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Medical Debt Among People With Health Insurance

An estimated 1 in 3 Americans report having difficulty paying their medical bills – that is, they have had problems affording medical bills within the past year, or they are gradually paying past bills over time, or they have bills they can’t afford to pay at all.1  Medical debt – and a host of related problems – can result when people can’t afford to pay their medical bills. While the chances of falling into medical debt are greater for people who are uninsured, most people who experience difficulty paying medical bills have health insurance.   Medical debt can arise when people must pay out-of-pocket for care not covered by health insurance or to which cost-sharing (such as deductibles) applies.  Medical debt might also result from health insurance premiums that individuals find difficult to afford.2  The consequences of medical debt can be severe.  People with unaffordable medical bills report higher rates of other problems – including difficulty affording housing and other basic necessities, credit card debt, bankruptcy, and barriers accessing health care.

This report examines medical debt through case studies of nearly two dozen people who recently experienced such problems, and reviews their experiences in light of other studies and surveys about medical debt. It focuses primarily on problems of medical debt among insured individuals and families.  Most of the case studies feature people who struggled with medical debt while covered under health plans that would be considered typical and mainstream today.   The report concludes with a discussion of how provisions of the Affordable Care Act (ACA) may influence the factors that contribute to medical debt.

Study Approach

In order to gain more detailed insights into the problems and causes of medical debt, we collaborated with a national, non-profit credit counseling agency to identify individuals struggling with medical bills and study their experiences.  We partnered with ClearPoint Credit Counseling Services (ClearPoint),3 a non-profit consumer credit counseling agency based in Atlanta, Georgia, that provided counseling and debt management services to over 200,000 people nationwide in 2011.  Most ClearPoint clients self-refer when they are in financial distress, for example, when they can no longer make minimum payments on loans and debts or when they’re contacted by debt collectors.  Others are referred for recommended or required counseling, for example, when they apply for mortgage foreclosure relief or file for bankruptcy. In 2011, roughly 12 percent of ClearPoint clients identified medical bills as the first or second leading cause of their financial difficulties.

We developed an online screening survey to send to clients who had recent difficulty paying medical bills and for whom email addresses were available. The survey requested information not already collected by ClearPoint, such as insurance status and coverage changes, the total amount and types of medical bills, and whether illness triggered other problems, such as job loss or missed rent or mortgage payments. It was also used to identify individuals with medical debt who were willing to participate in in-depth interviews.  Of the 129 respondents to the screener survey, 23 completed hour-long interviews providing detailed information about their medical bills, insurance coverage and financial status.  While neither ClearPoint clients – nor survey respondents or interview subjects – can be considered representative of the broader population, their circumstances are consistent with findings of other studies of medical debt.  This report examines the case studies in light of these other, broader studies.

A brief overview of each case study is displayed in Table 1.  Stories of the 23 people interviewed appear in the Appendix.  Several key characteristics of these individuals and their circumstances are summarized in Table 2.

 Table 1: Case Study Overview
Name * Age Occupation Income (% FPL) Insurance Source Amount Bills Bill Timeline Whose Bills?
Ben 59 Trucker $68,000 (590%) Large employer $5,000 2012 Self
Kris 56 Construction $38,000 (330%) Large employer $6,000 2011 Self
Kieran 43 Car dealer $75,000 (240%) Large employer $20,000 2007-2011 Spouse, children
Sonya 49 Homemaker $85,000 (360%) Large employer $60,000 1994-2011 Self, son
Stuart 48 Sales manager $74,000 (315%) Large employer $6,000 2010-2011 Spouse
Duncan 45 Teacher $50,000 (255%) Large employer $10,000 2010-present Spouse
Maisy 51 Librarian $66,000 (280%) Large employer $30,000 2004-2011 Spouse
Richard 36 Financial adviser $130,000 (550%) Large employer $30,000 2007-2011 Self, daughter
Dorothy 59 Teacher $34,000 (300%) Large employer $4,500 2011-2012 Self
Gwen 57 Medical transcriptionist $22,000 (140%) Large employer $40,000 2011 Spouse
Dillon 48 Repairman $59,000 (529%) Large employer $19,000 2003-2010 Self
Jeanne 64 Retired $24,000 (220%) Large employer $2,000 2010-2011 Self
Safiya 22 Restaurant worker $10,000 (90%) Large employer $5,000 2011 Self
Connie 47 Nurse $50,000 (210%) Small employer $36,000 1996-present Spouse, children
Elsie 37 Writer $60,000 (310%) Small employer $20,000 2007-2009 Self, child
Katherine 46 Customer service rep $19,200 (167%) Small employer $35,000 2006-2009 Self
Morgan 51 Entertainer $51,000 (220%) Non-group $35,000 2008-2012 Self
Millie 52 Realtor $65,000 (340%) Non-group $20,000 2007-present Self
Louise 58 Unemployed N/A Interrupted $50,000 2005 Self
Gillian 59 Artist $10,000 (90%) Interrupted $10,000 2009-2010 Self
Claire 44 Unemployed N/A Uninsured $50,000 2008-2011 Self
Tanisha 47 Unemployed N/A Uninsured $7,000 2008 Self
Charlene 51 Teller $38,000 (195%) Uninsured $23,000 2010-2011 Self, daughter
* Names and certain other characteristics of individuals have been changed to protect their identity.* Names and certain other characteristics of individuals have been changed to protect their identity.
Table 2:  Case Study Highlights
Characteristic Number of Cases
Age  < 30 1
  31-40 2
  41-50 9
  51-64 11
Amount of medical bills/ medical debt < $5,000 4
  $5,001 – $10,000 5
  $10,001 – $20,000 4
  $20,001 – $50,000 9
  > $50,000 1
Time period bills incurred < 1 year 6
  1-2 years 4
  > 2 years 13
Whose bills? Self or one family member 17
  Multiple family members 6
Household income <$20,000 6
  $20,000 – $50,000 7
  $51,000 – $75,000 8
  $76,000 – $100,000 1
  >$100,000 1
Illness triggered income loss? Yes 18
  No 5
Health insurance source Large employer 13
  Small employer 3
  Non-group 2
  Uninsured 3
  Coverage interrupted 2
Health plan deductible (per person)* <$500 3
  $501 – $1,000 5
  $1,001 – $2,500 3
  >$2,500 6
Significant out-of-network costs* Yes 7
  No 11
Other medical debt impacts Damaged credit 21
  Lost home/home equity 6
  Deplete retirement, other savings 13
  Other financial deprivation 9
  Bankruptcy 15
  Access to care barriers 5
* Insured cases only

