How medical debt erodes Oklahomans’ financial security

Medical debt is money owed for medical goods or services, like doctor’s visits, lab fees, or hospital stays.  One survey of low-income households in eight states, including Oklahoma, found that 46 percent of low-income households carried medical debt.  National survey research has found that 41 percent of adults of all income levels have either accumulated medical debt, or had difficulty paying medical bills in full.  Medical bills burden too many Oklahoma households with financial insecurity, debt collections that damage credit history, and bankruptcy.  

Financial insecurity

Without health insurance, households at any income level can be financially devastated by a serious illness that requires frequent doctor visits, expensive treatment, or surgical intervention.  But even relatively minor illness can threaten the financial security of low-income households, whether they have insurance or not.  Co-pays and medical bills that aren’t covered by insurance, and lost income or employment from time-off work, can become insurmountable obstacles for those already living paycheck to paycheck.  Those without sufficient income to pay off their medical bills face few good options: spending down their savings, charging the balance to a credit card, taking out a loan or a 2nd mortgage, leaving other bills unpaid, or some combination of all four.

Collections and damaged credit

If the options above aren’t available, or a consumer exhausts them, unpaid medical bills turn into collections that damage credit history.  A lower credit rating raises the cost of borrowing, so consumers end up paying more for home mortgages and auto loans.  A single medical episode can trigger dozens of bills – from the hospital, attending physicians, laboratory – risking multiple dings that can remain on a credit report for up to seven years.   Unfortunately, unlike many other types of debt, payments to health care providers can only harm your credit rating, not improve it:

When medical providers and their collection agents report debt to credit bureaus, they typically do so only when payments have not been made. This negative-only treatment of medical debt is all the more inequitable because it is one of the few types of debt that are involuntarily acquired.

It’s perhaps unsurprising then that a state with so many uninsured working-age adults (538,700), also has among the lowest average credit scores in the nation.  As much as unpaid medical bills are a bane for a consumer’s credit and a provider’s bottom-line, they’re a boon for debt collectors.  The majority of accounts in collection in consumer credit bureau files are unpaid medical bills, and healthcare providers account for more than half (52.2 percent) of the industry’s business.  Collection agencies were paid $63.8 million in commission alone on consumer medical debt in Oklahoma in 2010.  

Bankruptcy

Medical bills ultimately bankrupt many households – and at a much higher rate than was traditionally thought.  Older studies relied solely on court records to identify unpaid medical bills explicitly cited in personal bankruptcy filings.  Recent and more comprehensive research incorporates information from bankruptcy filers themselves, and has identified bankruptcies due to medical bills that wound up as credit card debts, second mortgages, payday loans, collection lawsuits, etc.  One such study published in the American Journal of Medicine found that 62.1% of personal bankruptcies nationally can be attributed to medical debt.  Using this national average as a benchmark, we can approximate that 6,000 bankruptcies on average each year in Oklahoma are attributable to medical debt (a conservative approximation given our high uninsured rate):

Since Oklahomans are more likely than residents of almost any other state to work a low-wage job and not have health insurance, adequate care is out of reach for those not earning enough to cover rising premiums and sizable medical bills.  Health insurance premiums for working families in Oklahoma have risen nearly 3 times faster than median earnings since 2000.  The issue, at least for low and middle income earners, is clearly one of affordability.

Unfortunately, the affordability of health care has become a political hot potato in Oklahoma.  Elected officials in the best position to offer relief to their constituents have opted for the political low road, and rejected reasonable and ready solutions.  The state’s hospitals, providers, employers, charities, churches and extended families are stretched to the limit picking up the slack.  Those in Oklahoma unlucky enough to get sick, but without the means to get well, are stuck for now with an untenable and precarious status quo.