Medical Debt Presents Complexities


Elements of surprise and mystery make medical debt unique. Both elements can cause headache and heartache for the victims. Being aware of how we think or don’t think about it is a big step in the right direction. If followed by several tiny steps, the pain of medical debt is preventable and treatable.

The Element of Surprise related to medical debt often occurs because we go through life dodging the bullet of any and all medical expense, but injury, illness and aging eventually seem to find us. For those of us without health insurance, medical events can feel like an assault as we become immediately responsible for sometimes huge bills. One in four U.S. families struggled to pay medical bills in 2012 and 10 percent said they had costs they couldn’t pay at all, the National Center for Health Statistics at the U.S. Centers for Disease Control and Prevention said in January. And nowadays, taking the chance of not having health insurance brings more financial pressure through penalties (links: Affordable Care Act 101 orWhat if I don’t have health care coverage?) that show up at tax time.

Surprise Element Not Restricted to the Uninsured. The insured pay monthly insurance premiums hoping that our future self will never need to pay more. Then life happens and we end up in the nearby hospital or clinic. A few docs pop their heads in and treat us, sending us home with prescriptions or scheduled follow-up appointments. We miss a few weeks of work while recovering.

Suddenly we are barraged by bills from multiple offices, as well as EOBs (explanation of benefits) that throw around terms like deductible, in-network, out-of-network, and other medical billing terms (link: Reimbursement Series) and numbers we can barely decipher. We lay it all aside while income is short, hoping that insurance will resolve it all. Time passes and before we know it we are notified of negative marks on our credit reports, and are perhaps invited to court. The little savings we had went to catching up on household bills and now thousands are owed to various collection agencies. We feel powerless amidst systems that were created to serve us. And the stress builds while our immune systems decline because of it, eventually heading us into another round of medical events and debt.

You are Not Alone. And yet, this is a very common, vicious cycle. Among families in which all members were insured, 21 percent still had difficulty paying medical expenses, per the National Center for Health Statistics 2012 survey. With high deductible plans on the rise, that number may continue to increase. On top of monthly insurance premiums, according to research at NerdWallet, the maximum out-of-pocket charge for Affordable Care Act plans sold through the government marketplace was set at $6,350 for 2014, an amount few Americans have set aside. We hear and know deep down that to avoid the potential of swimming in debt, damaging our credit, and avoiding garnishment we really need to have the amount of our deductible saved. So why don’t we do it? It is critical to understand the ‘why’ in order to start saving, as well as to start many other things that loom over us – things we know we ought to do with our time and money, but don’t.

Why We Don’t Save. A few fancy terms for three important things that get in our way are rational behavior education, internal inconsistencies, and the tyranny of the spending moment. Rational behavior education describes the “just” things we should do, like save the amount of our deductible. “Just save money.” “Just stop spending so much.” It points to all the things we know we should do, but that regularly cause strife and struggle. And yet, in the tyranny of the spending moment, we are faced with a tsunami of carefully crafted messages from advertisers and opportunities for personal immediate gratification. A little guilt from a family member or friend, and we toss the would-be savings across the counter once again. While the happy meal may satiate our little ones now, we are putting ourselves further away from truly caring for them by choosing not to stuff some money away to cover that insurance deductible. Our future self tells us we will save later, and wins. These spontaneous spending moments add up. When faced with the tyranny of that spending moment (or just after), we experience internal inconsistencies that because we ignore larger goals that align with our true values like, say, family and good health, or retirement. We feel, or physically experience, internal inconsistency or conflict, which leads to chronic stress and disease.

First, Exercise Choice. The rational education of ‘just save’ will not go far without moving through why we have not already saved. A series of exercises created by the Financial Health Institute can help discover our true values and how to move toward spending in alignment with them. These small steps can put us on the road to preventing the pain of sudden medical debt and alleviating the chronic financial stress of looming co-pays, co-insurance, and deductibles that can make us sick. Check back soon to see how to treat existing medical debt by solving the mystery and gaining control.