A side effect of the pandemic: Soaring medical debt
Medical debt ranks among the top causes of personal bankruptcies across the U.S., with people often struggling to handle unexpected health care costs even when they are covered by health insurance. But that problem has deepened during the coronavirus pandemic. Data show a growing number of Americans being pursued by debt collectors over their medical bills during the last year.
Customers at Credit Karma carried an additional $2.2 billion in overdue medical debt from January 2020 through March 2021, reaching about $47 billion in total — the highest point in at least 16 months. Overdue medical bills are also impacting more people, with the personal finance firm finding that an additional 2.5 million people saw their medical debt enter collections since the pandemic started.
Compounding the issue, Americans are increasingly turning to personal loans to handle medical costs. LendingTree found that the share of personal loan inquiries to pay for medical expenses was 50% higher in the last full week of 2020 than in the year-ago period.
The reasons are a triple-whammy from the pandemic, experts say. Millions of people suffered income losses last year, hindering their ability to pay for medical care. Others lost their jobs — and health insurance — adding to struggles with medical care payments. And the nation's 32 million cases of COVID-19 have caused a spike in health care costs, with some of that borne by consumers as they struggle with huge bills. In one stark case, a COVID-19 survivor told the British Medical Journal she was facing $150,000 in medical costs due to her treatment despite having private employer-based insurance.
"It's a sobering statistic," said Manu Lakkur, director of product management at Credit Karma, about the jump in overdue medical debt. Even before the pandemic, he added, about 60% of debt in collections was due to medical spending. "It was heartbreaking to hear that."
Medical debt can be devastating, ranging from garnished wages to liens on homes and cars. That happened to Maryland resident Michele Gregory, 44, whose husband suffered a stroke in 2006 and missed several months of work as he relearned to speak and read.
Although he had employer-based health insurance, their family ended up with debts of about $15,000, and Peninsula Regional Medical Center in Maryland took them to court for repayment — resulting in garnishment of her husband's wages. At the time, Gregory was a stay-at-home mom (she's now a city council member in Salisbury, Maryland) and the family was in Section 8 housing and receiving food stamps.
"It was an immense journey just recovering from [the stroke], and then you have people knocking at your door, demanding money," Gregory recalled. "It's trauma on top of trauma."
Hospitals suing patients
Gregory said her experience of being sued by the hospital that provided her husband's treatment — which she said was excellent — prompted her to support a new Maryland bill that could become one of the country's toughest for providing medical debt protections to consumers. That bill, the Medical Debt Protection Act, has been passed by the state's general assembly but has yet to be signed into law by the governor.
"It's almost a universal experience in America today where everyone has medical bills," Gregory said. "This is something the federal government should be looking at doing — this affects way too many people for this to be an issue that's just ignored. It can happen to literally anyone."
Hospitals are among the nation's most aggressive debt collectors, filing hundreds of thousands of lawsuits against patients in the past decade. Maryland's hospitals filed more than 145,00 medical debt lawsuits from 2009 through 2018, according to a 2020 study from National Nurses United. That includes famed medical center Johns Hopkins, which filed almost 3,000 lawsuits against patients for medical debt during that period, their study found.
"We have seen an uptick in calls with people with medical debt" since the pandemic, said Marceline White, executive director at the Maryland Consumer Rights Coalition. "They don't know what to do."
Some consumers aren't fully informed of their rights, she added. Because Maryland's hospitals are all nonprofit, they have programs to provide free or reduced care to low-income families that qualify. But patients aren't always aware of these protections — something the new bill seeks to address by requiring hospitals to provide a written statement of their financial assistance policies to patients.
"The problem is your average patient doesn't know that these options exist," said Lindsey Muniak of End Medical Debt Maryland, a coalition of unions and consumer groups that are supporting the new bill.
Impact on Black patients and millennials
Medical debt has a disproportionate impact on Black families and other people of color, experts say. More than 20% of Black residents in Maryland were unable to repay medical debt, compared with 7% of White residents, according to an October poll by Gonzales Research, a public opinion firm.
Almost 1 in 4 Black Marylanders said they had skipped medical care over the past year because of cost — twice the rate of White residents in the state, the poll found. The lawsuits filed by Johns Hopkins Hospital for medical debts tend to be clustered in predominantly Black ZIP codes, according to a 2019 study from National Nurses United.
Younger people are also disproportionately feeling the impact of medical debt, with Credit Karma finding that almost half of the overdue medical bills were hitting millennials, a generation that's known for its struggles with student debt. Baby boomers account for about 16% of medical debt in collections, which could partly reflect the impact of Medicare, the government program that provides health insurance to everyone over 65.
How to handle medical debt
Financial experts say there are steps consumers can take to cope with soaring medical bills.
First, call the hospital or medical provider and negotiate with them, Credit Karma's Lakkur advised. "The provider is often interested in settling rather than paying for collections — they have to pay the collector," he said. "Come in with good intent, share that you don't have the means to pay for this and be ready to talk about what you can pay or not be able pay."
For instance, consumers can propose a smaller payment or a payment plan that would spread out the repayments over time. Patients should also ask about financing plans offered by many medical providers, said Erika Giovanetti of LendingTree.
"Most medical offices know that people can't afford an unexpected expenses of a couple hundred or a couple thousand," she said. "If you have excellent credit, look for a zero-percent introductory credit card that can give you 12 months to 18 months to pay off the balance."
But she cautioned that people should pay off a card with an introductory rate before interest rates charges kick in. And be wary of personal loans, which can carry rates of as high as 36%.
"They can be a good option to pay for medical expenses up front, but it's best to examine other options first," she added.