Health Care Costs Overwhelm Many Who Have Insurance

Americans are accumulating household medical debt. Two new studies reveal that medical debt is a significant problem, even for those who have health insurance. The findings suggest that the ills of the American health care system are not confined to the margins of society.

A report last month in the journal Health Affairs stated that medical problems contribute to about half of all bankruptcies in the United States, with mental illness listed among the highest-cost diagnoses for those who listed medical causes for their bankruptcy. Mental illness accounted for about 10 percent of all bankruptcies, with a mean out-of-pocket expenditure of $15,478 incurred by debtors.

Meanwhile, the 2005 Commonwealth Fund Biennial Health Insurance Survey found that 8 of 10 people who have experienced problems with paying bills skip needed care because of the cost, and 2 of 5 with bill problems and debt have used up all or most of their savings.

Moreover, the trends toward consumer-driven health care and increased cost sharing in all types of health plans, as well as high-deductible health plans offered as part of health savings accounts, all appear likely to exacerbate the problem of medical debt, said Jennifer N. Edwards, Dr.P.H., director of health policy, research, and evaluation at the Commonwealth Fund.

“The cost sharing associated with high-deductible health plans can lead to under-utilization of services, and when you are sick is not the time to be shopping around for lower-price coverage,” Edwards said at a conference in Washington, D.C., in January sponsored by Families USA.“ The research to date shows that people can't distinguish between needed care and not-needed care. So when people have a financial incentive, they reduce all kinds of health care utilization, with adverse outcomes as a result.”

She presented data from the Commonwealth Fund's Biennial Health Insurance Survey, which surveys a nationally representative random sample of adults 19 and older living in the continental United States, with an oversampling of low-income, African-American, and Hispanic households. The Commonwealth Fund, located in New York, is a private foundation that supports independent research on health and social issues and makes grants to improve health care practice and policy.

The Commonwealth Fund's insurance survey consisted of a 25-minute telephone interview conducted by the research and survey company PSRA International between September 2003 and January 2004. A total of 4,052 households were surveyed, with a response rate of 50 percent.

Survey participants were asked the following questions:

Survey participants who answered “no” to the previous questions were asked these two additional questions:

Edwards reported that the survey found 37 percent of respondents had problems with either medical bill or medical debt. Of those under age 65, 41 percent had bill or debt problems; of respondents over age 65, who were likely to be covered by Medicare, 17 percent reported bill or debt problems.

Adults with low incomes and those who were sicker had higher rates of medical bill problems and debt. Among those respondents classified as both low income (below 200 percent of the poverty level) and sicker (defined as fair or poor self-reported health status or having any chronic condition), 67 percent reported either bill or debt problems.

This compared with 55 percent of those who were low income but were not sicker, 52 percent of those who were sicker but not low income, and 25 percent of those who were healthy and higher income.

Edwards told participants at the conference that insurance clearly serves as a buffer to medical debt, but does not guarantee protection against debt. Of those in the survey reporting either medical debt or problems paying medical bills, 64 percent were insured at the time care was provided.

Of those reporting medical debt, 25 percent said their insurance had a deductible of over $500, while 40 percent reported that the plan did not pay for care they had expected it to pay for. Twenty-seven percent of the debtors reported that the plan had reached a yearly or lifetime limit, she said.