NEW YORK, Jan. 16 /Standard Newswire/ -- As health care costs
continue to rise faster than incomes, families are turning to credit cards to
pay for medical care, according to new research by Demos and the Access Project.
The public policy groups published the findings today in a report entitled
Borrowing to Stay Healthy: How Credit Card Debt Is Related to Medical Expenses.
Based on data from a national survey of low- and
middle-income households with credit card debt, Borrowing to Stay Healthy
illustrates that those who identified medical expenses as a factor in their
credit card balances had much higher credit card debt than those who did not.
Americans with insurance, the report shows, increasingly find themselves paying
unmanageable out-of-pocket expenses for health care and do not have assets or
income safety nets to cover the extra, often significant costs.
Too many working people are piling up debt on high interest
credit cards, and risking their financial security, simply because they have the
misfortune of getting sick, said Mark Rukavina, Director of the Access Project
and co-author of the report. We can t let this happen in America.
Key findings from the report include:
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.
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).
Low- and
middle-income medically indebted households had higher debt-to-income ratios
than non-medically indebted households.
Among the
medically indebted, young adults between the ages of 18 and 34 had the
highest level of average credit card debt ($13,303) of any age group. Credit
card debt levels of medically indebted young adults ($13,303) were also
considerably higher than credit card debt levels for non-medically indebted
young adults (7,450).
The
medically indebted are more likely to be called by bill collectors than the
non-medically indebted (62 percent versus 38 percent).
American
families are running out of options and turning to credit cards to meet
necessary medical expenses," said Cindy Zeldin, report co-author and Federal
Affairs Coordinator for the Economic Opportunity Program at Demos, "Congress
should address this new and serious consequence of our nation's growing
health care crisis before more families go into debt, and risk their
financial stability, to get the medical care they need."
Borrowing to Stay Healthy outlines reforms addressing
several key factors that will only exacerbate the medical debt crisis in coming
years:
DIFFERENTIATE MEDICAL DEBT FROM CONSUMER DEBT. Poor credit ratings can ruin
a family s prospects for homeownership, small business development, and even
employment. National guidelines for identifying and differentiating medical
debt must be developed and enforced.
LIMIT THE
ENTRY OF MEDICAL PROVIDERS INTO FINANCIAL SERVICES. Provider-sponsored
credit cards and revolving lines of credit are often offered under the guise
of financial assistance frequently with the same rates and fees of consumer
credit. Patients may feel compelled or pressured to access these services as
up-front or in-house financing. This dangerous blending of the health care
and finance industries should be discouraged.
INCREASE
OVERSIGHT OF MEDICAL CREDIT CARDS AND LINES OF CREDIT ATTACHED TO HEALTH
SAVINGS ACCOUNT PRODUCTS. Medical credit cards are now being marketed
specifically for out-of-pocket medical expenses, and some HSA products now
include lines of credit. As these types of products become more common, the
effects on cash-strapped families could be severe. If a patient has a low
credit score or is late with a payment, he or she could pay exorbitant
interest fees and penalties for health care services. These new products
should be closely monitored.
IMPROVE
SCREENING FOR ELIGIBILITY IN PUBLIC OR PRIVATE FINANCIAL ASSISTANCE
PROGRAMS. Health care providers can help reduce medical debt while
maintaining their revenues by improved screening of patient eligibility for
public programs such as Medicaid and State Children s Health Insurance
Programs. Those who are eligible for an assistance program should be
encouraged by the provider to enroll.
ENACT A
BORROWER S SECURITY ACT. Today there are no legal limits to the fees and
interest credit card issuers can charge. They are allowed to change the
terms on cards at anytime, for any reason unlike other lenders. As a result,
cardholders often borrow money under one set of conditions and end up paying
it back under different terms. We recommend a Borrower s Security Act that
would limit these practices and restore the balance of power in the lending
relationship.
Peggie Sherry, a cancer survivor and founder of the Tampa,
Florida,-based foundation Faces of Courage, found that the Borrowing to Stay
Healthy Report hits close to home: When I was diagnosed with cancer several
years ago, the cost of the treatment wasn't on my mind. The expenses piled up,
but what other option is there? All I could do was deplete my savings and then
turn to my credit cards to pay the bills. There are millions of others in the
same boat. This research should set alarm bells off in Washington.
To view the full report, Borrowing to Stay Healthy: How
Credit Card Debt Is Related to Medical Expenses, visit
www.demos.org or
www.accessproject.org; individual
case studies are included in the appendix of the report.
