With skyrocketing costs and falling coverage, many Americans have to pull out the plastic to pay their bills.
This week's credit check: 17% of consumers can't afford to pay medical bills and Americans pay about $45 billion worth of health care costs with credit cards.
Today marks the one-year anniversary of the health care reform bill. Ezra Klein, ever an expert on the matter, explains exactly what it is meant to do:
In 2019, once the law has been fully implemented for five years, it is expected to cover about two-thirds of the uninsured, to cost about 4 percent of what the health-care system spends in any given year and to cut the federal deficit by less than 1 percent... [O]nce it kicks in fully in 2014, is expected to do four things: provide coverage; remake a small slice of the private insurance market; pay for itself; and try to control costs... Of the 32 million people the law is expected to cover by 2019, 16 million will be on Medicaid and the rest covered by private insurance.
This legislation literally can't come a moment too soon. Not only does our broken health care system have catastrophic -- and sometimes fatal -- effects on our health, but it has a serious effect on our wallets. There's been a recent increase in those who can't afford to pay their medical bills or buy medications -- 17% of consumers in February as opposed to 15.6% in January and 14.7% a year ago, according to the Consumer Reports Trouble Tracker. It was the most prevalent trouble faced by consumers, ahead of missing payments on their bills. The story is particularly bad for low-income households -- of those earning less than $50,000 a year, 26% can't afford medical bills or medications.
The recession is likely to blame for the upsurge in these numbers. High unemployment levels, rising treatment costs and unaffordable coverage means four in 10 Americans struggled to pay their medical bills last year, according to a report by the Commonwealth fund. The report also found that 40% of respondents had to forgo care they needed because of high costs. (That number was at 29% in 2001.) Fifty-seven percent of those who lost their coverage with their job couldn't get new insurance, and enrollment in a government program to cover part of the cost of COBRA ended last May.
In the struggle to pay for necessary care and medications, many Americans turn to using their credit cards. We pay about $45 billion worth of health care costs with cards, according to a report from McKinsey & Company. Meanwhile, Demos and the Center for Responsible Lending surveyed low- and middle-income households and found that nearly a third had used a credit card to pay medical expenses. They also had high levels of credit card debt: an average of $11,623, as opposed to $7,964 for households without, with 44% of those carrying more than $10,000.
Why do medical costs get so easily coupled with credit card debt? It's not that Americans have a knee-jerk reaction to reach for the plastic. "Up to Our Eyeballs" notes that the rising use of cards can be linked to an insistence from health care providers on getting up-front collection on co-pays and deductibles -- and the number one strategy is getting credit card information before treatment. Not to mention the creation of a whole new product: the medical credit card. They come in many shapes and forms, but most are filled with fine print and loopholes. While almost all start with an 0% interest rate, they often rocket up to over 20% after an initial period -- rates on GE's CareCredit card jump to 26.9%, for example.
Health care reform will help ease these problems by covering more Americans and hopefully lowering the cost of care. But even this sweeping bill won't grant relief to many until its implementation in 2014. Until then, more Americans are going to have to reach for plastic when faced with medical bills they can't afford.
Bryce Covert is Assistant Editor at New Deal 2.0.