Because nearly 46 million Americans have no health insurance, medical debt has been behind many of today’s foreclosures. The author offers potential solutions.Medically uninsured persons ; Foreclosure ; Medical care, Cost of

Mark Rukavina

English

Research Papers in Economics

Communities & Banking    9
ofHealth Care
by Mark Rukavina 
The Access Project
The
Financial Burden
Escalating medical costs are threatening the nation’s 
financial well-being and its health. With insurance pre-
miums increasing 78 percent between 2001 and 2007 
and wages by only 19 percent, American workers have 
felt the pinch. Few workers or their employers have been 
able to absorb premium increases comfortably, and for 
many people, coverage has been priced beyond reach.
Nearly 46 million Americans have no health insurance. 
The  percentage  of  Americans  who  buy  their  health 
insurance through their employer has declined in re-
cent years, and those who do buy it struggle with the 
cost. The average worker purchasing family coverage 
through an employer has experienced a doubling of the 
premium paid (from $1,620 in 2000 to $3,281 in 2007). 
Not only have costs increased, but coverage has been 
reduced. As strapped employers raise the amount that 
workers  contribute  to  premiums,  office  visit  co-pay-
ments, deductibles, and fees paid for prescription drugs 
have all gone up.1  
iStockphoto10    Summer 2009
High  health-care  costs  devour  family 
budgets. In 2004, an estimated 45 million 
Americans lived in households that spent 
more than 10 percent of total income on 
health  insurance  premiums  and  out-of-
pocket  expenses. This  was  an  increase  of 
nearly six million individuals from 2001.2  
And  in  2008,  an  estimated  72  million 
Americans  reported  that  they  were  strug-
gling to pay their medical bills or had medi-
cal debt that they were unable to pay.3 
Medical Debt
Medical  debt  is  personal  debt  or  money 
owed for medical services or medical prod-
ucts. It may be owed directly to a health-
care provider, to an agent of the provider, 
or to another source, such as a credit card 
company or other lender. For the past eight 
years, the issue of medical debt—a problem 
largely invisible to policymakers—has been 
documented and studied by a national orga-
nization called The Access Project.4  
In 2000, this nonprofit group conduct-
ed a study with two dozen groups in dozens 
of communities across 18 states and found 
that nearly half of the uninsured had unpaid 
medical bills or debts to local health-care 
providers.5 Since then, national data have 
been  collected  revealing  how  widespread 
medical debt has become. 
More than one in four American adults 
under the age of 65 (28 percent, or 49 mil-
lion people) have a medical bill or medi-
cal debt that is being paid off over time.6 
Although  medical  debt  is  most  common 
among  people  without  health  insurance, 
the extent of the problem is broader. (See 
“Uninsured Adults Are More Likely To Be 
Paying Off Medical Debt.”) 
Twenty-four  percent  of  Americans 
buying health insurance still incur debt—
a serious public policy challenge. Even in 
Massachusetts,  where  health-insurance 
reform  has  successfully  expanded  cover-
age for hundreds of thousand residents, the 
financial burden is far from eliminated. The 
percentage of Massachusetts residents with 
medical  debt  is  lower  than  seen  nation-
wide, but a 2008 study showed that nearly 
one in five residents was trying to catch up 
on medical bills, and more than one in 10 
adults did not receive needed care because 
they thought the costs were too high.7  
Medical debt is a barrier to care. Pri-
vately  insured  adults  with  medical  debt 
demonstrate  nearly  the  same  care-seeking 
behavior of the uninsured. Compared with 
those  having  insurance  and  no  medical 
debt, they are more likely to skip a test or 
treatment, postpone care, or decide not to 
