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For many adults, healthcare debt is part of their balance sheet — it may just appear differently than expected, according to new research.
Overall, an estimated 41% of people – or about 100 million adults – currently face such debt, ranging from less than $500 (16%) to $10,000 or more (12%). according to a report by the Kaiser Family Foundation. Using $2,500 as a delineation, 56% who have medical and/or dental debt owe less than that amount and 44% owe the same or more.
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However, some of these may not have been included in previous estimates or surveys aimed at capturing estimates of medical debt. For example, some are on credit cards (17% of adults pay this way) or are paid over time directly to a doctor, hospital or other healthcare provider (21%).
“It shows how big of an impact health care bills have on people,” said Liz Hamel, vice president and director of public opinion and survey research at the foundation.
The report was based on a nationally representative survey of 2,375 adults from February 25 to March 20 and included 1,292 adults with current health care debt. (Findings were weighted to reflect the US population.) The study was conducted as part of a larger research project with Kaiser Health News and NPR.
Changes are coming for medical debt on credit reports
The survey results precede anticipated changes to when medical debt will appear on consumer credit reports. Starting July 1, if such a debt shows up in your history because it was collected but you’ve since paid it off, the big three credit reporting companies — Equifax, Experian, and TransUnion — will stop reporting. include in your report. Under current practice, it can stay on your file for seven years.
Additionally, consumers will have one year, instead of six months, before unpaid medical debt will appear on credit reports once it is escalated to a collection agency. And in the first half of 2023, the credit bureaus will stop including anything under $500.
Credit ratings may improve for consumers who are affected by the upcoming changes, which could result in access to credit or loans at a more favorable interest rate than they would otherwise get.
“It could have a significant impact for people affected by it,” Hamel said.
Research has shown that medical debt is less predictive of a person’s ability to meet payments than other types of collection accounts.
Health care debt hurts consumer spending
Yet the financial consequences of medical debt go beyond credit scores, according to the Kaiser survey. For example, 63% of people with current or recent debt (within the past five years) said it caused them to reduce spending on food, clothing and other basics, including 51% of those with debt. annual household income was over $90,000. Almost half (48%) with such debt said they used all or most of their savings to pay it off.
Collectively, medical debt in the United States stood at $195 billion or more in 2019, according to Kaiser’s research.
Capitol Hill acts against billing surprises
One thing that could help prevent consumers from facing outrageous bills — at least in some situations — is a federal law that went into effect this year.
Historically, one of the biggest causes of unexpectedly large medical bills was that out-of-network providers got involved in your care without you realizing it. Then the bill would come and you’d find out that your insurance didn’t fully cover those charges, if at all.
The idea is that if you are able to plan ahead, you can compare prices between hospitals. However, only 14.3% of hospitals were fully compliant with the law in February, according to PatientRightsAdvocate.org, which reviewed 1,000 of more than 6,000 accredited hospitals in the United States.
The Centers for Medicare and Medicaid Services recently issued its first enforcement actions for noncompliance, fining two Georgia hospitals.