In this episode, we are joined by Erika Giovanetti a personal finance reporter and contributor to lendingtree.com to discuss how Americans are coping with medical debt.
Highlights of this episode include:
- Why Most Americans have been in medical debt
- The top drivers of medical debt
- How patients pay for the medical debt
Mike Passanante: Hi, this is Mike Passanante, and welcome back to the award-winning Hospital Finance Podcast. Recently, Lending Tree conducted a survey that looked at medical debt and its effect on people across the country. To offer an analysis of the survey results, I’m joined by Erika Giovanetti, a personal finance reporter and contributor to lendingtree.com. Erika, welcome to the show.
Erika Giovanetti: Hi, thanks for having me, Mike.
Mike: Erika, why don’t you start out by telling us why Lending Tree wanted to look at medical debt as a focus for this study and how they went about conducting the survey?
Erika: Yes. So Lending Tree is known to most people as a online loan marketplace where you can go to kind of compare loans, but we also have a focus on consumer education. And I write a lot about medical bills, negotiating medical bills, and consolidating medical debt. And one statistic I’ve always wanted but have had a really hard time finding is the percentage of Americans who have been in debt due to medical bills. And it’s a little bit different from what might be reported by the hospitals because we went straight to consumers and asked them in the form of a survey. So we commissioned Qualtrics for a survey of about 1,500 Americans and asked them a series of questions about if they’ve been in debt due to medical bills and how they paid those medical bills. And this is a really good way to measure medical debt without just saying they have unpaid medical bills, but maybe also people who took out a loan to pay medical bills and are in debt because they’re in that loan, or people who used a credit card to pay for medical bills and are now carrying that high-interest credit card debt.
Mike: Got it. So we’re looking at debt across the spectrum here, whether or not they were able to pay their bill essentially is not the issue, it’s more or less whether or not they took the money out to pay it and they’re in debt as a result of that. Right?
Erika: Right. So, I mean, it really could be either way. And that’s kind of what makes our direct-to-consumer survey different from a lot of data that is released by hospitals, is that we can kind of get a better pulse on different kinds of debt that people have due to medical bills, not necessarily just unpaid medical bills.
Mike: Okay. So with that set up, you had several key findings, and we’ll walk through them here. The first one, which was interesting, maybe not that surprising but you can talk about it, is that most Americans have been in medical debt at some point in time. Why don’t you tell us about that?
Erika: Yeah. So this finding certainly wasn’t surprising to me because I’m one of those people who has previously been in medical debt, not necessarily for taking out loans or credit cards but for having an unpaid medical bill, I suppose. So we asked people, “Do you have any medical-related debt?” And 37% said, yes, they currently have medical debt and 23% have previously been in debt due to medical bills. And that’s, like I said, not super surprising to me just because the cost of care can be kind of a surprise to some people. And it’s not particularly out of the realm of possibility that if somebody gets a $5,000 bill for an MRI that they weren’t expecting, that they might not be able to pay that off out of their savings or just have cash. So that finding wasn’t super surprising to me. And whenever you look at it all together, 60% of Americans – so about 6 in 10 – have been in debt due to medical expenses at some point. And on average, those who currently owe medical debt owe between $5,000 and a little under $10,000 dollars. So it’s quite a substantial amount and definitely could put a burden on these patients who may not have been expecting to have to pay out-of-pocket for certain parts of their treatment.
Mike: Yeah, no doubt. What were the top drivers of medical debt as you looked through the survey results?
