A new report released this month from the Kaiser Family Foundation captures some of the characteristics of medical debt in the United States. The authors conducted a qualitative study with 23 Americans from a broad range of socioeconomic background and age. In each of the hour-long interviews the respondents detailed their experiences incurring medical debt, as well as the ensuing struggle to manage the consequences. The results focus on the most salient, sometimes surprising, features of such occurrences and the possibility for change under the Affordable Care Act.
As the authors note the incidence of medical debt in America is quite pervasive. Their analysis of data from the National Health Interview Survey show that nearly one in three non-elderly adults said they struggled with managing medical debt in 2013. While the chances of falling into debt are greater for the uninsured, as the report shows, most experiences occur while having insurance and “covered under health plans that would be considered typical and mainstream today.”
Here is the breakdown in a graph:
As the study authors explain, the “vast majority of people with medical debt (70%) are insured. People with employer-sponsored coverage make up the bulk (54%) of medical debt cases.”
Medical debt can be a burden for anyone, so while the authors interviewed people whose income ranged from 90-550 percent of the federal poverty line, all struggled with managing debt incurred from medical expenses. Most of them had employer-sponsored insurance but the onset of accident, illness, or in some cases pregnancy, produced costs that they were unable to cover. The authors also write that, “[f]or most in our study, this instance of medical debt was the first time they had experienced serious financial or credit problems.”
What made those expenses unaffordable even though most were insured? The cost-sharing components included in their health plans. While the specific nature of each person’s obligation varied they all strained to handle some portion of their in- and out-of-network costs, or co-pays and coinsurance for prescription drugs. Some ran up against coverage limits in their policy, while others faced premiums that became unsustainable.
The authors explain that cost-sharing features in health plans can quickly exceed the available finances of many Americans. Using data from a 2010 Consumer Financial Survey, they show that the median household carries net assets of $5,200 or less:
With such a shallow personal financial net it doesn’t take much to start accruing medical debt. Even for more income-secure households who have to manage medium to long-term medical bills can see their resources exhausted. For the interviewees, especially for those with chronic conditions, it wasn’t just medical bills that became a burden. They were less able or likely to work and had difficulty managing other financial obligations. Trying to escape those debts became long, humiliating struggles, and most of those interviewed “ended up declaring bankruptcy as a direct result of high medical bills.”
This is largely the picture of people having having to bear the cost of a health care system with little mercy for those unfortunate enough to fall into an all-too common financial trap. This is also a situation that some of the reforms contained in the Affordable Care Act seeks to redress. The report discusses these aspects, including many that would have substantially helped those interviewed: subsidies to help pay for insurance premiums, a prohibition against annual and maximum out-of-pocket expenses, and mandated essential health benefits.
Yet private health plans offered in a post-ACA system will still contain relatively high cost-sharing. An out-of-pocket limit of $6,350 is out of reach for many households, as the table referenced earlier shows. Also, as the law “does not limit the cost-sharing that plans can apply” when patients receive non-emergency care, people can continue to face too-high out-of-network costs. This is all to say that there is still plenty of “skin in the game” in the ACA, enough to ensure that medical debt problems will continue to persist. For many supporters of the law, including myself, that is one of the larger drawbacks to an otherwise admirable policy.
Note: Originally posted at The McLean Parlor.