In an era of advanced medical treatments and cutting-edge technology, it’s disheartening to realize that a significant proportion of the middle class is grappling with the weight of medical debt. Amid the numerous financial challenges that middle-class Americans face, medical expenses have become a particularly heavy burden. Despite access to the best credit cards for healthcare expenses, almost a quarter of middle-class Americans found themselves burdened with unpaid healthcare bills in 2020, according to a recent report by Third Way, a reputable center-left think tank.

What the numbers say

The middle class, often considered the heart of any society, is defined by Third Way as families of three earning between $50,000 and $100,000 annually. Paradoxically, despite having higher rates of good health insurance than their lower-income counterparts, the middle class has been disproportionately hit by medical debt. This is due to a complex interplay of various factors, some of which are deeply rooted in the structure of the healthcare system itself.

The report reveals a startling statistic: 17 million middle-class Americans had unpaid healthcare bills in 2020, outnumbering both those in lower and higher income brackets. For comparison, the percentage of lower-income Americans with unpaid healthcare bills stood at 22%. In comparison, just under 13% of higher-income individuals faced the same issue, as per data from the U.S. Census Bureau.

Why is the middle class struggling?

One might question why a population with relatively good health insurance coverage struggles with medical debt. The answer lies in the nuances of the middle-class financial landscape. While these individuals are less likely to forgo medical care due to cost concerns, they are also less likely to qualify for financial assistance or debt relief at certain hospitals than their lower-income counterparts. Additionally, the middle class often lacks the disposable funds to cover high deductibles and out-of-pocket expenses, making even well-insured individuals vulnerable to financial strain.

Disturbingly, racial disparities further compound the issue. Black and Hispanic middle-class Americans are more likely to have unpaid healthcare bills compared to their White and Asian peers. Furthermore, these groups also experience higher rates of medical debt than their lower-income counterparts. According to Third Way’s findings, nearly 38% of Black and just over 25% of Hispanic middle-class individuals carry medical debt. In comparison, the figures stand at 20.4% for White individuals and 16.6% for Asians.

One interesting observation is that higher education is a buffer against medical debt. While some 16.5% of individuals with at least a bachelor’s degree reported having unpaid medical bills, this percentage was significantly higher among those without a college education. With more than a quarter of individuals lacking a college degree facing healthcare debt, education seems to play a role in determining the extent to which medical expenses become a financial burden.

What’s being done to alleviate the problem?

Efforts are being made to address this pervasive issue. Last year, the Consumer Financial Protection Bureau, the US Department of Health and Human Services, and the US Department of Treasury initiated an inquiry into medical credit cards and other specialty financial products contributing to patients’ high costs and debt burdens.

Additionally, Equifax, Experian, and TransUnion, the major credit reporting agencies, have taken steps to mitigate the impact of medical debt on credit reports. They have agreed not to include medical debt paid off in collections on consumer credit reports. Moreover, the grace period before unpaid medical collection debt appears on credit reports has been extended from six months to one year, offering individuals more time to address their bills with health insurers or providers.

Bottom line

As we move forward, it’s crucial to recognize that medical debt isn’t just a financial issue; it’s a societal one. The burden of medical debt can have far-reaching consequences, from hindering access to credit and employment to preventing families from building intergenerational wealth. By understanding the complexities of this problem and implementing measures to alleviate the financial strain on the middle class, we can work towards a more equitable healthcare system that benefits all segments of society.

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