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Medical Debt Is Linked to Most Personal Bankruptcies

An astounding one in three U.S. adults has medical debt in 2021, according to a Healthcare.com survey. This statistic is a sharp increase over the 19% of adults that the U.S. Census Bureau estimated to have medical debt in 2017.

Medical debt is increasingly becoming a significant factor in personal bankruptcy filings. About two-thirds (66.5%) of all bankruptcies are linked to medical debt.

After medical bills, other reasons cited for bankruptcy include the following:

The extent of medical bills in bankruptcies isn’t surprising. Only 40% of Americans can cover a $1,000 unexpected expense, and hospital visits and tests can be quite expensive. Unplanned medical bills can prove too much to accommodate into many people’s budgets.

More Medical Bills Are Going to Collections

Even before there were doctors’ visits, tests, and hospitalizations associated with COVID, medical bills were a pain point for many individuals and families. According to the Journal of the American Medical Association (JAMA), collection agencies had about $140 billion in unpaid medical bills in 2020. That’s a significant increase over four years earlier when $81 billion was in collections. Not included in the unpaid bills are those paid for by a credit card or are under a long-term payment plan.

Amount of Medical Debt

Americans spend an average of $5,000 annually on insurance, prescriptions, medical supplies, and other out-of-pocket health costs, according to the Bureau of Labor Statistics’ Consumer Price Index. The cost of medical care rose 4.6% in 2019 over 2018, the biggest year-over-year increase since 2007. Physician services and prescription drug prices also rose.

In a survey of working Americans by Salary Finance, 56% owed a medical debt of $5,000 or less. That means more than 40% owe more than $5,000. Some 5% said they owed more than $150,000.

Health Insurance Doesn’t Prevent Medical Debt

Some of those who are struggling to pay their medical bills have health insurance. According to a 2016 Kaiser Family Foundation/New York Times Survey, 32% of people insured but having problems paying their bills said it was due to care from an out-of-network provider. And 69% of those people said they did not know they were getting care from someone outside the plan’s network. About 26% of people said they struggled to pay their medical bills because their insurance company denied a claim they submitted. A full 75% said their plan’s copays, deductibles, or coinsurance were more than they could afford.

Tips to Dealing with Medical Debt

Unexpected serious illness, physical injury, or surgery can happen to anyone. And when it does, many Americans are unable to pay the bill.

If you are hit with a doctor or hospital bill you can’t pay, here are a few tips:

  • Ask for help. Talk to the healthcare provider about its financial assistance policy and whether you qualify. The hospital might drastically reduce the amount you owe. Federal law requires nonprofit hospitals to have assistance policies, but some for-profit hospitals have them as well.
  • Negotiate a lower rate. What you are being charged isn’t necessarily the final say. Service providers have lower rates negotiated with health insurers and Medicaid and Medicare. Ask for that rate.
  • Pay other bills first. Pay your rent, groceries bills, and utilities first. Pay on your medical debt only after your (and your family’s) basic needs are met.
  • Don’t put medical debt on a credit card. Credit cards are going to carry a much higher interest rate than the healthcare provider’s payment plan. Putting the debt on a credit card also disincentivizes the doctor or hospital to negotiate a lower bill.

Here is something else to keep in mind. The statute of limitations on medical debt is different in every state. In Missouri, that timeframe is 10 years. That means once you’ve passed the 10-year-mark, they can no longer sue you for the debt. You’ll reset the clock if you make a payment or contact the debt collector.

Knowledgeable Advice for Medical Debt Concerns

If you have a big medical bill hanging over your head, talk to one of our experienced lawyers at Licata Bankruptcy Firm PC. We can evaluate your overall financial situation to offer practical next steps. Medical debt can be discharged through Chapter 7 or Chapter 13 bankruptcy.

Our firm has been helping the residents of Missouri since 2008. Explore your options in a free, confidential consultation. Our insight can help you make an informed decision on how to best resolve your debt troubles. Call us at (417) 213-5006 or use our online form.

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