Understanding Medical Debt, Complexity of US Health Care System

On top of non-medical debt that millions of Americans face on a day-to-day basis, medical debt has become an increasingly growing issue in the US. A public health challenge that has resulted in government relief efforts, the key issue remains in the overall cost of health care, leading to millions of Americans with immense medical debt coupled with minimal health care access.

“Lack of affordability is arguably the biggest challenge in US health care, and the high level of medical debt is a tangible reflection of this challenge. A 2022 KFF survey found that 41% of people had debt due to medical or dental care for themselves or someone else,” wrote Larry Levitt, MPP, in an article published in JAMA Health Forum.¹

Before exploring the extent of medical debt in the US and how the government is approaching the issue, it’s important to understand that medical debt would not be possible without the growing issue of health care affordability.

Historically, with several contributing factors such as inflation, health care expenditures in the US have been steadily increasing in the past few years. From 2021 to 2022, overall health care spending rose 4.1% to around $4.5 trillion, equaling $13,493 per person. And in 2022, health care spending accounted for 17.3% of the country’s Gross Domestic Product.²

In his article, Levitt went into depth regarding medical debt relief, increasing health care costs, and the overarching reasons for why individuals typically fall into debt.

First, he mentioned the burden that insurance deductibles create for patients. “Deductibles now average more than $1700 per year per person in employer-sponsored health plans,” he wrote. With annual deductibles far-exceeding 4 figures on average for employer-based plans, many Americans—especially those from underserved populations—must enter medical debt right away to even reap the benefits of an insurance plan.¹

Next, Levitt mentioned the overall complexity of the US health care system and how it’s designed to hinder access for patients. He delved into the complexity of the health care system in a previous JAMA Health Forum article titled “Complexity in the US Health Care System Is the Enemy of Access and Affordability.”

“Almost 6 in 10 people with insurance reported a problem with using their health insurance during the past year…The result is that many delay or skip care or accumulate bills they cannot afford,” wrote Levitt and Drew Altman, PhD, in their previous article.³ “Health care simplification does not necessarily resonate in the same way as rallying cries for universal coverage or lower health care prices, but simplifying the system would address a problem that is frustrating for patients and is a barrier to accessible and affordable care.”

A reason more specific to US patients who have the high potential of experiencing unexpected medical bills, a lack of liquid assets can directly influence whether or not an individual will fall into medical debt. While unfortunate and often unpredictable, many Americans—whether they have experienced unexpected medical costs or not—do not consistently possess what Levitt defines as a “rainy day fund.” If a patient with minimal liquid savings or assets is quickly expected to handle major medical bills, subsequent medical debt is inevitable.

Finally, along similar lines as the issue of rising insurance deductibles, Levitt identified a lack of affordable health insurance in the US as a detriment to medical debt. “Health insurance coverage provides not only better access to care, but also financial security,” he wrote. But with such little access to employer-sponsored health insurance plans, high deductibles to access those benefits, and a persisting complexity when it comes to accessing benefits, the number of Americans in medical debt is even greater.

After explaining the key reasons for why the country is facing such high amounts of medical debt, Levitt discussed what the US government has been doing in its attempt to ameliorate the issue. He mentioned how implications of the Affordable Care Act were able to cut the number of uninsured Americans in half from 2013 to 2023. He also mentioned the No Suprises Act, “which prohibits hospitals and clinicians from billing patients for certain unanticipated out-of-network care.”

However, despite the government’s noticeable efforts to soften the health care-related financial burdens of Americans, the overarching issue of health care affordability is hindering the country’s ability to recover from debt.

“Effective long-term solutions to mitigate new medical debt would mean making health care more affordable in employer-sponsored insurance, which covers the majority of the population, including many low-income people. Until health care costs (and particularly the prices patients pay) are addressed, patients will not be well protected from going into debt. Medical debt is the canary in the coal mine for health care affordability, and the canary is not doing well,” concluded Levitt.¹

READ MORE: Health Care Affordability in the Election Spotlight

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References

1. Levitt L. Medical debt—The canary in the coal mine for health care affordability. JAMA Health Forum. 2024;5(9):e243368. doi:10.1001/jamahealthforum.2024.3368

2. National health expenditure data. CMS. July 8, 2024. Accessed September 10, 2024. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical

3. Levitt L, Altman D. Complexity in the US health care system is the enemy of access and affordability. JAMA Health Forum. 2023;4(10):e234430. doi:10.1001/jamahealthforum.2023.4430