This will hurt: Medical debt on the rise

Studies confirm what consumers can feel: Employees are taking on more debt to pay medical expenses, even as companies cover fewer insurance costs

Even as Washington and Wall Street debate the best way to avert an economic meltdown, more Americans are struggling with another financial crisis: unpaid medical bills.

Two studies released Wednesday provide further evidence of the toll that medical costs are increasingly placing on working families, even for those who have health insurance.

As employees pay more medical expenses out of their own pockets, they are having a harder time coming up with the money.

The studies by the Kaiser Family Foundation and the Center for Studying Health System Change were completed this year before the financial markets reached their current state of crisis.

But policy analysts say the findings underscore the mounting strain medical care is placing on working Americans.

"The problems people are having paying for health care and health insurance are a central dimension of the economic and pocketbook concerns right now," said Drew E. Altman, president of the Kaiser Family Foundation, a nonprofit research group that conducts an annual survey about employer medical benefits.

The studies, policy analysts say, underscore the need for the government to address the increasing cost of care -- despite the distraction and cost to taxpayers of a proposed $700 billion bailout of the financial sector.

"This makes clear the cost of doing nothing is high and growing," said Len Nichols, a health economist at the New America Foundation, a nonpartisan policy group in Washington that advocates universal medical coverage.

Policy analysts acknowledge that finding money to expand coverage may prove difficult. However, some say the terms of the debate may be changing as policymakers and the public rethink their positions on the need for regulation and the role of the government in industry, including the health care system.

"We can now imagine a government takeover that we could not imagine before," Nichols said.

Premiums going up

Although inflation in insurance premiums has moderated in recent years, the Kaiser survey found that employees were continuing to spend more in medical costs, including their share of yearly insurance premiums.

Employees are paying an average of $3,354 in premiums for family coverage, more than double the amount they paid in 1999. The total cost for family coverage now averages $12,680 a year, up 5 percent from 2007.

As people are paying more, they are finding the higher expense less affordable. In the study by the nonpartisan Center for Studying Health System Change, based on its national survey of households, nearly one of five families had problems paying medical bills last year.

More than half of these families said they borrowed money to pay these expenses, and nearly 20 percent of those having difficulty said they contemplated declaring personal bankruptcy as a result of their medical bills.

The study estimates that 57 million Americans live in families struggling with medical bills, and 43 million of those have insurance coverage.

"It's hitting both the insured and the uninsured, and it's hitting middle-class families," said Karen Davis, president of the Commonwealth Fund, the nonprofit research organization that paid for the study.

Some families start forgoing treatments, even for serious or chronic conditions, because medical bills already have put them in debt, Davis said.

In deciding not to fill a prescription for high blood pressure pills or failing to go to the doctor for diabetes, for instance, they risk incurring more acute and costly problems that can land them in the emergency room.

"It's a serious health problem, and it's a serious economic problem," she said. As the nation moves toward greater cost-sharing of medical expenses, "what we're seeing is families are not in a position to shoulder that financial risk," she said.

Large employers remain a strong and generous source of coverage, but the Kaiser study pointed to the widening divide between employees of big companies and those at companies with fewer than 200 employees.

Virtually all large employers offered coverage, but only 62 percent of small companies did. Employees of big companies also paid less, about $3,000 a year for a family, compared with $4,100 for those at small companies.

Faced with the prospect of dropping coverage altogether, many small companies have opted for health plans that ask employees to pay higher deductibles and out-of-pocket expenses.

One in three workers in small businesses has an annual deductible of $1,000 or more, in contrast to one in five in the previous year's survey.