July 13, 2016 by Mark Hammerstrom
The last two blogs I have written have focused on consumer debt (rising) and financial regrets (not saving enough for retirement, no emergency fund, too much college debt, etc.). Consumer debt, at least according to the New York Fed, seems manageable. Even though it is at or near historic highs the economy is providing enough steam that consumers are, so far, able to afford it. Of course, financial regrets don’t seem to go away; for example, saving for retirement when you are in your late fifties.
We hear a lot about excessive student debt being at or near a tipping point for many Americans. Yet, there does seem to be some initiative to help these folks avoid financial ruin through different re-financing options, government relief and so on.
The shock of Brexit seems to have worn off, too, at least for the moment. So, are we really living in a financial la-la land? I have wondered what the next shoe to drop will be, and perhaps this is it.
In a post from ACA International entitled “Study: Consumers’ Healthcare Financial Burden is Growing” the organization cites a recent report from TransUnion Healthcare (June, 2016) that, not surprisingly, finds the burden for medical costs is quickly shifting from employers to consumers. This change is not only in relation to increasing costs for premiums passed on to employees, but also the changes in the plans themselves which included much higher co-pays, deductibles and co-insurance.
Rising debt, combined with little or no savings to cover unusual or emergency items, has led consumers to be unprepared to budget and plan for these increases in the cost of medical care.
Some data points cited from the report include:
- “For every $100 in healthcare costs in first quarter 2016, consumers had $1,720 in revolving credit to potentially make those payments.” This compares to more than $2,200 in 2015.
- Additionally, “…approximately 51 percent of patients owe more than $1,000 in bills to their healthcare providers.”
- “Seventy-seven percent owe more than $500” according to the report.
- 43 million consumers have overdue medical bills on their credit reports. (This according to a Consumer Financial Protection Bureau report issued in 2014, “Consumer credit reports: A study of medical and non-medical collections”).
- Consumers saw a 13 percent increase in their average deductible and out-of-pocket maximum costs between 2014 and 2015. This will no doubt be higher for 2016 as well.
- Consumer’s average deductible also grew between 2014 and 2015 from $1,131 to $1,278. Again, in 2016 this will increase again.
- Average out of pocket costs also increased during that period to $3,065.
Quoting Gerry McCarthy, president of TransUnion Healthcare, in a news release: “Our findings emphatically demonstrate that despite the advent of the Affordable Care Act, more patients are struggling to pay their healthcare costs,” he said.
In many cases, hospitals are beginning to offer consumers more financing options and begin financial discussions prior to treatment. While that can be a sensitive subject, helping consumers understand accurately what they are going to pay for care can alleviate surprises and help decrease delinquencies on the front end.
All that said, what has been the effect on those seeking healthcare? That is, has there been a change in the deferment of needed medical care due to these increasing costs of treatment? Yes, according to a recently released 2016 study by Harvard University. According to this study, there has been a dramatic shift in healthcare spending from the poor to the rich. In summary, the report concludes that because of the increase in the number of high deductible and high out of pocket insurance plans, the poor appear to be deferring needed medical attention. Those who are wealthier can afford to pay their costs, although the report also points out that they tend to be the healthier of the two groups.
Once again, an unintended consequence of the ACA? It certainly appears so. Stay tuned; another blog on this will follow.
United Credit Service advises vigilance in this rapidly changing environment and stands ready to assist our clients manage their debt collections even in the most challenging situations.
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