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The hidden harms of medical costs

Over the past decade, new research and media coverage has brought to light the financial harm patients face from health care costs they can’t afford. An in-depth survey of people struggling to pay their medical bills found that patients are using up their savings, delaying long-term goals, and sacrificing household necessities because of medical debt. There’s even a term for how medical costs affect patients in the same way as disease – financial toxicity.

But there are other hidden ways that high health care costs are affecting patients. For example, if you receive a medical bill that goes unpaid, even if you are still negotiating the charge with your insurer or provider, the debt could lower your credit score. A recent article in Kaiser Health News tells the story of Jeff Woodard, who received $3000 in surprise bills after being hospitalized for a horse-riding accident. Like so many others who receive surprise bills, Woodard’s family had made sure his hospital was in-network, but didn’t realize that a specialist at the hospital was an outside contractor. The insurer refused to pay the bills and Woodard tried to negotiate, all the while collection agencies threatening to report the unpaid bill to credit bureaus. 

Damage to one’s credit from medical costs is surprisingly common, affecting nearly 40% of adults under 65. The effects of a lower credit score are far-reaching, affecting one’s ability to pursue a business opportunity or buy a home. A low credit score can even impede qualified workers from getting a new job. On a macro level, lower credit scores in communities of color reflect and likely exacerbate racial disparities, research from the Urban Institute shows.

Another hidden way medical costs impact financial health is their unpredictability. Most families in the US have little savings to weather any economic shocks; earlier this year, only about 40% of Americans reported that they would use their savings to pay $1000 for an emergency. Even middle-class families are left scrambling to cover unexpected medical costs.

Part of the problem is growing economic volatility in American households. Research over the past few years has shown that measures of average annual income are missing huge swings in household income and expenses from month to month, caused by unpredictable work schedules, seasonal work, and the growing “gig economy.” Medical costs add more uncertainty to households already experiencing significant income volatility.  

The shifting burden of health care costs from employers and government to patients has coincided with a similar erosion of the social safety net in other policy areas. If we want families to be able to stay healthy and invest in their future, we have to reduce the heavy burden of health care costs.