Health care costs in the U.S. continue to grow year after year, leaving Americans with more and more debt.

According to Credit Karma data provided to Yahoo Finance, roughly 21 million Americans holding $46 billion of medical debt as of April 2021 face collections — meaning that a third-party debt collector is trying to obtain the money owed.

“Our system is completely out of whack,” Frederick Isasi, executive director at Families USA, a nonprofit and nonpartisan consumer health advocacy organization, told Yahoo Finance. “We’re spending too much money, and yet people could still lose their savings and their financial security. So there’s a lot of frustration about this.”

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A survey of 3,753 adults living in all 50 U.S. states conducted from Feb. 15-21 via the Gallup Panel, indicated that an estimated 46 million people (or 18{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of the U.S. population) would be unable to pay for health care if they needed to. (Medical debt often arises from unexpected medical expenses.)

Some have resorted to crowdfunding their medical costs. A study from the Journal of the American Medical Association (JAMA) found that between May 2010 and December 2018, 26.7{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of the 1,056,455 fundraisers on the crowdfunding site GoFundMe were for health-related costs. And those health-related campaigns sought a collective total of nearly $10.3 billion and raised about $3.7 billion.

Health care in America is an ‘artifact’

The American health care system, unlike other developed countries, is dominated by employer-sponsored plans and leaves millions of citizens uninsured.

The structure is an “artifact” of World War II, according to Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.

“Companies could not give workers raises, and you might expect in World War II, there’s a real labor shortage because all the men were off fighting the war,” Gleckman explained to Yahoo Finance in a previous interview. “So there were really only women and young men and old men who were left in the United States to be the labor force. There was a lot of demand for labor and wage price controls on the government, which made it impossible for companies to give people raises. So what they did instead was they invented health insurance and gave workers health insurance benefits.”

Three women making US flags in a factory, USA, circa 1945. (Photo by Frederic Lewis/Archive Photos/Getty Images)

Three women making US flags in a factory, USA, circa 1945. (Photo by Frederic Lewis/Archive Photos/Getty Images)

Two decades later, in 1965, Medicare and Medicaid were established as the first public insurance programs in the U.S. Medicare provides health care for anyone 65 years of age or older, while Medicaid serves as a resource for those whose incomes meet the federal poverty level threshold. 

Those two programs, along with private health insurance, have remained in effect ever since. And in 2010, the landmark Affordable Care Act (ACA) — otherwise known as Obamacare — enacted structural changes to the system, including an attempt to expand Medicaid nationwide. 

The Supreme Court overturned the Medicaid portion of the law in 2012, leaving states to decide whether to expand Medicaid or not. As a result, the decision created “glitches” that led to a significant portion of the country remaining uninsured. The country’s uninsured rate is 8{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} — roughly 26.1 million people — according to the most recent Census Bureau data.

There are currently 12 states that have not adopted the aforementioned Medicaid expansion, and two that recently approved it through ballot measures (Oklahoma and Missouri). 

The Biden administration has promised to revamp Obamacare by expanding access and eligibility for subsidies to make it more affordable. At the same time, however, the Supreme Court will rule on the constitutionality of the ACA in the June 2021 session.

And as Obamacare remains a work in progress while potentially facing an existential crisis, Americans continue to face onerous medical bills. The ongoing coronavirus pandemic itself has killed nearly 600,000 Americans and caused major economic hardships, including massive layoffs and loss of employer-sponsored health insurance.

‘It doesn’t matter if you’re Republican or Democrat’

Amid President Biden’s first year in office, health care is the top issue for most voters. 

According to a Families USA poll conducted in early 2021, 75{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of voters indicated that health care should be among Biden’s and Congress’s top priorities this year. That included 91{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of Democrats, 75{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of Independents, and 58{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of Republicans, indicating that this is a bipartisan issue.

U.S. President Joe Biden speaks during a a 'Help is Here' tour event to tout the 1.9 trillion American Rescue Plan Act law on the 11th anniversary of the Patient Protection and Affordable Care Act (Obamacare) legislation being signed into law, as he visits the James Cancer Hospital and Solove Research Institute in Columbus, Ohio, U.S., March 23, 2021. REUTERS/Leah Millis

President Biden speaks during a a ‘Help is Here’ tour event to tout the American Rescue Plan Act, on the 11th anniversary of Obamacare legislation being signed into law, in Columbus, Ohio, March 23, 2021. REUTERS/Leah Millis

“It doesn’t matter if you’re Republican or Democrat,” Isasi said. “In fact, what we see in the polling is that the number one concern is Americans’ concerns that their neighbors, their family, or their friends can’t afford coverage. There’s a real belief that for a lot of people, even if an individual feels like they’ve got the financial means and the health insurance to protect themselves financially, still the greatest concern is that as a society, people are really living on the edge when it comes to health care costs.”

Medical debt has been a prevailing trend in the country for quite some time. A recent LendingTree survey found that a majority of Americans (60{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa}) had experienced medical debt, with costs averaging between $5,000 to $9,999. The leading causes include emergency room visits (39{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa}), visits with doctors and specialists (28{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa}), childbirth and related care (22{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa}), and dental care (20{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa}).

