Un-Affordable Health Care and Debilitating Medical Debt
Despite the best attempts of financial experts to convince you that your financial problems would go away if you just stopped buying lattes or using credit cards, the biggest cause of financial distress is not something you can control: medical costs.
A study from the American Journal of Medicine found that just over 62% of bankruptcies in 2007 were tied to medical bills. Roughly three-quarters of those bankruptcies were declared by middle-class families with health insurance.
One little medical emergency can be the difference between financial survival and massive, destructive medical debt.
Last week I saw a story on social media of a man who was laid off several days before he was scheduled to go on FMLA for paternity leave, leaving them without healthcare to cover the birth and newborn care.
Certainly the legality of laying someone off right before taking FMLA is questionable, but the reality is that it is not unusual to lose one’s job and be suddenly thrown into the expensive mess that is the health insurance marketplace.
“Just go on COBRA!” is the usual response. COBRA, the Consolidated Omnibus Budget Reconciliation Act, is meant to be a stopgap that allows you to stay on your former employer’s health plan for a period of time (hopefully long enough to get coverage at a new job).
The only problem is that you are typically responsible for paying not only the premium you had been paying, but also the portion your employer had been paying. This can make your premium double, triple, or more.
Basically, COBRA gives you the privilege of paying way more for your health insurance when you’ve lost your job. How nice. I guess we’re supposed to be grateful to have any coverage at all?
It’s crazy that our ability to afford healthcare is dependent on the benevolence of our employers. Self-employed people are all-too-aware of the difficulty of accessing affordable health insurance.
Even those lucky enough to have access to an employer plan are not always so lucky. When you’re making $45,000/year, paying $700/month for your family of four’s healthcare premiums leaves little for anything else.
Many of us have stories of insurance companies denying claims. You triple check to make sure that the surgeon and the hospital are in network only to find that the anesthesiologist is out of network. You have an emergency and end up at a hospital that isn’t covered. You have a baby and the enjoyment of your new child is marred by the worry of what unknown medical bills will arrive and whether you’ll have enough to pay them.
It’s no wonder that so many families struggle to save enough to survive a financial crisis. When the furnace goes out or someone requires expensive medical treatments, the only recourse is to put it on a credit card and hope you can pay it off before too much interest accrues.
The Affordable Care Act, as imperfect as it is, helped some. States like Minnesota have expanded access to Medicaid and offer reduced-cost health insurance to those making less than a certain income level, even if you have access to employer coverage.
But there are still many holes to be filled before everyone has access to affordable healthcare.
Perhaps someday our politicians will come up with a better solution to keep us out of medical debt. In the meantime, all we can do is educate ourselves about our insurance policies, build up our emergency funds as much as possible, advocate for better protections, and stop assuming that people with money problems are simply buying too many things.
Related article: How to Get Out of Debt
