Paul Sanchez
The topic of medical insurance coverage is a pressing issue, with many people, even in developed countries like the US, facing the difficult choice between seeking healthcare and avoiding the financial burden of medical bills. The high costs of healthcare in the US are impacting people's health, with 1 in 5 adults reporting that they delayed or avoided seeking medical care due to financial concerns, resulting in worsening health problems. This issue is not limited to the uninsured, as many insured Americans are also burdened by medical debt, billing errors, and denials of coverage. With the impending expiration of extended premium tax credits and the potential increase in premiums, the situation is critical, and policymakers are faced with the challenge of ensuring comprehensive coverage for their citizens.
| Characteristics | Values |
|---|---|
| People with medical insurance who have difficulty paying medical bills | 1 in 3 Americans |
| People with medical insurance who have medical debt | 1 in 10 adults |
| People with medical insurance who have filed for bankruptcy | 62% of 2 million people |
| People with private insurance who have medical debt | 10.5% of adults |
| Households with medical debt | 1 in 5 |
| Average medical debt per household | $4,600 |
| Percentage of services paid for by Medicare | Over 60% |
| Percentage of services paid for by private insurance | Over 18% |
| Percentage of services paid for by Medicaid | 7% |
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What You'll Learn
Medical debt among insured individuals
Medical debt is a significant issue in the United States, affecting millions of people, including those with health insurance. While the uninsured are at a higher risk of incurring medical debt, it is also prevalent among the insured, with about 10.5% of privately insured adults carrying medical debt. This equates to approximately 1 in 5 households, including those with private insurance, facing medical debt.
Several factors contribute to medical debt among insured individuals. One significant factor is the high cost of medical services, prescriptions, and insurance deductibles, copays, and coinsurance. These out-of-pocket expenses can quickly accumulate, especially for those with chronic illnesses or unexpected serious injuries or illnesses. Additionally, insured patients may incur debt from denied claims or care received out-of-network, which may not be covered by their insurance plans.
The financial burden of medical debt can be devastating, leading to an inability to pay for essential needs such as groceries, rent, or mortgages. It is associated with a higher risk of eviction, food insecurity, and financial distress. People with medical debt may resort to using credit cards, loans, or retirement savings to cover their medical expenses, further entrapping them in a cycle of debt. Additionally, the stress of managing overwhelming paperwork and bills during a major health event can exacerbate the situation.
Certain demographics are more vulnerable to medical debt. Women are more likely to carry medical debt than men, partly due to childbirth expenses and lower average incomes. Lower-income adults, particularly those below 400% of the federal poverty level, are at a higher risk. Adults in rural areas and certain states, such as South Dakota, Mississippi, and North Carolina, are also more likely to report medical debt.
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People with private insurance and medical debt
Despite over 90% of the United States population having some form of health insurance, medical debt remains a persistent problem. This is because, in some cases, patients are left to pay bills for care that their policy does not cover. They may also fall into debt trying to pay health insurance premiums they cannot afford.
Among 136,000 adults surveyed from 2017 to 2019, about 10.8% carried medical debt, including 10.5% of adults with private insurance. Women (about 1 in 8) were more likely than men (about 1 in 11) to carry medical debt. Nearly 1 in 5 households carry medical debt, according to the study. People considered middle class or low income bore the brunt of the burden. On average, an American household owes about $4,600 in medical debts.
Among the privately insured, people with high-deductible plans and people on Medicare Advantage were more likely to have medical debts. This is because high-deductible plans tend to come with lower monthly premiums, which can cost hundreds of dollars. However, policyholders with high-deductible/low-premium plans are less likely to seek out primary or preventative care due to high upfront costs. Since many medical problems are unexpected and exacerbated by a lack of preventive care, policyholders can quickly find themselves in debt, especially when they have to pay the full, yearly deductible amount.
Medical debt is leaving many people in the U.S. unable to afford groceries or pay their mortgages, even among the insured. People with medical debt are "much more likely to be evicted, much more likely to be unable to pay for their utilities and much more likely to be food insecure".
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Causes of medical debt
Despite over 90% of the United States population having some form of health insurance, medical debt remains a persistent problem. 20 million people (nearly 1 in 12 adults) owe medical debt, with an average American household owing about $4,600. Even among the insured, medical debt is leaving many people in the US unable to afford groceries or pay their mortgages.
High Deductibles and Cost-Sharing
High deductibles and other forms of cost-sharing can contribute to individuals receiving medical bills that they are unable to pay, despite being insured. People with high-deductible plans and those on Medicare Advantage were more likely to have medical debts. This is because they cover fewer benefits and include little to no consumer protections, such as required coverage of pre-existing conditions and limits on out-of-pocket costs. Patients with these types of plans often find themselves responsible for their entire medical bill without any help from their health plan, which can lead to significant medical debt.
