EDITOR NOTE: To boost economic recovery from its pandemic lows, America went into a massive spending mode, adding trillions of dollars to the national debt. Currently, US national debt stands at an astounding $28 trillion--a level that’s neither payable nor sustainable. Of course, the burden of payment is on American citizens, whether directly through taxation or indirectly through inflation. That’s the privilege that the government can coercively exercise. Many households unfortunate enough to experience illness (or job loss) during the pandemic, also ended up with debt levels that, too, are unsustainable, particularly among the low-income segment of American society. Around 12.5 million Americans are in debt--an estimated total figure of up to $125 billion. Unable to pay their bills, many have chosen to file for bankruptcy--an option that’s led to a 30% rise since February of this year. As inflation continues to surge, more personal bankruptcies are likely to follow. This can trigger a chain of events leading to lower corporate profits or, in the worst imaginable case, a bankruptcy disaster and a series of corporate bankruptcies that’ll likely take the economy down with it.
Case numbers and daily death tolls continue to drop, the majority of U.S. adults are fully or partly vaccinated, mask mandates are vanishing and summer socializing looks like it's back on the calendar. But even as America keeps marching steadily toward a post-pandemic future, another COVID-19 crisis looms—a debt and bankruptcy disaster fueled by mounting medical bills associated with treatment, especially among the most financially vulnerable parts of the population.
As many as 12.5 million Americans could already be saddled with COVID-related medical debt, based on a LendingTree survey conducted in March. The nationally representative poll found that 60 percent of the respondents polled had medical debt, with about 10 percent stemming from the virus; the amount typically owed ranged from $5,000 to $9,999. That suggests the collective debt for COVID treatment so far could be between $60 billion and $125 billion.
That number will inevitably grow sharply in coming months, experts say, as a trio of factors kick in: Expenses will mount for COVID "long-haulers" with ongoing health problems; more medical bills related to the virus will pass from the seriously past due stage into collections; and a panoply of government measures that were designed to help people stay afloat during the pandemic will end, from eviction and student-loan-payment moratoria to enhanced unemployment benefits, making it harder for more people to pay off the accumulating bills for treatment. That in turn is expected to lead to a spike in personal bankruptcies by the end of 2021 and into 2022.
"A lot of people are getting bills they can't pay," says David Himmelstein, a professor at City University of New York School of Public Health at Hunter College and author of several seminal studies on medical bankruptcy. "We're heading towards a mounting debt crisis for many people who have been sick during this COVID period that will ripple through the economy unless something is done about it."
Troublesome signs are already cropping up. From May 2020 to March 2021, medical debt among members of Credit Karma, a credit-monitoring site, grew 6.5 percent, by $2.8 billion, while the number of people facing past-due medical bills jumped 9 percent. In most cases, medical debt doesn't even make it to a credit reporting agency such as those tracked by Credit Karma until after a 180-day past-due waiting period, so that uptick is only expected to spiral higher as 2021 progresses.
Especially foreboding is the latest data on bankruptcy filings. In March 2021, the number of Americans filing for personal bankruptcy protection shot up 30 percent from February, to 44,103, the biggest number since March 2020 when the pandemic first took hold in the U.S. Rising medical bills and the ending of government pandemic-aid programs are key factors driving the increase, says Jonathan Carson, co-CEO of Stretto, a software company whose technology manages the online filings in most personal and corporate bankruptcy. He says, "It's gonna be a turbulent ride for the consumer."
That's just the start of what's to come, experts say, given that even before the pandemic medical debt was the leading factor in personal bankruptcy filings, associated with two-thirds of them, according to an American Journal of Public Health analysis. "It's been just a little over a year since COVID started, and it takes sometimes, a year or two for the medical debt issue to start rearing its head," says Allison Sesso, executive director of RIP Medical Debt, a non-profit that has bought and retired nearly $4 billion of outstanding debt since 2014. "We're just on the cusp. It's going to get ugly."
Plus, it's not just COVID-19 sufferers who are in a financial bind now. After medical debt, the other leading cause of personal bankruptcy is unexpected job loss, that other hallmark of a pandemic that resulted at its height in a national 14.7 percent unemployment rate. Add in the looming end on June 30 to the Centers for Disease Control's national moratorium on evictions—more than 8.3 million renters, or 15 percent of the national total, are behind, according to the Census Bureau—and the expected resumption in October of collection of federal student debt payments.
