A recent study published by the Kaiser Family Foundation, indicates that 41% of American adults – or nearly 100 million people – face medical debt stemming from medical bills. Due to employers shift to high deductible health plans, consumers bear a much higher financial burden associated with healthcare services and pharmaceuticals. Employees remain unprepared for the financial burdens that arise from medical bills, as evidenced by the percentage of Americans that have medical debt outstanding.
Shift to high deductible health plans
The percentage of Americans that are enrolled in high deductible health plans has doubled over the past 10 years. This growth has led to a fundamental shift in healthcare payment responsibility. Within high deductible health plans, employees are required to pay for 100% of their medical bills up to their deductible. In 2021, the average deductible for an employer-based single plan was $1,669. However, 42% of Americans have less than $1,000 in savings.
Let’s say you have an unplanned emergency room (ER) visit where the average cost in the U.S. is $2,200.
|ER Medical Bill||The amount you owe||But you only have||You take on debt of|
The $669 you can’t pay becomes medical debt, which you will owe to a medical debt lender (e.g. CareCredit) or your credit card company.
Now you have medical debt
Medical debt acts like any other debt you might have like a mortgage, auto loan, or credit cards. It will turn that $669 into a series of monthly payments. The average interest rate on medical debt is consistent with credit cards, meaning it’s in the 17-25% range, depending on your credit score. Most medical lenders provide 0% financing for 6 to 24 months, but don’t fall behind in payments! Falling behind on payments to medical debt lenders can prove very punitive.
It’s here where things can really snowball for people. String together a couple of years of medical issues and you could potentially amass a lot of medical debt. In fact, 12% of Americans have more than $10,000 in medical debt outstanding. Some never overcome this vicious cycle of debt, upon debt, upon debt and must declare bankruptcy.
Medical issues and bankruptcies
Medical issues are the #1 reason for personal bankruptcies in the United States. In fact, over 40% of cancer patients declare bankruptcy within 5 years of diagnosis. Putting aside why as a superpower we let this happen to our citizens, the collective failings of the healthcare and financial systems to help these people is truly astounding. Seeing as bankruptcy is typically the culmination of a series of bad financial outcomes, how are we not intervening at the earliest stages of diagnosis to help everyone (thus capturing those where a truly horrible outcome will one day occur)?
Improve your financial situation using Iryss
As with most things in life, we can’t control what comes our way, but we can very much choose how we respond. A sound plan is an excellent way to prepare for your future, regardless of where you find yourself today. Let a specialist like Iryss guide you in the right direction.