New Demos Report Explores the Burden of Medical Debt Among Low- and Middle-Income Households

Every day, many U.S. families must make the impossible choice of falling into debt to pay for critical medical care or foregoing necessary treatment. In 2014, 64 million people were struggling with medical debt and it is the leading cause of bankruptcy in the United States.

In fact, even with health insurance, families are coping with large out-of-pocket costs: In 2015, average out-of-pocket costs were $1,300. For far too many families, these costs are not just a burden, paying them means not paying for necessities such as food, heat, and housing. As a result of these costs, millions of households also carry hidden medical debt—not debt owed to a particular provider or hospital—but a range of medical costs reflected as outstanding balances on their credit cards. A new Demosreport, Enough to Make You Sick: The Burden of Medical Debt, by Demos Policy Analyst Sean McElwee explores this troubling trend.

The report finds that among low- and middle-income households carrying credit card debt:

• Medically indebted households struggle with more credit card debt overall. On average, medically indebted households had $8,762 in credit card debt, compared with $5,154 for households with credit card debt that did not stem from medical expenditures

• Households carrying medical expenses on their credit cards are more strained financially.Households who pay for medical expenses on their credit cards were dramatically more likely than households with credit card debt stemming from non-medical expenditures to report using their credit card to pay for basic expenses (52 percent vs. 29 percent).

• Medically indebted households have a higher APR on their credit card. Medically indebted households reported an average annual percentage rate (APR) of 16.75 percent, while households with credit card debt but no charges stemming from medical costs reported an APR of 15.47 percent.

• Individuals with medical debt are far more likely to report forgoing care. 63% of people with medical expenses on their credit cards report forgoing care, while only 36% of people with no medical bills on a credit card report the same.  

McElwee concludes by offering solutions to fight this trend. He notes that we should give the Consumer Financial Protection Bureau greater authority to protect customers from debt collectors. Additionally, we should pass the Medical Bankruptcy Fairness Act, which would help families dealing with medical debt keep their homes by providing them with bankruptcy protection, and pass the Medical Debt Responsibility Act, which would require that fully paid medical debt be removed from credit reports within 45 days.

This report continues the groundbreaking work Demos has been doing on credit card debt for more than a decade. When we commissioned  the first-ever survey of households with credit card debt in 2003, we found that families were relying on credit cards to make ends meet. Credit card debt had become a plastic safety net—the way that households kept food in the fridge, lights on in the house and even how they pay for essential medical care. Previous reports detailed how credit card debt has especially affected theLatino community, older Americans, and African-Americans.