Take a guess: What is the number one reason why people file for bankruptcy every year?
Many people answer poor spending habits, but the real reason is medical debt. Healthcare is expensive, and the United States spends more per person on healthcare than any other country worldwide. According to a recent study from the Kaiser Family Foundation, health spending per person was $10,224 in 2017, 28% higher than Switzerland who was next on the list.
The following four facts illustrate the current state of medical debt in the U.S., and its lasting effects.
Many patients delay medical care. Currently, the average cost of a primary care visit is $200 and a hospital stay costs an average of $15,734. Because of these prices, one in ten adults is delaying medical care. As a result, more life-threatening conditions are being diagnosed too late for patients to receive effective treatments, even for those with health insurance.
Health insurance isn’t making much difference. Despite health plans being made more affordable in recent years, the barriers to entry have continued to increase as well as deductibles. Many health plans follow an 80/20 model: 80% of a procedure is covered and patients cover the remaining 20%. While this seems reasonable, many still struggle to make this payment. As a result, patients stop taking their medications because they can no longer afford the payments. In addition, deductibles present challenges because consumers are unable to pay them, which creates more debt, requiring providers to raise prices.
Debt leads causes more debt.
Healthcare spending already accounts for 20% of the economy and is growing at 1.5 times the rate of growth of GDP.
If 66 million Americans charge an unexpected $500 medical bill to a credit card and pay it off over time, this would have a dire effect on the national economy. Given the average credit card interest rate is nearly 16%, it can be a significant struggle to get ahead of the charge.
Draining savings accounts. According to a Kaiser Family Foundation and New York Timessurvey, 60% of Americans have drained their savings to pay off medical debt. Most shocking is that this statistic includes those who have health insurance. With so much debt being accumulated, many patients are borrowing money from family members or dipping into their nest eggs to make payments.
Although there is no end in sight to these challenges, the best hope is for providers to implement effective revenue cycle management practices that help patients effectively reduce debt over time and remove some of healthcare organizations’ liability. If patients can follow a routine payment schedule, less medical debt will accumulate, and providers can maintain regular payment for services.