More than 2 in 3 U.S. households with debt point to medical spending as a key contributor to their indebtedness. Among the out-of-pocket (OOP) costs that drive household debt are the cost emergency room visits, dental expenses, prescription medications, inpatient hospital stays, and visits to the doctor, shown in the chart.

Welcome to The Plastic Safety Net, the use of credit cards to fund living expenses in America, a phenomenon explained in a report from Demos, published in May 2012. Demos surveyed nearly 1,000 low- and middle-income households in February and March 2012 to gauge the rate of use of credit cards as a “safety net” for daily living costs.

While on average credit card debt has declined, 40% of households use credit cads to pay for basic living expenses like rent, groceries and utilities because their checking accounts don’t have enough saved to pay for current expenses. Exacerbating this situation is that unemployment and medical bills, with half of households carrying debt from OOP medical expenses on credit cards — with an average of $1,678.

Among people who admit to having poor credit, 55% say that unpaid medical bills or medical debts contributed to their low credit profile.

In the Demos survey, the #1 contributor to current credit card debt is medical expenses, cited by 76% of households. The second highest expense driving household debt is car repairs, followed by purchases of non-essential goods and services, home repairs, and major purchases of goods and services.

Health Populi’s Hot Points: The typical household, Demos found, puts $800 of medical bills on their credit card that results in debt. In addition, 30% of households in debt have medical debt beyond the credit card — on average $6,476.

Medical debt caused one-half of householders with debt to skip health care treatments such as avoiding a medical test or follow up (36%), not filling a prescription (33%), or not seeing a doctor when necessary (39%).

Medical debt is therefore a source of self-rationing health care.

3 Comments on The impact of out-of-pocket medical expenses on credit card debt

Lindsay said : Guest Report 10 years ago

There are several new websites that are allowing consumers the ability to "shop" for a fair cost of health care services. These companies include the following: Healthcare Blue Book, Castlight Health, and Change: Healthcare. I believe that if there are more of these companies, perhaps insurance companies would pay attention, and more competition could be created.

medical bills said : Guest Report 10 years ago

Increasing Medicare cost sharing certainly seems to be an easy way of reducing the cost of the program to the government but, as Naomi points out, it could hurt the least well-to-do seniors while having only a limited impact on the total costs of care. Maybe it’s time to brush the dust off some of the recommendations from the co-chairs of the 1999 National Bipartisan Commission on the Future of Medicare. Two of the recommendations were particularly directed towards cost-effectiveness. The first called for the conversion of Medicare to a premium support program — but one very different from that proposed by Paul Ryan earlier this year. The 1999 recommendation would leave traditional Medicare as an option for seniors, but encourage selection of less expensive options like HMOs. (As the experience of organizations like California’s public employee plan shows, this kind of approach can be highly effective in encouraging enrollees to choose cost-effective plans.) The second recommendation would give traditional Medicare far more contracting flexibility. For example, rather than allowing any provider — no matter how inefficient — to participate — Medicare could contract directly with PPOs or with selected providers only. Neither recommendation will be popular with the most inefficient providers and Medicare Advantage insurers, but would make Medicare a much more cost-effective program — without taking more dollars from seniors’ pockets.

Sprig Health said : Guest Report 10 years ago

Part of the problem is that people don't shop around for health services, and as a result they end up spending more than is necessary. As health care reform moves forward, educating patients about their personal health needs and providing platforms for individuals to decrease out of pocket costs will be important to decreasing medical debt.

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