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Rising Medical Debt, Even For The Insured

With the passage of the Affordable Care Act, there are an estimated 15 million fewer uninsured Americans facing the possibility of needing medical care without a safety net. But according to an article that appeared recently in The New York Times, that shift has in no way eliminated the problem of medical debt. Instead, health care advocates are finding that those who have insurance are being caught unaware by a new development in the insurance industry – insurers are providing coverage affordably but asking customers to assume a larger responsibility for their bills. This translates into deductibles and co-payments that quickly add up and overwhelm patients’ ability to pay. As patients have been asked to shoulder a higher percentage of medical costs, the effect has been chilling – and particularly for those who already had financial problems to begin with.

Evidence of this shift comes from a poll conducted by The New York Times and the Kaiser Family Foundation, and the results of the poll revealed some startling statistics:

  • About one in five Americans under the age of 65 who have health insurance report struggling with their medical bills over the last year.
  • Of those who do not have health insurance, 53 percent were experiencing the same difficulty.

Though the United States is considered to have most expensive health care in the world, medical costs have seen relatively slow growth in the last few years, so it’s easy to assume that as more people are purchasing health insurance the problem of medical debt would be on the decline. But according to the poll,

  • 63 percent of those who admitted to having trouble paying medical bills said that they’d used up all or most of their savings to pay down their medical debt
  • 42 percent had taken on an extra job or more work hours
  • 14% percent had addressed the problem by moving or taking in roommates
  • 11 percent had turned to charity

People who had thought themselves well-protected against medical debt by having done the right thing and purchasing health insurance are now in the position of having to postpone vacations and major purchases, using up savings, and cutting back on overall household spending.

The Problem With Medical Debt

One of the problems is that as the insurance companies have been required to offer more comprehensive coverage, and have in many cases lowered the cost of their premiums, they have offset these benefits by cutting back on the generosity of their compensation. This is particularly true of the low-cost, high deductible policies that are favored by so many who are already struggling to stick to tight budgets. These policies are attractive at the outset as the come with such low premiums, but policy holders often find themselves being nickeled and dimed for copays and deductibles while the network that they can seek services from continues to shrink. Over 25 percent report having claims denied and two thirds had been unaware at the time that they sought treatment that the provider was out-of-network and not covered.

Medical bankruptcy was a common problem prior to the passage of the Affordable Care Act, but where in the past it had largely been a direct result of being uninsured, the decline in generosity of health insurance coverage is now just as big a factor. When big bills are not covered or small copays add up, families face tough choices – and especially when the illness that acted as the catalyst for the debt also forces a contributing family member out of work or to cut back on hours. The reality is that this is often the case, and it is one of the leading reasons why families who have medical insurance find themselves considering bankruptcy today.

Options for Medical Debt

There are many options for paying for your medical debt, but you’ll need to choose the right solution for your particular financial situation. If you don’t qualify for grant programs and assistance for low-income individuals, this can leave you with a pretty hefty bill. Here are some options for paying for your medical debt:

Use Your Savings

One way to tackle medical debt is to use the money from your savings account. Though this is not an ideal solution, it can help in extreme circumstances.

Tap Into Your Retirement Funds

If you want to get the headache of medical bills off of your mind, you could tap into your retirement funds by either taking a loan or early withdrawal of funds. You’ll probably need to make loan payments, which may not solve your financial issue of paying for medical debt. This may also affect your long-term goals for retirement, so you’ll want to consult with a financial professional/consultant/advisor before making any decisions.

Evaluate Your Lifestyle

Maybe you take 2 or 3 vacations per year or drive a high-end gas-guzzling SUV. It might help to evaluate your lifestyle and determine if making changes would make a worthwhile impact on your medical debt. You’ll want to consider your quality of life versus peace of mind if the medical debt is financially stressful and getting to be unmanageable.

Consider Paying With Credit Cards

Some credit cards offer a 0% interest offer for 12-months or 18-months, which may help paying for medical debt. You’ll want to pay close attention to the interest rates, any annual card fees, balance transfer fees, transaction fees, and the pay-off date before the interest hits. If you think you can pay-off the debt before the interest would hit, then this may be a good solution for you.

Take Out A Life Insurance Loan

Depending on why you have medical debt, there may be certain circumstances that would qualify you for a life insurance loan. Typically, you must have a advance-stage illness (meaning it has been determined that you have a life expectancy of approximately 8 years or less) in order to obtain funds from your life insurance policy. An example of this illness would be an advanced-stage III or IV cancer, advance-stage heart disease, COPD or other life-threatening illness. Once you medically qualify, obtaining the loan is a fairly simple process. With a life insurance loan, you don’t have to make loan payments and your premium payments taken over by the company providing you with the funds. You don’t have to take the full amount of your life insurance policy, so you can still leave funds behind for your family as planned.

How have medical bills changed your life?

Share your story in the comments below.

Note: We recommend that you consult with a financial advisor, accountant, or an attorney to discuss your specific situation.

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