fill a prescription.8  
Medical  debt  threatens  other  basic 
needs, too. In 2007, when an estimated 28 
million American adults used up all their 
savings trying to pay off medical bills, near-
ly  one-third  of  those  with  medical  debt 
were unable to pay for food, rent, or heat, 
and a small percentage took out a mortgage 
or loan against their home to pay medical 
bills. Moreover, those with medical debt are 
often contacted by collection agencies, carry 
higher outstanding balances on credit cards, 
experience housing problems, and have dif-
ficulty accessing loans or credit.9 Research-
ers examining personal bankruptcy filings 
have cited medical causes (loss of income 
and/or medical debt resulting from a medi-
cal incident) for nearly half of the filers.10  
Debt Resolution Program
Several years ago, The Access Project devel-
oped the Medical Debt Resolution Program 
to assist people in resolving unpaid medi-
cal bills. The protocol involves giving peo-
ple  critical  information  and  a  framework 
for  assessing  whether  relief  from  medical 
debt  might  be  provided  through  private 
insurance,  public  programs,  a  health-care 
provider’s  charity  care,  or  another  form   
of assistance. 
The  program  has  proven  very  effec-
tive. Hundreds of people have been assist-
ed and millions of dollars in medical debt 
have been resolved through payments from 
private insurance and public programs, pro-
vider  discounts,  and  renegotiation  of  the 
outstanding  balance  payment  terms  into 
something  more  realistic.  Recently,  the 
number  of  people  reaching  out  for  help 
has climbed dramatically, providing a win-
dow  into  underinsured  patients’  current 
challenges—including  handling  the  stress 
of potential economic ruin while trying to 
recover from an illness.  
Uninsured Adults Are More Likely To Be Paying Off Medical Debt
Adults ages 19 to 64 paying off medical debt over time
Total Insured all year Uninsured anytime in past year
Insured now Uninsured now
Percent with medical debt or 
bills being paid off over time?
28% 24% 39% 35%
How much are the medical bills 
that are being paid off over time?
under $2,000 51% 57% 46% 38%
$2,000-$3,999 21% 20% 25% 22%
$4,000-$7,999 12% 11% 11% 14%
$8,000 or more 12%  9% 13% 20%
Was this for care received in the 
past year or earlier?
Past year 54% 57% 53% 43%
Earlier year 37% 35%  37% 44%
Both  8%  7%  9% 12%
Source: The Commonwealth Fund Biennial Health Insurance Survey (2007)Communities & Banking    11
Credit Reporting
Many  Access  Project  clients  have  pulled 
their credit reports and found that medi-
cal  bills  are  damaging  their  credit.  One 
study on consumer debt and credit report-
ing published by the Federal Reserve found 
that  more  than  one-half  (52  percent)  of 
collection actions are associated with med-
ical bills.11 Unsurprisingly, accounts in col-
lection have a detrimental effect on credit 
scores. Once a health-care provider trans-
fers bills to a collection agency, that agency 
is likely to report the account to the credit 
bureaus. Even after accounts have been paid 
off in full, the black mark can linger for sev-
en years, lowering credit scores and increas-
ing the consumer’s cost of credit. 
Consumer Protection
Consumers  should  not  be  punished  for 
medical bills that, unlike many other forms 
of debt, are incurred involuntarily. What can 
be done? The new administration is con-
sidering health-care reform at the nation-
al level, and there may be an expansion of 
comprehensive insurance coverage that pro-
vides  protections  from  financial  ruin  for 
Americans experiencing serious illness. 
In  the  meantime,  state  and  national 
regulators could take other steps to provide 
relief.  For  example,  regulators  could  call 
on health-care providers to enact a credit-
reporting holiday, during which providers 
and their collection agents would be banned 
