Medical debt is a big problem in the United States. For years, it’s been the No. 1 reason people file for bankruptcy — even though the more common assumption is that those struggling financially have been overspending in other areas of their life.
Luckily, bankruptcy can be a helpful solution for a lot of people. It’s not easy to get out of debt alone, but filing for Chapter 7 bankruptcy allows a person to keep most of their property AND rid themselves of medical debt and other types of unsecured debt, like credit card bills and personal loans. As we’ll discuss below, many Americans don’t have the cash to take on all of their medical bills, so they’ll rack up credit card spending or visit a payday lender after blowing through their savings. Bankruptcy puts an end to all this. Plus, those annoying creditors will stop calling.
If you’ve ever thought you knew a lot about why people file for bankruptcy, think again. These 10 facts about U.S. medical debt may come as a surprise.
Per capita, the U.S. spends more per person on health care than any other country.
The United States spends more than $9,000 per person on health care per year. While this might initially sound like a good thing, it’s not — despite its high spending, our country doesn’t have the best health outcomes. For instance, the U.S. ranks 12th in life expectancy among the 12 wealthiest industrialized countries.
About 1 in 10 adults delay medical care.
Nearly one in 10 adults reported delaying or not receiving medical care due to cost in 2015. However, the rates of cost-related access barriers were lower than in any other year during the period of 1998 to 2015 for low-income people as well as those classified in worse health. Dental care, prescription drugs, and eyeglasses are the first things people give up because of health costs.
A $500 unexpected medical bill is too much to pay for many people.
According to a Kaiser Health Tracking Poll in 2017, 45% of Americans said they’d have a difficult time paying an unexpected $500 medical bill. About 19% wouldn’t be able to pay it at all, while 20% would put it on a credit card and pay it over time. Others said they’d need to borrow money from a friend, a family member, a bank, or a payday lender.
Meanwhile, 1 in 5 working-age Americans with health insurance have trouble paying off their medical bills.
According to a Kaiser Family Foundation and New York Times survey conducted in 2016, 20% of Americans with health insurance found that when trying to pay off their medical bills, they had serious financial challenges and even changes in employment and lifestyle. For those uninsured, the number rose to 53%. Although it’s clear insurance helped in terms of people’s ability to make payments, about the same amount of people — insured and uninsured alike — still said their medical bills had a huge effect on their families.
More than 60% of insured Americans with medical bills blow through most or all of their savings.
From that same survey, people with health insurance still make sacrifices to pay their medical bills, including going through their savings. Many also take on an extra job or work more hours (42% of respondents) or borrow money from family or friends (37%). Eleven percent seek the aid of a charity.
Another near 60% of people who have problems paying their medical bills have been contacted by a collection agency in the past year.
This goes for both people with and without health insurance, according to the Kaiser/New York Times survey. Fifty-five percent of people with insurance and medical bill problems say they are just getting by or don’t have enough to make ends meet. About one-third of all those with medical bills were unable to pay for basic necessities like food, heat, or housing.
The good news: Nearly 13 million fewer people have medical bill problems today than they did 5 years ago.
According to the National Center for Health Statistics, the percentage of persons under age 65 who were in families having problems paying medical bills over a 12-month period decreased from 21.3% (56.5 million) in 2011 to 16.2% (43.8 million) in the first 6 months of 2016. Of all families with persons under age 65 in 2016, here’s the breakdown of those who had trouble paying their medical bills: 28.5% were uninsured, 21.1% had public coverage, and 12.6% had private coverage.
However, 7% of adults struggling with medical bills over the past two years have declared bankruptcy.
A 2015 poll done by NPR, Robert Wood Johnson Foundation, and the Harvard T.H. Chan School of Public Health found that 7% of respondents declared bankruptcy due to their health care costs over the previous two-year period. Other ways medical bills affected families? Nearly 20% reported taking out a loan that would be difficult to pay back, while 23% piled on credit card debt.
Some bankruptcy attorneys have noticed fewer medical bankruptcies since the Affordable Care Act (ACA) aka Obamacare rollout.
While the controversial Affordable Care Act has certainly helped some people (20 million became insured through it), it’s unclear how much of an effect the universal health care law has had on bankruptcies. People aren’t required to declare why they’re filing bankruptcy, though we know many do so because of medical debt.
We polled some of our member attorneys on if the repeal of Obamacare would increase medical bankruptcies. Here are the results:
- 58% felt an Obamacare repeal would increase medical bankruptcies
- 34% thought it would have no impact
- 8% thought it would increase medical bankruptcies
Despite ACA, health insurance has become less affordable since 2015.
More people with health insurance have had a difficult time affording their health care since 2015. For premiums in 2017, 37% now find it difficult to pay versus 27% just two years ago. Meanwhile, 43% are having a hard time paying their deductibles in 2017 while just 34% were struggling in 2015. And finally, copays and prescription drugs seriously affected 31% of people in 2017 versus 24% in 2015.
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If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed over a thousand cases. We can help you now. Come in or call in for your free initial consultation.
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