Is Health Insurance A Cause of Past-Due Debt?

A study of past-due medical debt by Michael Karpman and Kyle J. Kaswell of the Urban Institute demonstrates the expansion of coverage subsequent to the Affordable Care Act is associated with a reduction in the proportion of adults with past-due medical debt.

In 2012, 29.6 percent of U.S. adults had past-due medical debt, versus just 23.8 percent in 2015. The study does not define “past-due,” nor the average amount of medical debt that is past-due. However, it cites research that almost half of debt in collections is owed to hospitals and other providers.

Although health insurance is supposed to protect us from such a situation, it often does not. Among insured people, 26.6 percent had past-due medical debt in 2012, versus 22.8 percent in 2015. However, among uninsured people it declined more: 39.8 percent in 2012, versus 30.5 percent in 2015. What to make of this?

Obamacare is associated with a bigger impact on past-due medical debt among those who remained uninsured than the insured, that would be an odd outcome. (Actually, it is more likely the large improvement among the uninsured is a result of adverse selection into insurance due to Obamacare. Those who remained uninsured were more likely to be healthy, therefore less likely to have medical debt.)

Further, other research indicates no change in the proportion of Americans having trouble paying medical bills from 2005 through 2015. What really stands out in the Urban Institute study is the proportion of 18 to 24-year olds with past-due medical debt: 27.3 in 2012 versus 21.1 percent in 2015.

Seriously? One in five Americans aged 18 through 24 has past-due medical debt? What could possibly  drive that? I suggest health insurance itself is a cause. We still have a system where insurers control prices and charges. People have little idea how much they will pay out of pocket until long after they receive care. Claims have to be processed, Explanations of Benefits (EOBs) and invoices have to be mailed.

Another Urban Institute study defines credit card debt past-due if it is over 30 days late. That study also reported 35.1 percent of adults had debt in collection in 2014! The average amount was $5,178, or 7 percent of average household income of $72,254. As noted above, a big chunk of this is medical debt.

Indeed, it would be virtually impossible for an American patient to pay a medical bill within 30 days. If we paid our doctors directly, instead of sending our money on a convoluted voyage through insurers’ bureaucracies, medical debt would go down a lot – especially among young adults.