from  routinely  reporting  accounts  to   
credit  bureaus.  Massachusetts  Attorney   
General  Martha  Coakley’s  Community 
Benefit Guidelines for nonprofit, acute-care 
hospitals  provide  another  approach.  The 
guidelines will take effect in October 2009 
and advise hospitals not to “report a patient’s 
medical debt to a credit-reporting agency 
unless specifically approved by the hospi-
tal’s board of directors.”12  A few health-care   
providers  have  voluntarily  adopted  such 
policies  without  significant  financial  cost. 
Other  steps  might  include  more  effective 
regulation  of  health  insurance  products;   
and  having  providers  screen  patients  for   
eligibility in public or private financial assis-
tance programs.  
America faces a health-care crisis in the 
midst of a credit crisis, and protections are 
needed for millions of struggling families. 
Regulators could help by acting to ensure 
that these families are not further compro-
mised  when  facing  simultaneous  medical 
and economic challenges. 
Mark Rukavina is the executive director of 
the Boston-based Access Project, a resource cen-
ter for communities working to improve health 
and health-care access.
Endnotes
 Gary Claxton, et al, 
1  Employer Health Benefits: 2007 
Annual Survey (Henry J. Kaiser Family Foundation and 
the  Health  Research  and  Educational Trust,  2007), 
http://www.kff.org. 
  Jessica Banthin, Peter Cunningham, Didem Bernard, 
2 
“The Financial Burden of Health Care, 2001-2004,” 
Health Affairs (January-February 2008). 
 Sara Collins, Jennifer Kriss, Michelle Doty, Sheila 
3 
Rustgi, Losing Ground: How the Loss of Adequate Health 
Insurance  is  Burdening Working  Families  (New York: 
The Commonwealth Fund, August 2008).
  The  Access  Project,  http://www.accessproject.org, 
4 
works to strengthen community action, promote social 
change, and improve health, especially for the most 
vulnerable.
  Dennis  Andrulis,  Lisa  Duchon,  Carol  Pryor, 
5 
Nanette Goodman, Paying for Health Care When You’re 
Uninsured:  How  Much  Support  Does  the  Safety  Net 
Offer? (Boston: The Access Project, 2003).
 Michelle Doty , Sara Collins, Sheila Rustgi, Jennifer 
6 
Kriss,  Seeing  Red:  The  Growing  Burden  of  Medical 
Bills  and  Debt  Faced  by  US  Families  (Boston:  The 
Commonwealth Fund, August 2008).
 Sharon Long, “On The Road to Universal Coverage: 
7 
Impacts of Reform in Massachusetts Year One,” Health 
Affairs web exclusive, June 2008.
  Catherine  Hoffman,  Diane  Rowland,  Elizabeth 
8 
Hamel,  Medical  Debt  and  Access  to  Health  Care 
(Washington:  Kaiser  Commission  on  Medicaid  and 
the Uninsured, 2005).
  Collins, 
9  Losing  Ground;  Cathy  Schoen,  Michelle 
Doty, Sara Collin, Alyssa Holmgre, “Insured But Not 
Protected:  How  Many  Adults  Are  Underinsured,” 
Health  Affairs  (June  2005);  Cindy  Zeldin,  Mark 
Rukavina, “Borrowing To Stay Healthy: How Credit 
Card Debt is Related to Medical Expenses,” Demos 
(2007); and Robert Seifert, Home Sick: How Medical 
Debt Undermines Housing Security (Boston: The Access 
Project, 2005).
  David  Himmelstein,  Elizabeth  Warren,  Deborah 
10 
Thorne and Steffie Woolhandler, “Illness and Injury 
as  Contributors  to  Bankruptcy,”  Health  Affairs  web 
exclusive, February 2005.
  Robert  Avery,  Paul  Calem,  and  Glenn  Canner, 
11 
Raphael  W.  Bostic,  “An  Overview  of  Consumer 
Data and Credit Reporting,” Federal Reserve Bulletin, 
February 2003.
The  Attorney  General’s  Community  Benefits 
12 
Guidelines for Non-Profit Hospitals, Office of Attorney 
General Martha Coakley, 
http://www.mass.gov/Cago/docs/healthcare/
13 
hospital_guidelines.pdf.
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The financial burden of health care

http://www.bostonfed.org/commdev/c&b/2009/summer/Rukavina_medical_debt.pdf

The financial burden of health care

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