Health insurance represents one of the most significant line items in a family budget. Still, the monthly premium is just a portion of the healthcare costs in the U.S., which are approaching $4 trillion a year. Keeping up with medical bill payments is becoming more challenging for consumers daily. Medical debt can overwhelm an individual’s finances, making potential bankruptcy even more likely. In this article, we take a closer look at the state of healthcare and medical debt in America and discuss how you can resolve your debt issues.
By the Numbers
Here is a synopsis of the key findings from a recent Lending Tree research study regarding medical debt:
- 23% of Americans currently have medical debt, and another 22% report previous medical debt.
- 30% of millennials have medical debt, as opposed to 24% of Generation Xers, 22% of Gen Zers, and 13% of baby boomers.
- 30% of parents with minor children (younger than 18) have this type of debt, as opposed to 20% of those couples without children and 19% with adult children.
- 28% of those with an annual income of $35,000 or less carry medical debt, versus 14% who earn more than $100,000 annually.
- 22% of households in the South report having medical debt, compared to 20% in the Midwest, 16% in the Northeast, and 15% in the West.
- 4% of American households have accrued “high” medical debt, defined as debt exceeding 20% of a household’s annual income.
- 31% of households without adequate health insurance report debt related to medical issues, compared with 16% of fully insured households.
- 6% of adults in the United States have more than $1,000 in medical debt, while 1% of American adults owe more than $10,000.
- The Consumer Financial Protection Bureau estimates that $88 billion in medical debt was reflected on consumer credit reports before July 2022.
In the last 24 months, two significant measures were introduced to help Americans mitigate their medical-related debt and how this debt affects their credit rating and purchasing power.
The “No Surprises” Act
Patients are typically not advised of detailed medical costs before they receive care. Many consumers are unpleasantly surprised after the fact by exorbitant medical bills they have no way to pay. The rude awakening of seeing the final bill has led to disdain for the medical system in its entirety.
As of January 1, 2022, the No Surprises Act dictates that federal law will protect individuals from many of these unexpected medical bills. The new legislation prohibits specific predatory practices, such as surprise bills for emergency services.
Major Credit Agencies Revise Reporting of Medical Debt
Medical care is typically not a choice, and patients are often saddled with bills they did not ask for and never expected. Because of this fact, three nationwide credit reporting agencies removed approximately 70% of medical-related debt from credit reports in July of 2022.
The credit agencies:
* removed debt balances paid in full after collection actions were initiated
* removed unpaid medical debts of $500 or less
* postponed adding new medical expenses for a year after the creditor submitted the debt to collections.
Important to Note: Medical bills and debt are not forgiven by this action. Instead, paid-in-full medical bills no longer generate a “negative mark” from credit agencies. The move will help millions of Americans improve their credit scores and access more favorable lending terms in the future.
Bankruptcy May Be an Option
For those who have crushing debt that they cannot pay, bankruptcy may be a practical solution. If you are in this situation and need professional assistance and advice, call Richard V. Ellis, Sarasota bankruptcy attorney. After an illness or injury, don’t continue to suffer unmanageable medical expenses – call us today.