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Americans Facing Increasing Problems with Medical Debts

By Ben Weyl, CQ Staff

September 2, 2008 -- The number of Americans struggling to repay medical debt soared in 2007, adding to an already bleak picture of the country's health system and economy, according to a new report (Losing Ground: How the Loss of Adequate Health Insurance Is Burdening Working Families).

In 2007, 41 percent of working-age Americans, or 72 million people, had medical bill problems or were paying back medical debt, a 7 percent, or 14 million-person, increase since 2005, according to a survey by The Commonwealth Fund. An additional 7 million Americans age 65 and over also struggled to pay their medical bills.

The 2007 Commonwealth Fund Biennial Health Insurance Survey and its accompanying report, Seeing Red: The Growing Burden of Medical Bills and Debt Faced by U.S. Families, detail the scope of the crisis facing many Americans.

At every income level, people saw their medical debt increase or faced problems with medical bills, with the increase most pronounced among low- and moderate-income Americans, the report noted. A majority of those making less than $40,000 a year reported medical bill problems such as not being able to pay bills or being contacted by a collection agency.

Mounting medical debt can be life altering. According to the study, 39 percent of respondents used up all their savings to repay their debt; 10 percent took out a mortgage on their home or took out a loan; and 30 percent took on credit card debt. More than a quarter of working age adults (29 percent) said they were unable to pay for basic necessities like food, heating, or rent because of medical bills.

"Medical debt can push people over the edge," said Commonwealth Fund President Karen Davis in a conference call with reporters. "People have less in reserve and are more vulnerable when medical emergencies arise that take away what little they have set aside for retirement or for other contingencies."

Those with health insurance were more immune to the rise in medical bill problems, though it was not a complete safeguard. Sixty-one percent of respondents who had health insurance the whole year but were underinsured and had high out-of-pocket expenses or deductibles, reported problems, the same number as those with no health insurance. Just 26 percent of respondents with adequate health insurance said they had medical bill problems.

The report echoes the findings of other recent studies. A new Health Affairs study found that $30 billion will be spent out of pocket this year for health services by those who lack health insurance. A Kaiser Family Foundation poll conducted in August found that one of four Americans currently struggle to pay for health care. And the National Association of Insurance Commissioners found in July that 22 percent of people were seeing a doctor less regularly in light of the declining economy.

If Americans continue to shy away from getting the health services they need, the country's economic health could worsen along with their own health, according to experts. "Health care is the biggest sector of the economy, 15 percent of the economy," said Paul Fronstin, director of the Health Research and Education Program at the Employee Benefit Research Institute, in an interview. "Even a small increase in medical debt will have a big impact."

Furthermore, rising health care costs have caused people to reduce their savings overall, which could slow any economic recovery. "If people are saving less, there's less money to invest, and we're slower to sort of grow out of these things," Fronstin said. "All these things are interrelated to one degree or another."

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