Erika: So patients were most taken aback by emergency room visits. And that also wasn’t a very big surprise finding to me, just because you hear these horror stories about ambulance bills and insurance not covering all the costs of an emergency room visit. I’ve had personal experience with getting billed for an emergency room visit that I thought was going to be mostly covered by insurance, and I feel like many patients are probably in the same boat as me. So out of all of the people who have or have had medical debt, 39% said that it was from an emergency room visit. And people were able to choose more than one answer, so we end up having more than 100%, but some of the other big drivers of medical debt were visits with specialists, childbirth, dental care, lab fees or tests, prescription drug costs, surgery. So that’s definitely something that makes sense, in my opinion, that emergency room visits were by far the top driver. But visits with specialists and lab fees are another thing that I’ve had personal experience with going to a dermatologist. Of course, the dermatologist was mostly covered by my insurance, but my dermatologist worked with an out-of-network lab, which I didn’t know because I didn’t know any better than to ask upfront. And, of course, that’s a lesson learned and I was able to negotiate a discount on that bill for paying upfront, but it was quite a shock to have to pay $600 without thinking twice about saying, “Yes, you can test this mole. I want to make sure I don’t have skin cancer.”
Mike: Right. Yeah. I mean, the out-of-network and surprise billing issue, it’s a top issue. It’s something that is talked about in various circles throughout our government, frankly. Right?
Erika: And especially childbirth. Not something that I have personally experienced, but Lending Tree data found that the cost of childbirth in America can range from $10,000 to $30,000 or more. So while typically not all of that is passed on to the patient, a good portion of it will be, and it can be a really big burden on new parents. And they might not have a choice but to take out a loan or to even get on a payment plan to try to pay off this medical debt.
Mike: So let’s talk about that a little bit. How did people go about paying for the medical debt?
Erika: So it’s kind of a mix. People who have already paid off their medical bills, which was a smaller portion of the survey that we conducted, they paid off their medical bills in a variety of ways. About a third used money from their savings. So that’s definitely something that as a personal finance writer, I would recommend you don’t want to be paying interest on top of hospital bills. There are already going to be something that is maybe not expected, maybe some needed budget for especially if you have an emergency room visit. So paying out of savings and not having to have an interest-bearing credit card or loan is certainly the preferable way to do it. But of course, not everybody has the money and savings to be able to cover these bills. So 23% worked with their health care provider on a payment plan, which is always one of my number one recommendations. A lot of people in medical billing will know that interest-free payment plans are something that is offered. You just want to be able to recuperate the money that is owed to the hospital, so sometimes getting on a payment plan and breaking up those payments over a number of months is the best way to get the payment from the patient. Another 23% took on credit card debt, which is definitely probably the least advisable way that I would see a way to pay for these.
Of course, there’s options like care credit, but when patients don’t adhere to the terms of care credit, they’re stuck with a 26.99% APR, which is incredibly high. And that’s something that really concerns me as somebody who writes about credit cards and credit card debt and debt consolidation, is that a lot of medical providers work with care credit. And it can be a good option in some cases, but the standard purchase APR is quite high. There’s also a chance that people could be taking on credit card debt and taking advantage of a 0% APR introductory rate, which would definitely be a preferable way to make sure that they’re not paying interest on these medical bills. But those were the top three reasons: savings, payment plans, and credit cards. But 16% cut other expenses from their budgets, maybe cutting down on discretionary spending. 13% took on another job to pay for their medical bills. 10% took out a personal loan. A lot of people have been seeking personal loans for medical expenses, according to our data here at Lending Tree. I work on the personal loan and debt consolidation bit here, and we have found that in recent months there is more interest for personal loans for medical expenses. We had 9% borrowed from a loved one, 8% declared bankruptcy, and 5% tapped into their retirement savings.
So definitely a mix of the right and wrong ways to pay off medical bills, but people really are just doing the best that they can for their unique financial situations. Most Americans have less than $1,000 saved up in their emergency fund. So it’s another issue where that’s really not as much as most financial professionals advise. Most say to have three to six months worth of expenses in your emergency fund, but frankly, a lot of people just don’t have that right now. Especially with the coronavirus pandemic that has affected a lot of people’s employment and their health and the health and welfare of their families and just so much going on that’s unique to our time right now in 2020 and 2021 that people haven’t had to deal with before.
