ⓘ Medical debt

Medical debt

ⓘ Medical debt

Medical debt refers to debt incurred by individuals due to health care costs and related expenses.

Medical debt is different from other forms of debt, because it is usually incurred accidentally or faultlessly. People do not plan to fall ill or hurt themselves, and health care remedies are often unavoidable; medical debt is often treated with more sympathy than other kinds of debt resulting in advice that people ought not try to convert it to credit card debt.


1. United States

Medical debt is an especially notable phenomenon in the United States. In less developed nations those on low income in need of treatment will often avail themselves of what ever help they can from either the state or NGOs without going into debt, and in most developed countries public coverage of healthcare costs are comprehensive. But in the USA, even when the patient has insurance coverage, including coverage under the Patient Protection and Affordable Care Act of 2010, considerable medical costs remain the patients responsibility. Consequently, medical debt has been found by a 2009 study to be the primary cause of personal bankruptcy.

A 2007 survey had found about 70 million Americans either have difficulty paying for medical treatment or have medical debt. Studies have found people are most likely to accumulate large medical debts when they do not have health insurance to cover the costs of necessary medications, treatments, or procedures - in 2009 about 50 million Americans had no health coverage. However, about 60% of those found to have medical debt were insured. Health insurance plans rarely cover any or all health-related expenses; for insured people, the gap between insurance coverage and the affordability of health care manifests as medical debt. As with any type of debt, medical debt can lead to an array of personal and financial problems - including having to go without food and heat plus a reluctance to seek further medical treatment. Aggressive debt collecting has been highlighted as an aggravating factor. A study has found about 63% of adults with medical debt avoided further medical treatment, compared with only 19% of adults who had no such debt.

In the United States, one of the largest concerns of medical debt stems from the high medical costs present. For example, in a 2011 study of fees paid to physicians for office visits and hip replacement procedures across the United States and several other wealthy countries, the patients in the United States paid 27% or more for office visits and 70% or more for the hip replacement procedures. Similarly, the United States charges an average of $75.345 for a heart bypass operation whereas the same operation in other wealthy countries such as the Netherlands and Switzerland costs $15.000 to $36.000 on average. These are just a couple examples of many, and due to this, data has shown that individuals in the United States pay nearly double the amount of money on healthcare in their lifetime than those in other wealthy countries. As these healthcare costs continue to rise, a lack of insurance or insurance that does not cover all fees causes a rise in out-of-pocket expenses. According to a study conducted in 2012 by Demos, it was determined that among indebted households 62% cited out-of-pocket medical expenses as a contribution to their debt. As these medical fees continue to rise and out-of-pocket expenses continue to grow, Americans are at much higher risk of falling into medical debt whether insured or not.


2. Medical debt in bankruptcy

Medical debt is considered as a non-priority unsecured debt in Chapter 7 bankruptcy. In other words, medical debts are paid only after assets are applied to the debt of creditors who hold priority debt, and thus medical debts are often discharged in their entirety at the conclusion of the bankruptcy process. If the bankrupt estate has sufficient assets such that a part of the medical debt is repaid through bankruptcy, any remaining outstanding medical debt that is included in the bankruptcy case will be discharged.


3. Debt forgiveness organizations

In 2018, two local women from the Finger Lakes region in New York partnered with the nonprofit RIP Medical Debt after fundraising for the purpose of debt collection for debt forgiveness. The nonprofit looks for bundled packages of debt from first or third party agencies which the group negotiates to purchase at discounted prices pennies on the dollar. The two women initially raised $12.500 and used this money to purchase $1.5 million of medical debt through RIP Medical Debt, which was then forgiven.

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