Most Americans assume that if they’re employed and have health insurance, that means they don’t have to worry about medical expenses.
The weight of debt that falls on Americans each year is staggering – topping $400B in out-of-pocket medical expenses. Combined with the fact that 72% of millennials under 24 have less than $1,000 in savings and 31% have nothing saved at all, the risk of bankruptcy is alarming. In fact, $100B in medical debt never gets paid.
In 2016, the average American spent $10,345 on health-related bills. In 2007, that number was just under $8,000. Fifty years ago, the average was just $146 — which, when adjusted for inflation, means costs are 9x higher now. By 2023, that number is expected to be closer to $15,000 per year. This number is over twice the per capita average of other developed nations.
For many Americans who find themselves faced with this dilemma, the disconnect comes in the way insurance companies structure their coverage plans. Most don’t realize just how many medical procedures are not covered by their insurance plans, or fall under high premiums, copay, out-of-pocket, and out-of-network costs. The types of medical events that trigger these bills often aren’t exotic or rare procedures, either. The most common expenses fall in categories many assume are covered by their insurance plans – 52% for general doctor expenses; 44% for prescription drugs; 32% dental and vision each; and 27% for hospital-related bills. The highest average out-of-pocket costs are for orthopedics, plastic surgery, urology, and neurology, all ranging in the thousands or multiple thousands of dollars. The issue is heightened for those with high-deductible health plans, which now account for more than one-third of all American health plans. According to the National Center for Health Statistics, 43% of people under 65 who are insured by a private health insurance plan have an HDHP.
The deeper source of the problem lies in the cost of medical care in the U.S. On average, the most common medical procedures, like an appendectomy or normal delivery, cost 10-30% more in the United States than the rest of the world. In 2017 alone, out-of-pocket healthcare costs increased by 11%. On average, the increase in a given year is north of 5%. According to a recent study conducted by JPMorgan, roughly one in six families make an extraordinary medical payment in any given year, and are associated with 9% higher credit card debt a year later. Commonly, costs for prescription drugs cost up to 10x more in the U.S. then most developed countries. A day in a U.S. hospital costs roughly $5,220 – versus just $424 in Spain. C-section procedures cost twice as much in the U.S as they do in Australia, and the typical bypass surgery costs $54,000 more than the same procedure in the UK. The list goes on and on.
For the average American facing medical bills, credit cards are the first line of defense. Americans paid banks over $100 billion in credit-card interest and fees in 2017, up 11% from 2016, and up a staggering 35% from 2011. The compounding issue is that while credit is easily accessible, it is costly, with interest rates as high as 26%. The average American between 18-65 has $4,717 in credit card debt at any given time. 65% of credit card users carry a balance every month, meaning they don’t pay off their bill every month and therefore incur interest. Given that the average interest rate is 15%, a minimum payment of $189 on that $4,717 balance would take over 10 years to pay off and accrue $18,155 paid in interest alone.
For those with medical expenses that require deeper pockets of cash, they often fall prey to predatory lenders who charge massive amounts of interest. In fact, the number one usage of payday loans is to service medical debt. Even those with good credit can find themselves remortgaging their homes, taking out personal loans, or utilizing peer-to-peer lenders to raise money for healthcare costs. In fact, 30% of GoFundMe campaigns are used for medical bills.
The cost of healthcare is crushing most Americans, and there seems to be no end in sight to the growing crisis.