. “Cold showers, can’t fix plumbing,” one told the surveyers. “Not getting groceries some weeks to get by,” said another. “Can’t take the kids anywhere.”  

Kaiser’s report concludes by noting that this information can be used to “help policymakers and others as they work on solutions to alleviate the burden of medical debt on American families.” This is something of an optimistic statement. While a number of states are taking on the issue of balance-billing—that is, the difference between what a doctor will take and insurance will pay—at least when it comes to addressing this in Congress, Washington is gridlocked.

None of this should come as a surprise. The idea that we need “skin in the game” is a lot more questionable when people are ill. Never mind competitive shopping for medical services. Just under 30 percent of those who were struggling with health care bills told the surveyors that someone in their household had to cut back their work hours or cease paid employment entirely, either because of their own illness or to help take care of someone else. Less money coming in as bills increase is a formula for financial woe.

Moreover, household incomes are near stagnant, even as medical costs continue to increase, albeit at a slower rate than before Obamacare became law. Surveys routinely show about half of us are living paycheck to paycheck. A sudden $500 bill has the ability to send all too many financial lives careening. People don’t suddenly acquire the ability to spin gold out of straw simply because their debts are related to a medical bill. Debt, after all, is debt.