May 23, 2013

Medical debt continues to weigh on the shoulders of consumers.

Last year, 41 percent of adults ages 19 to 64 said they had problems paying medical bills or were paying off medical debt over time, according to a survey by the Commonwealth Fund.

The fund, a private foundation that promotes improvements in the health care system, also reported that many people surveyed were carrying “substantial medical debt.”

Twenty-nine percent of those paying off medical bills said they were carrying more than $4,000 in debt and 16 percent reported $8,000 or more in medical debt.

“What we’ve seen is an increase in the percentage and the number of people who are reporting problems paying their medical bills,” said Sara Collins, vice president of Affordable Health Insurance at the Commonwealth Fund.

Gaps in health insurance, inadequate coverage and large medical bills have left millions with medical debt, Collins said.

The Affordable Care Act, which goes into full effect next year, has improved the situation somewhat, she said. In particular, a provision that allows adult children to remain on their parents’ health insurance policies until they’re age 26 has had an impact.

“What’s most notable is the ability for young adults to come on to their parents’ policy,” Collins said. “What we’ve seen in the survey data is the increase in the number of young adults who have coverage. That is a major reversal in terms of the trends that we’ve seen among young adults over time.”

Collins said the Affordable Care Act will enable uninsured people to get affordable health coverage and underinsured people to get more comprehensive coverage.

“A lot of people have really skimpy plans that don’t cover a full range of benefits,” Collins said of underinsured people. “So when they do get sick, even though they have coverage, they’re still going to have financial difficulty paying off those bills.”

As for the uninsured, Collins said, “Once they get coverage, they’re obviously going to have financial protection and they’re not going to be hit with these catastrophic bills.”

Unpaid medical debt is not like other debt since it is often beyond your control.

What’s more, because many medical bills are submitted first to insurance companies, consumers often don’t learn that they’re responsible for a medical bill until they hear from a collection agency, by which time their credit score has already suffered.

Consumers may get some help from Congress.

The proposed Medical Debt Responsibility Act would prohibit credit bureaus from using paid-off or settled medical debt collections in determining a consumer’s credit worthiness.

The bureaus also would have 45 days from the date the medical debt collection is paid off or settled to expunge the collection from the consumer’s credit report.

Medical debt has implications beyond just consumers’ health care.

“It affects their ability to get mortgages, to apply for car loans, to even to get jobs, so it is very troubling that so many Americans are reporting such high levels of debt,” Collins said.