Medical Debt Points To Holes in Health Insurance Industry

The widespread nature of medical debt in the US indicates that there are holes in the health insurance system, researchers from the Peterson-Kaiser Family Foundation (KFF) Health System Tracker found.

“Medical debt can happen to almost anyone in the United States, but this debt is most pronounced among people who are already struggling with poor health, financial insecurity, or both,” the researchers found.

The researchers leveraged Survey of Income and Program Participation (SIPP) data to assess medical debt, specifically individuals who had significant medical debts of more than $250 in December 2019.

Nine percent of American adults had significant debt. Medical debt was more likely after a stretch of more than six months without insurance. Thirteen percent of the individuals who had been uninsured for over six months had medical debt of over $250.

However, the researchers noted that having health insurance was not necessarily a shield against medical debt. Nine percent of individuals who had been insured for a whole year or who had experienced up to six months of uninsurance had medical debt.

Private insurance coinsurance, copays, and deductibles can bury members who have a serious health event. Chronic disease management costs can also accrue over time as well as denied claims and out-of-network services.

Individuals in lower income brackets were also more likely to have significant medical debt. Twelve percent of adults between zero and 199 percent of the federal poverty level and 12 recent of those between 200 and 399 percent of the federal poverty level had significant medical debts. 

However, even among individuals with higher incomes, medical debt was a concern for some share of the population. Nearly one in ten individuals with incomes between 400 and 599 percent of the federal poverty level (nine percent) had medical debt along with four percent of those whose incomes met or exceeded 600 percent of the federal poverty level.

Health status was a major indicator of whether or not an individual was likely to have medical debt along with income and race. Most individuals who had medical debt were in fair or poor health. Additionally, 16 percent of those who owed medical debt were non-Hispanic Black individuals.

Although the researchers set the threshold for “significant debt” at $250, most individuals who were in medical debt owed a much higher sum. Slightly less than a quarter of all individuals who have medical debt (22 percent) owe between $2,001 and $5,000. Thirteen percent of those who owe medical debt owe more than $10,000.

Although the share of individuals who owe over $10,000 in medical debt makes up only one percent of the US adult population, this group owes slightly more than 70 percent of all medical debt in the country. This one percent of Americans shoulders approximately $138 billion in medical debt.  

"The fact that medical debt is a struggle even among households with health insurance and middle incomes indicates that simply expanding coverage will not erase the financial burden caused by high cost-sharing amounts and high prices for medical services and prescription drugs,” the researchers concluded.

Medical debt was fairly evenly spread across the age range, with the highest concentration in the 35- to 64-year-old age bracket. 

For younger individuals, medical bills may create fiscal challenges since individuals in this bracket may already be burdened with student loans, separate studies have indicated.

But those who, traditionally, have been outside of the academic system for a long time are not safe from medical debt, a MedicareGuide.com survey revealed. The MedicareGuide.com survey found that nearly three in ten seniors over the age of 65 had $500 or less available for medical emergencies and one in five had no savings for medical emergencies. 

The Peterson-KFF Health System Tracker brief noted that insurance does not necessarily protect Americans from medical debt. 

This was corroborated separately by an Urban Institute brief which found that certain plan types are associated with medical bill problems. Specifically, high deductible health plans—particularly when combined with low incomes—can leave insured individuals struggling to pay their medical bills.