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Medical Debt: How Bad is the Problem and How You Can Avoid It


With the number of uninsured Americans hovering at approximately 40 percent, more people than ever are becoming saddled with the burden of medical debt. For many individuals and families walking a financial tightrope, all it takes is one unexpected illness or an unforeseen night in the emergency room to push them over the edge. If you yourself are not in this situation, chances are you know of someone who is.

Medical debt

Over 40 percent of Americans carry some sort of medical debt.

But just how widespread this problem is, the exact reasons for it, and how you can avoid being another story and statistic, are the very questions that we seek the answers to.

The Cost of Medical Care

A recent study conducted by Commonwealth Fund found that as of 2007, 41 percent of working-age Americans, or approximately 72 million people, carry some sort of medical debt -- a figure that is up 7 percent from just two years earlier in 2005.

This study also probed the unseen costs of America's ever-expensive health care system. It has been estimated that about 20 million American families face some sort of medical debt. The study also revealed that amongst Americans between 19- and 64 years old:

  • 31% did not get a prescription filled because of financial strain

  • 20% didn't see a specialist even though it was needed

  • 25% skipped a medical test, treatment, or follow-up

  • 31% have a medical problem, but are not seeing a doctor or attending a clinic for it

These are cost-access problems of the American health care system and are not faced by just the uninsured.

Among the 45 percent of all Americans who face at least one of these problems, 29 percent had at least some sort of insurance year round. For those who were uninsured, 60 percent of those who had a medical problem didn't seek medical help and of those who were underinsured 42 percent got sick but didn't see a doctor.

Finally, among those who were underinsured in the past year but who currently have adequate insurance, 57 percent did not seek treatment for an illness.

From the Emergency Room to the Poor House

The effect of this crisis on bankruptcy statistics is staggering. The number one reason for bankruptcy filings in the U.S. is not, as most people believe, credit card debt, but medical debt.

In a study published by Health Affairs, as of 2005 the average out-of -pocket medical debt for those filing for bankruptcy was $12,000. And according to the National Coalition for Healthcare every 30 seconds someone files for bankruptcy in the United States as the result of a serious health problem; about 68 percent of these filings are done by those with some sort of insurance.

One of the reasons 40 million Americans go without health insurance is the struggle that the government, employers and health care providers have in keeping health care costs down, leading to higher insurance premiums. Here's a peek at how high health care expenditures in the United States have ballooned in recent years.

  • Over $2 trillion was spent on health care in 2007, three times the $714 billion spent in 1990 and eight times what was spent in 1980. This amounts to $7,600 for every person.

  • Since 2000 employer-sponsored health care premiums have increased by 87 percent. This rapid increase is forcing many employers to pass the bill for these higher premiums onto their employees in the form of higher premiums and co-payments. With cost of living and inflation rising and wages stagnating, it's harder for employees to make up that difference.

Why Does Health Care Cost So Much?

There are many reasons for these ever-growing numbers, such as:

  • Intensity of Services

  • Prescription drugs and Technology

  • Aging of the Population

  • Administrative Costs

1. Intensity of Services

Longer life spans and greater prevalence of chronic illnesses has forced the health care industry to change and adapt in recent years. The need to treat ongoing illnesses and provide long-term care for an aging population has placed great strains on our nation's health care system.

2. Prescription Drugs and Technology

Increased spending on prescription drug research and the technology to develop them and overall health care technology are contributors to increased health care spending. With the implementation of Medicare Part D benefits, prescription drug costs rose dramatically. Another contributor is the increasing availability of state-of-the-art prescription drugs and technological services, partly because people ask for them even though they aren't always cost-effective.

3. Aging of the Population

Health costs rise with age and as the baby-boomers reach middle age and beyond, many believe that caring for this generation has raised costs as a whole. This trend will only continue as they begin to qualify for Medicare in 2011, at which time the costs will shift to the public sector.

Medical debt

Most health care billing departments will be happy to work out a payment plan with you if you can't afford to pay. This is a better option than simply ignoring the bill, which can allow it to be sent to a collections agency.

4. Administrative Costs

About 7 percent of all health care costs are administrative (i.e. billing, marketing), although this portion is lower in the Medicare program by 2 percent since it's operated by the federal government. It's been argued that the mixed public-private system is creating an overhead that is fueling health care costs.

Working With the System to Stay Out of Debt

There are steps you can take to help yourself if you do wind-up in medical debt.

  1. Don't ignore your bills. As daunting and complicated as dealing with the bill might be, ignoring it will make the situation worse. Doctors and hospitals can and will take you to court so your best option is to just deal with the bills when they arrive.

  2. Check for errors. As everyone knows, hospitals do make mistakes and their billing department is no exception. Asking for an itemized bill will help you weed out errors and avoid being charged for services you never received.

  3. Don't be afraid to negotiate. Most billing departments will be willing to work with you on a payment plan if you can't pay away. They might even be willing to negotiate on the amount of the bill. There are also a number of organizations that are willing to help out those who need it. The Patient Advocate Foundation has a state-by-state directory of financial resources that are available to those who need medical help but are strapped for cash.

  4. You better shop around. People are used to shopping for cars and clothing, but not so much for health care. If you need an expensive procedure done, check around at different hospitals in your area. If the one down the road charges $10,000, perhaps the one across town is only charging $5,000. Knowing that you have options and what they are can save you thousands when the bill comes due.


The best way to deal with excessive medical costs is to avoid them if you can. The easiest way to accomplish that is through prevention. A proper diet, combined with frequent exercise, and a good night's sleep can go a long way in your effort to ward off illnesses and stay out of the doctor's office, thereby significantly reducing your medical costs.

Recommended Reading

Universal Health Care: What's the Debate All About?

Debt Collection Abuse? What Debt Collectors Can and Cannot Do

Sources Medical Debts

The Health Care Blog August 25, 2008 August 28, 2008

The Henry J. Kaiser Family Foundation

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