"The magnitude of the coming medical debt crisis is not yet clear," says Brian Martucci, finance editor at MoneyCrashers.com, a personal finance website. "But given that tens of millions of Americans lack health insurance and hundreds of thousands have been hospitalized with COVID since the pandemic began, it's certain that many individuals and families will face or are already facing life-changing financial trauma."
'I Don't Know What I'll Do'
Count retired bookkeeper Sherry Hoak, 65, among those already hit hard by the physical, emotional and financial fallout of COVID. Once or twice a week, she sits at her kitchen table in Fort Worth, Texas with her daughter Cindy Cox, who helps her mom make a few calls to the debt collectors. It's about all that Hoak, a COVID survivor now grappling with heart and lung ailments that she didn't suffer from prior to the virus, has strength for since returning home from a two-week hospital stay in January. Her husband Ken Hoak was less fortunate; he was infected around the same time as his wife and died on January 28 in the same hospital, Harris Methodist, after a month on a ventilator.
"My mother doesn't have enough money to pay everybody what they want right now," says Cox, 40, who took four months off from working as a teacher to care for Hoak full time after her release from the hospital. Hoak's total debt: more than $6,500 and climbing. "Everybody says, 'Oh, we'll get her on a payment plan,' but she doesn't have enough money to do $30 here and $40 here and $30 here," says Cox. "That adds up quickly."
Cox has gone through every household bill with her mother looking for places to reduce costs and Hoak plans to raise additional money to pay off her medical debt by selling her motorhome and one of the two cars she owned with her husband. The couple had planned a retirement that relied on both of their Social Security checks as well as their pensions; now Hoak will get only her own Social Security check and pension.
Meanwhile, she's been seeing two or three doctors a week for various COVID long-haul symptoms including fatigue and breathing problems and the family had to buy a $2,500 motorized scooter because she can't walk. The hospital debt alone is more than $3,500 and a flood of other bills arrive routinely "and they just keep getting darker and darker in the shades of red they're printing these bills in," Cox says. "When she was in the hospital, they used all these out-of-network labs and providers that she didn't have a choice about. They come in, they take your blood. So we're getting six or seven bills from different places."
As so many others have done, Cox started a GoFundMe crowdsourcing campaign in April hoping to raise the $3,500 she needs to settle the hospital bill; so far they've received just $475 from six donations. "She's ongoing sick, and she can't just go get a part-time job and pay these things off," Cox says. "They're going to $5 and $10 her into bankruptcy."
Similar tales of economic desperation appear all over both GoFundMe as well as the Facebook group called Survivor Corps, a 166,000-member community of COVID long-haulers. Beth Eppler, who posts in the group, is a former CrossFit athlete who was living near Ocala, Florida, when she simultaneously got the flu and COVID-19. She wasn't hospitalized, but she did lose her job as an accountant in November because she was too weak to return to work; unable to pay her rent and with her landlord threatening eviction, she moved back to hometown of York, Pennsylvania, and got a different job. In February, she had two surgeries for COVID-related kidney ailments—a $13,000 bill for the second operation just arrived—and lost the new job, too, because she was still too fatigued to work. Eppler says she now tosses the bills in the trash and has blocked the numbers that were delivering threatening text messages warning her of what she owes.
"I was healthy, now I can't do anything," she says tearfully. "I'm sick. It's depressing. I still can't taste, I still can't smell. I still sleep 12 hours a day. I had a life. I had a vibrant life. Now I have no savings, I have no 401(k)—the only money I have in the bank right now is $3,082, and that's got to pay the rent until I can find a job. I have nothing to sell. I have no jewelry; no parents, no siblings to help. I don't know what I'll do."
Holes in the Safety Net
It wasn't supposed to be like this. A variety of government and private programs were put in place early in the pandemic to shield COVID patients from high out-of-pocket medical expenses. But many of those safeguards have either expired, were often not properly implemented or didn't cover key ways people could be on the hook for treatment costs.
