Out-of-Pocket Medical Expenses Among Top Sources of Credit Card Debt
New York, NY — With the mid term elections approaching, many candidates and incumbents are seizing on this moment to court voters by calling for the repeal of the health care reform law--the Patient Protection and Affordable Care Act (PPACA), the largest piece of social legislation passed since 1965. A new report, Sick and in the Red: Medical Debt and its Economic Impact, released by Demos and The Access Project, underscores the dire need for more immediate implementation of the bill, as families continue to reel from higher and higher medical costs.
Based on data from the 2008 Demos national survey of low- and middle-income households with credit card debt, the report illustrates that those who identified out-of-pocket medical expenses as a factor in their outstanding credit card balances had higher balances than those who did not. Americans households hit with medical bills have limited assets or income to cover these often significant costs and too often turn to plastic.
"Millions of working people are piling up debt on high interest credit cards because they do not have adequate insurance" said Mark Rukavina, Director of the Access Project and co-author of the report, "and they need help today. Those calling for the repeal of health reform are irresponsible, heartlessness or both."
Key Findings Include:
- In 2008, more than one-half- 52% -of low- and middle-income households with outstanding credit card balances cited medical expenses as contributing to their credit card debt.
- Those households with medical debt carried credit card balances averaging more than 40% more that those without medical expenses.
- Nearly one-third (30 percent) of households with medical expenses carried additional medical debt averaging $3,174, owed to other creditors and not reflected on their credit cards.
- More than half (57 percent) of households with private insurance carried medical expenses on credit cards with average amounts totaling $2,116.
- Households with medical debt were further burdened by the rate of interest paid on their credit cards (16% for those with medical debt and 14% for those without), as well as overall monthly debt payment with the medically indebted carrying 25 percent more in total monthly debt (i.e. housing, student loans, car payments, and other loans) than those without medical debt.
- More than half of those with medical debt cited prescription drug costs (51%) and two in five (42%) cited dental expenses (see Fig. 6) as the contributing factors for the medical debt on their credit cards.
Some report findings were similar to what has been documented through other research. For example, nearly half (45%) of the households charging medical expenses on their credit cards reported not seeking care when they had a medical problem and nearly as many reported skipping a medical test or not filling a prescription in order to avoid adding further to their debt load.
"American families are running out of options and turning to credit cards to meet necessary medical expenses," said Jose A. Garcia report co-author and Associate Director for Research and Policy for the Economic Opportunity Program at Demos,
"Congress and the American people should not allow the repeal or water down of the PPACA this would bring serious consequence of our nation's growing health care crisis before more families go into debt, and risk their financial stability, to get the medical care they need."
The report outlines reforms addressing several key factors that will only exacerbate the medical debt crisis in coming years:
Health Care Reform
- Universal Coverage. We urge Congress and state policymakers to promptly implement the PPACA to provide security for millions of American families. In addition, we also urge advocates to continue their work to push to for further reforms that extend health insurance to all of our nation's families, regardless of immigration status or income.
- Affordability. There must be ongoing monitoring of private insurance products to ensure high quality coverage while limiting cost sharing for patients.
- Eligibility Screening & Consumer Protection. After full implementation, consumer assistance and protection programs must be operated at the state level to ensure that the uninsured receive the assistance needed to access quality coverage, that the quality of private coverage is monitored, and that billing practices are fair and reasonable.
Financial Services Reform
- Medical Bill Collection & Credit Reports. We urge passage of the Medical Debt Relief Act (HR3421/S3419). This legislation would specifically amend the Fair Credit Reporting Act to put an end to the practice of using paid off or settled medical debt accounts in calculating a consumer's credit score.
- Regulation and Consumer Protection. It is critical that the CFPB implement clear rules that mitigate the effects of high interest rates and penalty fees that prevent low- and middle- income families from paying down outsized medical debts. To this end, the Bureau should be responsible for examining financial services utilized by health care facilities and providers in their quest to collect payments