Study: Paying medical bills with credit cards leads to debt

By Jeremy Simon

Low- and middle-income consumers who used their credit cards to pay for medical costs had much higher credit card debt than patients who do not pay with plastic, according to a report released Jan. 16, 2007, entitled "Borrowing to Stay Healthy: How Credit Card Debt is Related to Medical Expenses."

The report, issued in conjunction by nonpartisan public-policy research and advocacy group Demos: A Network for Ideas & Action and Brandeis University-affiliated The Access Project, showed that low- and middle-income households with medical debt shouldered an average of $11,623 in credit card debt, versus $7,964 for households with no medical debts on their credit card accounts. 

Demos analyzed 2005 U.S. survey data collected in cooperation with the Center for Responsible Lending, looking at households who had credit card debt for three months or more at the time of the survey.  

A release from report co-author The Access Project noted that there are too many workers who are building up debt on their high-interest credit cards and putting their financial security in jeopardy when they end up getting sick. 

The report also found that:

• Of those low- and middle-income households with credit card debt who were surveyed, 29 percent reported that medical costs made up part of their existing credit card balances.
• Of that group, 69 percent reported having a major medical expense in the prior three years.
• On the whole, 20 percent of low- and middle-income households with debt acknowledged both having a major medical expense in the prior three years and that medical costs made up part of their current credit card debt.
• Low- and middle-income households with medical debts had greater debt-to-income ratios than households with no medical debts.
• Among those with medical debts, young adults between the ages of 18 and 34 had the greatest amount of credit card debt with $13,303 on their plastic.  That compared with $7,450 in average credit card debt for young adults without medical debts.

The report stated that consumers with medical debt are more likely to avoid getting health care due to the cost.  Recommendations in the report included distinguishing between medical debt and consumer debt to help consumers avoid weak credit ratings in addition to limiting the "dangerous blending" of the health care industry with the finance industry.

Meanwhile, the president of the Association of Independent Consumer Credit Counseling Agencies, David C. Jones, explained that medical debt has had a major part in raising overall credit card debt during recent years as well as helping cause a jump in personal bankruptcies.  And, with many older Americans paying for medical expenses with a credit card, seniors have been placed in dire circumstances, he added.  

For those consumers looking to pay medical bills with a credit card, low interest credit cards may help keep debt levels manageable.

Published: January 19, 2007

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