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A health insurance claim form along with a couple of medical bills.

Millennials rack up the most medical debt, and more frequently

People often imagine medical debt as something that comes from late-life catastrophic illness. But a recent study shows millennials carry a greater amount of this kind of debt than older Americans, and incur it more frequently.

In this latest study published in Health Affairs, researchers looked for trends in Census data paired with anonymized 2016 credit records for more than 4 million Americans from the Consumer Financial Protection Bureau’s Consumer Credit Panel. With these data, researchers determined whether a past-due bill originated in a health care setting or elsewhere.

They found that one in six Americans have past-due health care bills on their credit report, a debt totaling $81 billion in all. More than half of those bills — 53 percent — amount to less than $600 each. These findings are consistent with a 2017 Urban Institute report that suggested medical debt is the most common financial burden in collections in the United States, a country where health care spending amounts to 18 percent of the nation’s gross domestic product.

Among all people with at least one medical bill in collections in 2016, 11 percent were 27-years-old — the largest share observed in this new study. That’s one year after children lose eligibility for a parent’s health insurance coverage under the Affordable Care Act, which is important for policymakers to remember, said Benedic Ippolito from the American Enterprise Institute, one of the three economists who conducted the study.

Medical debt takes many forms. A person can rack it up when they use a credit card to cover a medical bill but don’t pay it off, or choose to pay a medical bill but then have a utility bill or car payment go to collections. And sometimes, hospitals will waive costly medical payments they never expect to receive in the form of charity care. This report did not look at those forms of medical debt, instead focusing only on past-due medical bills that are turned over to third-party agencies for collection.

There are parallels between insurance and medical debt, said Kenneth Thorpe, who leads the Department of Health Policy and Management at Emory University in Atlanta.

Between ages 27 and 45, the rate of people who say they have no health insurance drops about 30 percent, the study said. That’s when medical debt begins to drop, too, Thorpe said.

“We need to redouble our efforts to try to find ways to make health insurance more attractive and more affordable, particularly under the age of 44,” said Thorpe, who is also the chairman for the Partnership to Fight Chronic Diseases.

Medical debt did not become so pervasive overnight, Ippolito said.

“The role of health care in the personal finances of Americans has grown in lockstep with the role of health care in the broader budgetary picture of the United States,” he said.

But to drive down medical debt, Americans need more than insurance, the study suggested. In the 2016 National Health Interview Survey, conducted by the Centers for Disease Control and Prevention every year since 1957, nearly three-quarters of Americans between ages 20 and 65 said they were insured but could not pay their medical bills, a finding cited by this latest study.

Before policymakers work to figure out how to reverse these medical debt trends, Thorpe said they need to do more to confront chronic illness, such as hypertension and diabetes, which is linked to the vast majority of health care spending.

These trends align with what Caroline Ratcliffe has seen about debt among young Americans. A senior fellow at the Urban Institute who studies asset building and poverty, Ratcliff said wealth is stagnating for younger generations today compared to what their parents and grandparents enjoyed.

“If you look at people under age 40 today, their wealth has only inched up compared to the wealth their parents had back in the early 1980s,” she said.

That’s driven by many factors, including student loans, Ratcliffe said. And these medical debts, while often small, can haunt a young person when they try to secure a good interest rate for a home mortgage or a car loan.

Digging deeper into the data, Ippolito said he wondered if this is exclusively a health care issue, or just once instance of larger financial instability. What can be done to make people more financially secure? Do current policies target the right population? Should policymakers incentivize ways to help people save?

For instance, Ratcliffe said, researchers at the Urban Institute found in a 2016 study that families that set aside between $250 and $749 were less likely to be evicted or miss a mortgage or utility payment.

And while medical debt is an important measure to monitor, Ippolito says it touches on a broader health issue — the cost of foregone care: “If you know you can’t afford a bill, and you really don’t want to incur debt, then you might not go out and seek care.”