Inadequate Health Care Coverage
The root cause of medical debt is primarily a result of problems with inadequate health care coverage. Affordable, comprehensive health care coverage is the most important protection against medical debt. However, simply expanding coverage will not erase the financial burden caused by high cost-sharing amounts and high prices for medical services and prescriptions.
Income Loss
Significant health events can trigger a loss of income, rendering unaffordable bills that might have otherwise been manageable. Such events can also compromise a person's ability to manage the paperwork of medical bills.
Lack of Insurance
While the chances of falling into medical debt are greater for people who are uninsured, it is also common among people with private insurance. People with medical debt are much more likely to be evicted, unable to pay for utilities, and food insecure.
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Health insurance and bankruptcy
Health insurance is intended to provide financial protection against unpredictable medical expenses. However, the reality is that even those with health insurance are not shielded from the risk of bankruptcy due to medical bills. In fact, a study by Dr. David Himmelstein found that 60% of bankruptcies are filed at least partially due to medical bills, and most of those who filed for bankruptcy were insured.
There are several reasons why insured individuals may still face bankruptcy due to medical expenses. Firstly, coverage limits, exclusions, and unaffordable premiums can leave patients with substantial out-of-pocket costs. For example, a person with insurance may require treatment that is not covered by their policy or has high cost-sharing requirements, leading to unexpected medical debt. Additionally, significant health events can result in a loss of income, making it challenging to keep up with medical bills. The complexity of medical billing and the sheer volume of paperwork during a major health event can further exacerbate the problem.
Moreover, people with high-deductible health plans or those on Medicare Advantage are more likely to experience medical debt. This is because these plans often require individuals to pay a significant amount of money out-of-pocket before their insurance coverage kicks in. As a result, even those with "good" insurance can find themselves facing substantial medical debt. For instance, a retired couple with Medicare and supplemental insurance faced $30,000 in debt after the husband's cancer treatment, which was only partially covered by their insurance plans.
The consequences of medical debt can be severe, leading to difficulties in paying for basic necessities like groceries, rent, or mortgages. It can also result in evictions, food insecurity, and even homelessness. Furthermore, bankruptcy due to medical debt can create a cycle of financial hardship, as it becomes challenging to find employment with a bankruptcy filing on one's record.
The issue of medical debt and bankruptcy is not limited to the uninsured but affects a significant number of insured individuals as well. This highlights the need for policy reforms to address the financial burden of medical expenses and ensure that health insurance provides adequate protection against catastrophic medical costs.
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Healthcare spending by insurers
In 2022, the United States spent $4.5 trillion on healthcare, with government insurance programs such as Medicare and Medicaid making up 45% ($1.9 trillion) of national healthcare spending. Private insurance programs were the largest single source of funding for healthcare expenditures in 2022, accounting for 30.1% of total health spending in 2023, up from 20.4% in 1970. Per enrollee spending by private insurers grew by 80.4% from 2022 to 2023, while Medicare and Medicaid spending grew by 50.3% and 30.3% respectively.
Private insurance expenditures have been increasing faster than public insurance spending, with private insurance spending increasing by 5.9% from 2022 to 2023, compared to a 5.1% increase in public insurance spending. The higher spending growth in private insurance is partly due to private insurance paying higher prices for healthcare than Medicare and Medicaid. For example, spending on hospital care services is the largest source of payment by private insurance programs, tripling in the past two decades from $166 billion to $486 billion. This is about $133 billion more than the amount spent by Medicare on hospital care.
Out-of-pocket spending, including premiums paid by individuals, accounted for 24% ($1 trillion) of national health spending in 2022. The average annual health insurance cost is $7,080 for ACA marketplace plans, varying based on age, plan type, and other factors. The average monthly cost is $445 for a single 21-year-old, increasing to $505 for a single 30-year-old.
While insurance coverage helps protect against medical debt, it does not eliminate the risk. About 10.5% of adults with private insurance carried medical debt, with women being more likely than men to do so. The debt was often associated with an inability to pay rent or mortgages, leading to evictions and food insecurity.
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Frequently asked questions
In 2022, 92.1% of people in the US, or 304 million, had health insurance at some point during the year.
In 2024, 56% of insured working-age adults in the US had high out-of-pocket expenses or deductibles relative to their income, rendering them underinsured.
Fear of incurring expenses for care they can't afford is endangering the health of many Americans, even those who are insured. Two out of five adults have reported delaying or skipping needed care due to costs, and people with poor health or chronic conditions are among the highest rates of health issues worsening as a result.