ER visits are the leading cause of medical debt. (Chart: LendingTree)

ER visits are the leading cause of medical debt. (Chart: LendingTree)

“It just shows you that our health care system leaves people very exposed to health care costs,” Sara Collins, vice president for health care coverage and access at the Commonwealth Fund, told Yahoo Finance. “It’s gotten better. The Affordable Care Act, covering more people, reduced people’s exposure to health care costs.”

Collins added that while out-of-pocket costs have slightly declined among low- and moderate-income groups in the last decade, commercial insurance plans (from both employer groups and the private/individual market) are leaving people vulnerable to costs through high deductibles.

“We know that high deductibles are associated with medical bill problems — either not being able to pay your bills or trying to pay debt off over time,” Collins said. “This is an ongoing chronic problem in private coverage that’s leaving people with lots of unpaid bills or bills that they’re struggling to pay off over time.”

In 2019, the average individual deductible was $1,931 and the average family deductible was $3,655. Deductibles and premiums accounted for 11.5{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of median household income that year, which was a 9.1{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} increase from the prior decade. 

“If you had a deductible of $1,000 and you had an unexpected visit to the emergency room, would you have the savings to pay that $1,000 bill?” Collins said. “A very large share of people in employer plans, particularly people with incomes under 250{46ece712d47a548853c1df5fc986acb8576114db7f09b4bb424dac12c34fcafa} of poverty, so somewhat lower and moderate incomes, about half of them said they would not have the money to cover that bill. … Most people don’t have a lot of out-of-pocket costs in any one year, unless you have a lot of chronic health problems. But when you do, people are left holding the bag.”

APPLE VALLEY, CALIFORNIA - JANUARY 05:  A patient lies on a stretcher in a hallway in the overloaded Emergency Room at Providence St. Mary Medical Center amid a surge in COVID-19 patients in Southern California on January 5, 2021 in Apple Valley, California. California has issued a new directive ordering hospitals with space to accept patients from other hospitals which have run out of ICU beds due to the coronavirus pandemic. The order could result in patients being shipped from Southern California to Northern California as Southern California continues to have zero percent of its remaining ICU (Intensive Care Unit) bed capacity. (Photo by Mario Tama/Getty Images)

A patient lies on a stretcher in a hallway in the overloaded Emergency Room at Providence St. Mary Medical Center amid a surge in COVID-19 patients on January 5, 2021 in Apple Valley, Calif. (Photo by Mario Tama/Getty Images)

‘The worst thing you can do is not do anything at all’

Premiums and deductibles are the result of health care costs in general, which raises a larger question.

“What’s driving health care costs?” Collins said. “There was considerable evidence that health care costs are driven by prices charged by providers in commercial plants, particularly hospitals. Those prices are the root cause of the growth of health care costs we’ve seen — the cost of premiums and higher deductibles.”

“Think about what that means,” she continued. “Think about the medical bill — it means that someone who didn’t have the money to cover an emergency room visit. The reason the emergency visits is so expensive is because of the prices that institution charged, and often there’s no relationship to the cost of producing that service. That drives the costs of that individual’s premiums, but it also drives the size of that deductible. The size of that deductible is linked to the prices that are being charged by that institution in order to have them in the network. The person can’t pay their bill off right away, so that means they’re carrying that bill over time. Hospitals try to collect that money from the individual and sometimes send them to collections agencies.”

That’s the case for at least one major hospital chain. According to CNN, Community Health Systems, Inc. has filed at least 19,000 lawsuits over allegedly unpaid medical bills since March 2020. 

Frank Lee, a striking UAW auto worker from the General Motors assembly plant in Bowling Green, calls a bill collector from his home in Auburn, Kentucky, U.S., October 1, 2019. Picture taken  October 1, 2019. REUTERS/Bryan Woolston

Frank Lee, a striking UAW auto worker from the General Motors assembly plant in Bowling Green, calls a bill collector from his home in Auburn, Kentucky, U.S., October 1, 2019. Picture taken October 1, 2019. REUTERS/Bryan Woolston

“We do know that a lot of people have bills that are sent to collection agencies when they can’t pay,” Collins said. “It’s a cyclical problem where hospitals are charging high prices that are leading to this high cost exposure in private insurance, and people aren’t able to pay their bills when they actually go to these various institutions. We need to recognize that commercial industry is part of this problem, and we need to protect people through public policy, but the source of the problem is pretty well known at this point.”

Credit bureaus are aware that hospital bills could incorrectly charge someone, and they want to give the consumer time to dispute the claims. That’s why Manu Lakkur, director of product at Credit Karma, encourages Americans to stay on top of their bills and avoid missing payment deadlines.

“If you’re able to track your bills and know what you owe, you have a little more time to go resolve those issues,” Lakkur told Yahoo Finance. “Another good reason to keep track of all your medical bills in one place.”

And once medical debt is paid off, that collection gets removed from the person’s credit report. In comparison, most collections remain on a credit report for seven years, even if they have already been paid off.

“The most important thing here is just to make sure you take action,” Lakkur said. “There are so many more protections than people realize. The worst thing you can do is not do anything at all and not take advantage of those protections.”

Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at [email protected]

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