How Subsidies Are Protecting Against Medical Debt

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March 4th, 2015

Medical DebtOne positive piece of news circulating each year since the PPACA was signed into place has been the decline in the number of Americans suffering from medical debt. In fact, the number of Americans struggling to pay medical bills has declined every year since 2011 and particularly since 2013, a new government report shows.

Medical debt isn’t like other debt. It is not cause by unwise purchases, but often because of unforeseen circumstances, like an illness or accident. Unpaid medical debts can harm credit scores, which can make it harder to apply for loans, apply for credit cards or apply for a lease. In 2013, the average amount of unpaid medical bills per family suffering from medical debt was $9,374.

In 2014, 47.7 million respondents across the US said their families struggled to pay medical bills (17.8%), compared with 51.8 million (19.4%) in 2013. Health policy and medical bill experts believe the new patient protections and coverage offered under the Affordable Care Act, as well as the steadily improving national economy, may have contributed to families' financial relief.

A key contributor to the decline in medical debt seems to be the controversial subsidies introduced under the Affordable Care Act. Families who qualified for the most financial aid also reported the biggest drop in trouble paying medical bills during the first six months of receiving subsidized health insurance.

As indicated under the Affordable Care Act, people with incomes between 100% and 400% of the poverty level were eligible beginning in January 2014 to receive subsidies to buy health plans. The lowest-income households received the most financial aid and additional help to lower the cost of deductibles and copayments. For 2015, almost 6.5 million individuals have signed up for subsidized care. Many are hoping this will help with their existing or pending medical debts.

However, the current legal challenge before the U.S. Supreme Court could jeopardize those subsidies in as many as 37 states. Regardless of the outcome, it remains clear that from the consumer’s perspective, the Affordable Care Act and the introduction of health insurance subsidies have helped reduce the number of Americans suffering from medical debt due to costly or unpaid medical bills.

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