Key Interview Themes

Together, these cases reveal cross cutting themes and insights into the problem of medical debt, its causes and potential solutions.

Medical debt can affect almost anyone. People we interviewed ranged in age from 20s to 60s and lived in various states.  Some were single, others headed families.  Their annual incomes ranged from less than $10,000 to more than $100,000.  Most were insured continuously in job-based group plans; a few were covered in non-group policies.  Two others were insured at the outset of illness, and then lost coverage. Three were uninsured the entire time.  For most in our study, this instance of medical debt was the first time they had experienced serious financial or credit problems. The onset of an illness, accident, or pregnancy generated expenses that they did not anticipate and which they were unprepared to pay.   Some faced tens of thousands of dollars in medical debt.  For others, just a few thousand dollars of bills proved unaffordable, particularly when a chronic illness meant bills would continue year after year.

Among insured individuals, unaffordable medical debts resulted primarily from cost-sharing for care covered by their insurance.  Some insured people faced exceedingly high levels of health plan cost-sharing (e.g., $10,000 or more per person per year).  For most, though, much smaller amounts proved unaffordable.   Some with limited incomes and/or cash savings had trouble paying even a few thousand dollars.   Others might have been able to handle a single year of cost-sharing liability for one person, but when treatment spanned two plan years or when more than one family member made significant claims, cost-sharing expenses multiplied and became unaffordable.

Out-of-network charges also proved burdensome. Typically health plan coverage is less for care rendered by non-network providers.  Many people inadvertently received non-network care while hospitalized.  Though they had selected a network facility, other hospital-based professionals whom they did not and could not select – such as anesthesiologists and emergency physicians – were not in network.  As a result, patients owed much more out-of-pocket than expected.

Coverage limits and exclusions and unaffordable premiums also caused problems. In some cases, patients were left to pay bills for care their policy simply didn’t cover.  Some also fell into debt trying to pay health insurance premiums they couldn’t afford.

Related problems can often exacerbate medical debt. Often significant health events triggered loss of income, rendering unaffordable bills that might otherwise have been manageable.  For the vast majority of those interviewed, the medical event associated with the debt also left the patient unable to work or prompted a working family member to quit or reduce hours in order to become a caregiver.   Significant health events can also compromise a person’s ability to manage the paperwork of medical bills.  Nearly all those interviewed emphasized how the sheer volume of bills during a major health event was overwhelming.  They had trouble tracking what had been paid, what was owed, and what had been transferred to collections.  Their task was made more difficult by confusing provider bills and insurance company statements that lacked key information.  Most didn’t know where to seek help, and the burdens of illness made it harder to resolve problems on their own.

Once it starts, medical debt can be hard to stop. Most of those interviewed struggled for years to climb out of medical debt, and for some, new debts arose even after prior ones had been resolved.  This was the case for people with chronic health conditions as well as for people with high medical bills from a single health event.   Fifteen of those interviewed used credit cards to pay at least some of their outstanding medical bills, and resulting finance charges increased their debt.

Medical debt can trigger other severe consequences. The economic and personal impact of medical debt can be devastating.  Most of those interviewed ended up declaring bankruptcy as a direct result of high medical bills.  Others depleted retirement or college savings, lost homes to foreclosure, or did without basics such as home heat.  Almost all suffered damage to their credit rating.  Some eventually bounced back from medical debt problems while others permanently reduced their standard of living.  Some people experienced barriers to care.  Nearly all expressed a strong ethic to pay their bills and deep regret, even shame, to be in medical debt.

Incidence of Medical Debt