Medical Debt Ravaging American Households

Medical Debt

Medical debt is ravaging American households, and the problem is only going to get worse before it gets better. The debilitating effect was released in full detail by financial education website Medical expenses rose $1,814, but income levels dropped by $2,300 in median income. The projected annual growth rates for out-of pocket expenses are expected to grow much faster than the national economy by 2023.

More than 60 percent of bankruptcy filings in the United States are generated by medical debt. Those who make less than $30,000 a year often find themselves with more medical bills than emergency savings. Over the past year, there has been a flurry of activity to decrease strain on consumers. The two largest changes so far have been to the individual mandate of the Affordable Care Act and modifications to FICO score calculations.

However, Americans are cautioned not to expect relief from their medical debt. Alex Szeto, a spokesperson for the Association of Credit and Collection Professionals, reported that revenue collected from third-party debt collectors steadily increased over the last three years. An estimated 1 in 5 Americans may be contacted concerning unpaid medical expenses in 2014.

Retirees can expect medical costs to be well over $220,000 as they live beyond 80 years old. The medical debt from these rising costs in the American health care system will easily ravage whatever nest eggs they have built for their household to depletion. Medical costs will rise from 69 percent of their Social Security benefits for couples who retire in 2015 to 98 percent of their benefits in 2025. In 2045, the projected percentage is expected to be at 127 percent of their Social Security benefits.

According to a poll conducted by Harris Poll, 57 percent of consumers report receiving confusing medical bills. Robert Zirkelbach, spokesman for America’s Health Insurance Plans, stated that there was very little transparency concerning what hospitals and doctors are charging for the services they provide. More of the focus on public policy has been on premiums for health insurance, ignoring the prices for medical services being charged to patients.

A 2013 study done by the Centers for Medicare and Medicaid Services discovered hospitals charging up to 10 to 20 times the amount Medicare will reimburse for a service. Medicare does not pay the rates hospitals charge. They use their own system of standard payments of reimbursement for the treatment of specific conditions. Private insurances also do not pay the full rates hospitals charge. The ones who will be expected by hospitals to pay the full amount are those who have little to no insurance.

According to the NerdWallet report, hospitals will furnish more than $50 billion worth of care in 2014 for which they will receive no payment for from either the patient or insurance company. Hospitals often write off the differences between what it charges and what Medicare is willing to pay, rather than trying to collect medical debt from patients. When insurance companies pursue larger discounts from hospitals, those facilities will often raise their prices in order cover the discount. An exception is for those covered under the Affordable Care Act, which limits what hospitals can charge for services, to try to reducing the ravaging effect of the spiraling medical debt American households are currently facing.

By Valerie Bordeau


Yahoo Finance


NY Times

Photo by: 401(K) 2012-Creativecommons Flickr

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