Medical Debt

“I’ve stopped checking my mail,” said Travis, overwhelmed by the past-due medical bills and collections notices piling up in his mailbox. He was behind on everything except his mortgage. To make matters worse, Travis’ wife was in need of extensive medical care but—because they were behind on payments—the medical provider would not extend care until they started paying again.

Unfortunately, Travis’ situation is all too familiar. It seems like every week another family is in the news, sharing their story about unexpected medical bills, unaffordable healthcare costs, or being so burdened by medical debt that they have to file for bankruptcy. These stories aren’t anomalies; they’re very much a reflection of reality: one in four Americans are struggling to pay medical bills; 70% of Americans are paying for significant healthcare costs; and medical bills are the number one cause of all U.S. bankruptcies.

Causes of Medical Debt
One reason why medical debt is so pervasive is because no one is immune to the increasing costs of healthcare. It’s a problem that affects most age groups, communities, and socioeconomic levels. Even those who think they’re well-insured or financially responsible can find themselves saddled with bills amounting to tens of thousands of dollars. In fact, more than 50% of Americans with medical debt have no other debt on their credit reports.

However, the bills themselves aren’t the only problem. If a person becomes sick or is caring for a sick loved one, he/she might have to take time off work, resulting in lost income. This leaves someone with not only less money for medical bills but for other necessary expenses like mortgage payments, groceries, and car repairs. More than 60% of those who file for bankruptcy name loss of income to due illness or care-taking as their reason for bankruptcy.

Finally, people just don’t have the knowledge or resources to avoid costly medical situations (or at least mitigate the short and long-term consequences) because health insurance benefits and the healthcare system itself are incredibly complicated. For instance, a patient may seek emergency care in a hospital that’s a part of his/her provider network. But this doesn’t mean all of the physicians that see the patient (ER doctor, radiologist, etc.) are also in the same network. The result? A “surprise” bill in the mail that’s more costly than expected. From finding an in-network healthcare provider to verifying if a procedure requires prior approval, confusion lurks around every corner—and both people and businesses are paying the price.

There are limited options outside of bankruptcy for those who don’t have the means to pay off expensive medical bills. And many of these options can cause further financial strain or lead to physical and/or emotional health problems. In order to afford medical bills:

  • 70% of Americans say they cut back spending on food, clothing, or other basic needs
  • 59% say they use most or all of their savings
  • 41% say they take on extra hours or work an additional job
  • 34% say they increase their credit card debt

The Human & Business Cost
It’s obviously no secret that medical care is expensive. So, to avoid medical debt altogether, people simply stop going to the doctor: 32% of Americans have postponed necessary medical care due to costs and 21% of Americans have skipped a doctor recommended medical test or treatment. Skipping necessary medical treatments can exacerbate current illnesses or cause new ones—ultimately making people sicker.

High healthcare costs can also impact a person’s health in other ways. The majority of people with medical expenses cut back on their basic needs in order to pay the bills. This could mean skimping on food and nutrition or cutting out some meals entirely, making it harder for a sick person to get healthy. On the business side, sick employees are costing U.S. employers $530B in illness-related lost productivity. The largest portion of this cost is attributed to absenteeism (missing work due to illness) and presenteeism (present at work but not working at full capacity).

Additionally, a person’s emotional well-being can take a serious hit due to the repercussions that follow neglected medical bills. Once these bills go to collections, it can affect every part of a person’s life, including preventing them from renting an apartment, having utilities in their name, or securing loans for a vehicle or a home. Fifty-seven percent of Americans with incomes lower than $50,000 are stressed about their medical bills. This financial stress not only impacts a person’s home life, but it can follow them to work. All in all, stressed-out employees are costing businesses more than $300B a year.

Unfortunately, medical costs will continue to rise until the systemic issues within the healthcare system are addressed. According to the California Health Care Foundation, spending on healthcare is projected to grow 5.5% a year, reaching $6 trillion by 2027. Despite the rising costs, employers can support their workers now by helping them navigate costly medical situations. WorkLife Partnership’s Health Benefits Navigator can:

  1. Help your employees understand their current health benefits so they can better predict medicals costs and avoid “surprise” bills
  2. Coach your employees on conversations with collections agencies
  3. Connect your employees to community resources to help alleviate some of their financial burden

Want to learn more about WorkLife’s Health Benefits Navigator Service? Contact us.