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4 surprising facts you didn't know about healthcare debt

Article

While many people blame poor spending habits for bankruptcy, the number one reason is medical debt.

healthcare debt, medical debt, health insurance, patients

©nito/Shutterstock.com

While many people blame poor spending habits for bankruptcy, the number one reason is medical debt. 

The U.S. spends more per person on healthcare than any other country in the world. According to the Centers for Medicare & Medicaid Services, this spending came to the tune of $3.5 trillion, or $10,739 per person, in 2017.

The worst part is that everyone from patients to providers don’t fully understand medical debt and the detrimental effect it has on patients and the healthcare industry as a whole. Check out these four surprising facts about healthcare debt: 

1. More than 60 percent of Americans deplete their savings to pay off medical debt 

Nearly all of us have had to dip into our savings to pay off a bill or an unexpected expense. However, according to a Kaiser Family Foundation and New York Times survey, 60 percent Americans have completely drained their savings in order to pay off their medical debt.

What many will find surprising is that this statistic includes those who have health insurance. In today’s healthcare landscape, even those with health insurance are struggling to pay increasing out-of-pocket expenses. In fact, of the population with health insurance, 42 percent pick up extra jobs and 37 percent have admitted to borrowing money from family members to pay their medical bills. With that in mind, it’s important that providers identify these patients early on and take action to prevent debt from getting this far. 

2. Health insurance has continued to become less affordable since 2015

While recent laws have actually made insurance itself more affordable, the barriers to entry have continued to rise along with deductibles. When people cannot pay their deductible, more debt is created, leading to prices rising even more. It’s a vicious cycle that has forced millions to stop taking their medications. Many insurance policies follow an 80/20 coinsurance model; however, even after 80 percent of an expense is covered by insurance, the remaining 20 percent can still be impossible to pay for some patients. 

3. Approximately 1 in 10 adults delay medical care due to cost

Medical treatment is starting to take a back seat in family budgets. Currently, the average cost of a primary care visit is $200, and the average cost of a hospital stay sits at $15,734. With looming costs like that, many patients delay medical care, which can result in life-threatening conditions being discovered too late to receive effective treatments. Once again, this statistic includes those who are medically insured. To combat this alarming issue, providers need to be transparent when discussing costs with patients and proactively help in setting up payment plans and options. 

4. Debt creates rising medical care prices

According to a 2012 report, healthcare spending is growing at 1.5x the rate of growth of GDP and is already close to 20 percent of the economy. What does this mean for prices? Well, the cycle continues since this debt forces the industry to raise prices in order to compensate for the difference, ultimately creating more debt for everyone.

For example, 20 percent of Americans would have to charge an unexpected $500 medical bill to a credit card and pay it off over time. With the average credit card interest rate at nearly 16 percent, it becomes incredibly difficult to catch up and pay off the charge. 

There seemingly is no end in sight when it comes to the vicious cycle of medical debt. Providers with an effective revenue cycle management strategy can work to help patients reduce their debt load and reduce their own charge off liability. Ultimately, these RCM strategies should help providers keep track of payments and help patients keep their payments on a schedule which works for them. If payments are frequently made on time and in full, less debt will continue to be created. 

Steve Scibetta is the vice president and general manager at Ontario Systems. Shawn Yates is the director of product management at Ontario Systems

 

 

 

 

 

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