Credit cards and the "medically indebted"
Borrowing to Stay Healthy: How Credit Card Debt Is Related to Medical Expenses
By Cindy Zeldin and Mark Rukavina
Demos
The Access Project
January 16, 2007
The cost of health insurance continues to outpace overall inflation and wage growth, placing added pressure on already stretched family budgets. A family health insurance policy is now equivalent to 18 percent of median family income.
In general, the trend for health insurance policies has included higher deductibles and co-payments for hospitalizations, office visits, and prescription drugs, which, in turn, increases the financial burden for people who get sick. Medical debt can also be tied to less-comprehensive insurance. As Health Savings Accounts (HSAs) and high deductible health plans grow more common, patients face higher first-dollar expenses and may become more susceptible to medical debt.
Key findings from the report include:
- Low- and middle-income medically indebted households had higher levels of credit card debt than those without medical debt — on average 46 percent higher. ($11,623 versus $7,964).
- Low- and middle-income medically indebted households had higher debt-to-income ratios than non-medically indebted households.
- Among the medically indebted, young adults between the ages of 18 and 34 had the highest level of average credit card debt of any age group. Credit card debt levels of medically indebted young adults ($13,303) were considerably higher (79 percent higher) than credit card debt levels for non-medically indebted young adults ($7,450).
- The medically indebted are more likely to be called by bill collectors than the non-medically indebted (62 percent versus 38 percent).
Against a backdrop of declining economic stability, trends such as rising health care costs, changes in health insurance benefit design, and an ever-increasing reliance on credit cards forecast dire conditions for America’s family finances.
Policymakers must address the twin problems of health care cost and coverage in a comprehensive manner to protect American families from financial insecurity and the deleterious health outcomes that result from the current system. We believe that the ultimate solution is a system that provides universal access to comprehensive benefits.
Press release:
http://www.accessproject.org/adobe/borrowing_to_stay_healthy_release.pdf
Report “Borrowing to Stay Healthy:”
http://www.demos.org/pubs/healthy_web.pdf
Comment:
By Don McCanne, MD
We are seeing a flurry of proposals for universal coverage that depend on mandates to purchase affordable insurance options - options that are possible only by accelerating the trend to shift more costs to patients.
Affordable, stripped-down private insurance options will further compound debt problems for patients. Comprehensive private plans are not a solution either, because those plans are unaffordable. A family policy is now 18 percent of median family income!
Keep in mind that this and other studies show that medical debt is a problem for middle-income families, not just low-income. The average American can no longer pay the full pro rata tab for comprehensive health care and coverage.
Proposals that would insure everyone in essence are proposing the establishment of a de facto universal risk pool, even though fragmentation introduces complexities. Equitable risk pooling requires that funds be shifted from the healthy to the sick and from the wealthy to middle- and low-income individuals with health care needs. Average Americans now need either more money to purchase comprehensive plans, or more money to pay out-of-pocket expenses not covered by skimpier plans.
How do you do that? Do you use an administratively complex and inefficient system of means-tested insurance vouchers and health care stamps? Should we humiliate ourselves in this way merely because we want to keep the wasteful, intrusive private insurers in play? Or do you give up and decide to expand Medicaid to 70 percent of us? Has the divide become so great that average Americans should be entitled to a welfare program? (Let’s not go there.)
Assuming that the national clamor to insure everyone is genuine, we should turn to the most efficient and equitable system of doing so. That would be to establish a single, universal risk pool that is equitably funded. Then health care would be affordable for everyone.
We already have the money. All we need is the political will.