The Rising Epidemic of Healthcare Debt in the U.S. in 2022

Capitalism screws you on housing and healthcare especially.

Photo by Towfiqu barbhuiya on Unsplash

Hey Guys,

This article is the first in a new Column called Debt Watch.

I’m a huge watcher of Capitalism and I thought it important to cover this. Until I’m able to make more publications, many of my Newsletters are graduating more columns (at the top) to improve my interest based coverage.

This column takes stock of Capitalism's health looking at various incidents of consumer debt, housing unaffordability and other indicators including wealth inequality, income inequality, labor participate rate imbalances and other measures of the decline of Capitalism.

As fears over a recession continues, I’m especially worried over indicators in housing and health-care debt and how they compound overtime to produce a generation of consumers that cannot grow GDP like we have in the past. You understand, 70% of American GDP is based on the health and spending consumers.

So what happens when their actual debt and health begins to break down?

$195 Billion

In March, 2022 The SIPP survey suggests people in the United States owe at least $195 billion in medical debt. Approximately 16 million people (6% of adults) in the U.S. owe over $1,000 in medical debt and 3 million people (1% of adults) owe medical debt of more than $10,000. Medical debt occurs across demographic groups.

Like the housing affordability crisis or rent inflation is the hottest job markets, these are not conditions that produce an inclusive sense of Capitalism.

New data in June, 2022 paints an even more foreboding picture.

100 million adults have health-care debt — and 12% of them owe $10,000 or more

The recent study (via CNBC) comes ahead of scheduled changes as to when medical debt will show up on consumer credit reports.

In this particular snapshot, overall, an estimated 41% of adults face health-care debt, ranging from under $500 (16%) to $10,000 or more (12%), according to a new report. With healthcare systems breaking down an a mental health epidemic which has caused a spike in crime and gun violence in the U.S. widespread poverty and debt problems only compound matters.

I live in Canada, we don’t think about healthcare expenses for the most part. But in the U.S. what you put into your body matters more to your wallet in a ruthless way.

For many adults, health-care debt is part of their balance sheet — it just may show up differently than expected, new research suggests. In October, 2021 I saw a worrisome statistic:

50% Of Americans Now Carry Medical Debt, A New Chronic Condition For Millions

With Long-covid and Covid causing new cases of chronic conditions, the picture is significantly worse. Forget that the pandemic has cut over 1.1 million lives short, it’s the after-effects to our health that might also compound in uncomfortable ways.

Overall, an estimated 41% of people — or about 100 million adults — currently face such debt, ranging from under $500 (16%) to $10,000 or more (12%), according to a report from the Kaiser Family Foundation. Using $2,500 as a delineation, 56% who carry medical and/or dental debt owe below that amount and 44% owe that much or more. 

With stimulus funds, poor investing decisions and trends in retail like buy-now pay-later BNPL, American consumers are holding more debt than usual and their savings are drying up faster than ever before with record inflation. For many of us, we’ve never seen inflation like this in our lifetimes.

Financial worries make our mental health worse and things can fall off of a cliff in our personal lives, welcome to the great recession of 2023.

So not only are we living paycheck to paycheck, we have more credit card debt and health care related debt than ever before.

This means many of us will gradually or suddenly fall out of the Middle Class. The sample size of the study however wasn’t so large. The report was based on a nationally representative survey of 2,375 adults Feb. 25 to March 20 and included 1,292 adults with current health-care debt.

I wonder what this looks like for Single Mothers, African-Americans and LatinX populations. We are failing our most vulnerable members of society.

New Medical Debt Credit History Changes

The survey results come ahead of scheduled changes as to when medical debt will show up on consumer credit reports. As of July 1 (2022), if such debt shows up on your history because it went to collections but you’ve since paid it off, the three big credit-reporting companies — Equifax, Experian and TransUnion — will stop including it on your report.

Think about it, Americans have more diabetes, obesity and mental health issues than ever before. Clearly more than half (57%) of Americans with medical debt owe at least $1,000, driven by diagnostic tests, hospitalizations, and emergency room visits. With many nurses and other healthcare professionals leaving the industry, healthcare systems all over the world are literally breaking down.

But how our health and mental health impacts our wallet and savings has never been so stark in the 21st century as we are seeing today. Interestingly, research has shown that medical debt is less predictive of a person’s ability to keep up with payments than other types of collection accounts.

The problem is housing affordability and healthcare debt could actually begin to impact consumer spending in late 2022 or 2023. Think about it:

Health-care debt hurts consumer spending

Yet the financial consequences of medical debt go beyond credit scores, the Kaiser survey shows. For instance, 63% with current or recent debt (within the past five years) said it caused them to cut spending on food, clothing and other basics — including 51% of those with annual household income above $90,000.

When our debt begins to impact our discretionary spending, GDP as a whole begins to suffer. Without peak inflation in sight, the situation could spiral with “contagion” and a domino-effect in this manner.

They say Health is Wealth, and it’s literally never been so true for Americans today. When your savings dwindle your health is also more likely to suffer. The connection between mental health and poverty is poorly understood by society at large.

Nearly half (48%) with such debt said they used up all or most of their savings to pay it off (their medical debt). In our generation we might witness an increasing collapse of the lower Middle class and some members of the Middle class into lower socio-economic brackets.

Collectively, medical debt in the U.S. stood at $195 billion or more in 2019, according to Kaiser research. 

Clearly American consumerism is not okay. Healthcare and housing are not insignificant parts of American GDP. But we are failing each other on these levels, the system is no longer working. There will be consequences that we aren’t openly discussing very much.