Mike: Yeah, no doubt about that. And as we chatted before the podcast, Erika, obviously the audience for this podcast, everybody is a consumer but the people that listen to this show, a lot of them work on the revenue cycle side of the hospital. They’re in the business of dealing with patients and helping them understand their financial responsibility for their medical bills and also negotiating with them in certain cases. And is that something that you found in the survey, that patients went about trying to negotiate their bills? And did they have any success in reducing the obligation by doing so?
Erik: We did find that three out of four patients attempted to negotiate their medical bills, and most of them were pretty successful. Out of those who negotiated, 33% asked for certain items to be taken off, 28% asked to go on a payment plan, 23% asked for their balance to be lowered. So they kind of negotiated in different ways. And out of all these people who did negotiate their medical bills, they were at least partially successful. So we found that 92%, 93% said that they were at least partially successful. 60% said they were very successful. So I do think that this is something that people will try to negotiate with their medical providers and with these people who do work at the billing department. And I’m guessing that people who do work at the hospital billing departments are probably not very surprised by this. Even before I was starting as a personal finance writer, I always knew if you get a really big medical bill, it’s good to try to see if there is any way to get that balance reduced or to get on a payment plan.
For me personally, my first option is always to get an itemized copy of the bill and my summary benefits and coverage by from the insurance company to just make sure that there is no coding errors or billing mistakes first. The billing department is really the last place that I like to call, and it’s something that I’ve had personal experience and personal success with. And I’m sure that as people who work in billing departments, you get a lot of people who call in and say, “I wasn’t expecting this bill. I don’t know how I’m going to pay for it. How can you help me to reduce the amount owed or get me on a payment plan so that I can break up these payments into more affordable chunks that fit into my budget?” So we found that people who asked for a discount upfront were more successful if they offered to pay in a lump sum. I know that for some medical providers, when you enroll a patient on a payment plan, obviously, it’s better than not getting paid. But at the same time, you just don’t know if a patient is going to be able to adhere to that payment plan, and sometimes just recuperating some of the money is the best way to do it. But I can only imagine how complicated it must be to try to explain to some of these patients what their responsibility is just because as somebody who writes about medical billing a lot, there seems to be a lot of confusion, even among people who are what I would consider financially literate as to why they are responsible for a certain bill.
And I’ve had a lot of personal experience with this, like I said, with that dermatology bill, and then recently with a coronavirus test bill where– this is right at the beginning of the pandemic, and I got a coronavirus test thinking that it would be free because, unfortunately, I wasn’t as well-versed as I am today in the actual legislation here. And as we know, the Cures Act allows for a lot of wiggle room, I would say, for between how insurance is required to cover the cost of coronavirus testing. So I was left with a bill for $150. I was able to get it dropped, I think, because this was the beginning and people were still getting the legislation figured out. But I’ve had co-workers who also have been charged for coronavirus tests and they have been unable to get these bills reduced or dropped because, at the end of the day, insurance didn’t pay. You can’t expect the provider to just not charge you because it’s a service that was rendered and it’s a service that costs money and with all of the high-quality medical care that providers are issuing right now during the pandemic, it comes at a cost. And a lot of the times, we’re finding out it’s being passed on to the patient, which can just cause a world of problems for patients and providers alike.
Mike: Yeah, it certainly took a complex system and made it even a little bit more complex. So not making life easier for anybody, but certainly, we all have to work together to resolve these issues. And you shed some light on it here today, so we appreciate that, Erika. If someone wanted to read more about the survey results, where can they go?
Erika: So you can head over to lendingtree.com. You could search for our medical debt survey, and it was written by me, Erika Giovanetti. I’m on the personal loans verticals, but yeah, head on over to Lending Tree and you can find our medical debt survey to see the full results and everything that we found in depth.
Mike: Erika, thanks so much for joining us today on The Hospital Finance podcast.