Credit Cards

Medical Bills and Credit Card Debt

Comments 6 Comments

Those of us in the personal finance world have long understood that medical bills are a major driving factor behind consumer debt issues. I can’t even begin to count how many emails I’ve received from people struggling with debts or considering bankruptcy due to bills related to an injury or illness. Without health insurance, consumers can easily build up $10,000 in debt for a simple visit to the emergency room. Even with health insurance, many consumers face incredible deductibles or costs for even basic medical treatment.

A new study from Demos and the Access Project entitled "Borrowing to Stay Healthy" has revealed new data on just how much medical costs are impacting consumer credit card balances. The report found that:

  • Low- and middle-income medically indebted households had higher levels of credit card debt than those without medical debt-on average 46 percent higher. ($11,623 versus $7,964).
  • Twenty-nine percent of low- and middle-income households with credit card debt reported that medical expenses contributed to their current balances. Within that group, 69 percent had a major medical expense in the previous three years.

The report also goes on to discuss the issue of medical credit cards and revolving lines of credit. These services are often offered to patients as "financial assistance" by health care providers when, in fact, they usually have higher rates and fees than comparable standard financial products.

The group advises a solution that is very close to my own wishes: a requirement to differentiate medical debts from other types of debts in the credit system. I feel very strongly that new regulations should be passed to reform the way medical bills are sold to collections and included in credit reporting. Under the current system, any size of unpaid medical debt can be sold by a health care provider to a collection agency. The resulting collection record causes significant credit score damage for 7 years; damage that doesn’t end when the consumer pays off the debt.

It doesn’t make sense that a consumer’s credit score would drop dramatically because they are unable to repay exorbitant bills for something like cancer treatment. Struggling to repay unavoidable medical bills is a very different situation in my mind than being unable to repay bills for electronics and other avoidable expenses. And, although creditors and lenders would argue against it, I don’t think medical collection accounts are a fair or accurate item to use in credit scoring calculations.

Have you recently faced an expensive medical bill? Did you use credit card or other financial products to manage the debt? Share your feedback and stories in the comments section below.

  • Gerri Detweiler

    I recently spoke with a woman whose credit had been ruined because of a car accident. She has good medical insurance and health insurance, but the insurers wouldn’t pay until the insurance settlements were straightened out…the medical providers charged her off in the meantime…and it was her credit that took the hit. To me that is completely wrong.

  • Jerel McDonald

    I have a related problem because my insurance company only pays if I go to an in-network provider. Of course I always go to an in-network provider and now I take pains to verify that they are in-network.
    But the provider, without my knowledge or consent will “sub-contract” out some of the job to other providers who are out of network. It’s not malicious, bookkeeping in the physician offices is horrid and insurance is complicated.
    The out-of-network provider then bills my insurance, who refuses to pay, and I get the gigantic bill for the full amount from this subcontractor. Typically it’s an anesthesiologist or assistant physician.
    I refuse to pay because it’s not my fault they screwed up and chose to perform the service against my wishes. So far I’ve been able to stave off any dings to my credit without going to court but it gets old and it’s nerve-wracking.
    I’m thinking of making an affidavit for my provider to sign stating that they will verify that any other providers they use are contracted with my insurer. What a pain!

  • Cynthia Smith

    I am a junior in college working towards my B.S. I had two unexpected surgeries my freshman year and was unable to pay them due to the unaffordibility of medical coverage. I am now approximately 30,000 in debt from these procedures that were life-saving, and my credit is ruined. I can not get a loan to finish college.

  • Amanda

    I am also in college and have been killed by medical bills. I have had to max out all of my credit cards for perscriptions and medical supplies and even with insurance I have $5,000 owed to the hospitals because of deductibles. I agree that when these are reported it should be noted they are medical. I have always been very careful to maintain my credit but because of my condition I am unable to work and have fallen behind. I think the companies hurt themselves by juping to report. When I can get back to work what is my motivation to give them all my paychecks when my credit score is going to remain hurt just the same either way.

  • Kweb

    My husband and I did very well for ourselves. We were enjoying a comfortable lifestyle until an MRI revealed a mass on one of my ovaries. I had to have immediate surgery to have it removed only to find out that it had killed the ovary and it all had to be removed. We worked some bills around and were making the payments until my husband lost his job. I put all the medical bills on my credit card to pay them off thinking I could make the minimum payment on the card. Then my husband was off work longer than expected. I couldn’t make the credit card payments and now I have a judgement against me for that. My whole bank account was garnished a week before christmas. A medical bill that wasn’t put on the card went to judgement and garnishment started on that two weeks before christmas. I’m planning on filing for personal bankruptcy to get a clean start but of course then that will be on my credit report. It’s a no win….. Where do we go for help?

  • Bobbi

    I worry each and every day that I might lose my home due to medical debt. I am trying to pay off multiple accounts that have been given to a variety of agencies. Most from the same hospital. They must sell to a variety of collection agencies. One of the agencies is just asking for money but won’t tell me anything about the account.
    I do pay, but I do it in payments. I have a daughter with severe migraines that sometimes render her without site, speech, or use of her left side. The care for her has been outrageous. I am also sick and tired of being accused of being a loser who doesn’t want to pay off my medical debt. I am not a loser. I just can’t keep up with it. It has driven me to the point where I worry constantly.
    I even received a notice from one agency telling me that because I own a home, mean that I have the means to pay off my medical debt. I just don’t know what to do anymore. I will continue making payments until the medical debt is paid off. I myself am having medical issues but have not gone to the doctor because I don’t want to worry about another bill.
    I don’t want to use my credit card because I hear that can run you into trouble too.

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