Several major insurance carriers, for instance, announced policies early in the pandemic to fully cover COVID-related treatments, by waiving deductibles, co-pays and other cost-sharing requirements for insured members. Most of the companies, though, rescinded those policies months ago, even though the pandemic was ongoing. Among them: UnitedHealthcare's cost-sharing moratorium ended in October, Humana's in December, Aetna's in January and Blue Shield of California's in February.
The $2.2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES) passed in March of 2020 also contained key provisions, designed to protect uninsured Americans and those who received care from providers outside of their insurance network, a common occurrence during hospital stays where patients have no control over who attends to them. The legislation allowed providers to bill the government directly for treating the uninsured and made it a condition of receiving aid from the $175 billion Public Health and Social Services Emergency Fund established to help financially struggling hospitals, medical practices and other healthcare providers that patients would not be billed more for COVID treatment than what insurers paid out at in-network rates.
But plenty of patients slipped through the billing cracks. In cases where insurers didn't waive co-pays or health care providers did not take federal assistance, some patients are being besieged by bills, especially if their coverage comes from one of the industry's increasingly common high-deductible plans. Older patients on traditional Medicare who don't have supplemental coverage to help with cost sharing are also especially vulnerable to high out-of-pocket treatment costs.
Meanwhile, experts say that hospitals and health care providers frequently failed to use correct billing codes for COVID expenses or incorrectly delineated treatments for post-COVID maladies as unrelated to the disease itself. "It wasn't like you actually had to match the aid you received to patients receiving care," says Elisabeth Benjamin, vice president of health initiatives at the New York-based anti-poverty advocacy non-profit Community Service Society.
Agreed Brianna Wells of the Greenlining Institute, a non-profit advocates for economic equity for people of color, who authored a March 2021 report on the medical debt crisis that focuses on its disproportionate impact on minorities in California: "There seems to be a disconnect between the protections in the CARES Act to prevent people from acquiring medical debt due to COVID-19 and hospital practices. That means that even though people were supposed to be protected from treatment costs, they're still facing high out of pocket costs for these services."
A lot of this—billing errors, surprise bills, misused federal money, a lack of communication with patients about the assistance that's available to them—reflect pre-existing conditions that plagued the U.S. healthcare system long before COVID. Benjamin noted, for instance, that some hospitals that received billions in federal aid nonetheless continued to aggressively pursue patients to pay outstanding medical debt even as the pandemic crashed the economy itself. "The billing infrastructure hums along like it's a wartime economy," she says. "We're fighting a COVID war, but the people that are stuck holding the bag are the patients."
Himmelstein, the professor and medical bankruptcy researcher from Hunter College, sees accumulating COVID medical debt as a symptom of a bigger problem regarding the use of public money for health care. "The government is spending $2 trillion every year on our system and is not exercising accountability for how that money is used and what it's going for." he says. "Increasingly, it's going for investors and huge profits out of the system rather than actually ensuring people get the care they need and that they're not in financial trouble. There's no plan for dealing with long-term illness other than if you're sick enough, long enough, and you're finally bankrupted and you happen to live in the right state, then you'll qualify for Medicaid. If not, then they're just totally out of luck. But being bankrupt and qualifying for Medicaid is hardly a good outcome either."
Persistence Pays Off
The kind of persistence and awareness it takes to make sure providers are behaving properly can be exhausting, as DaJuan Hunter discovered. The 40-year-old JetBlue flight attendant was hospitalized for a week in July with COVID-19 in Munster, Indiana, and returned home to receive a $25,000 bill for his stay followed by a flood of other bills from "anybody else who touched me."
What followed was a Byzantine nightmare of repeated phone calls and conflicting information from providers and insurers that, ultimately, more than six months later, was resolved to some extent in his favor. The $25,000 bill was reduced to a co-pay of $1,500, but at least one separate bill, for $3,000 for a specialist he saw after his hospitalization, was passed on to a collection agency. Hunter says he didn't pay it because a representative from his insurance company, Anthem Blue Cross, told him they would handle it.
"So many times, I had the insurance company on the phone with the billing department from the hospital and they're explaining to the billing department at the hospital that this wasn't coded correctly, it's a billing error, we're gonna fix it," recalls Hunter, who raised $2,368 on GoFundMe to defray some of the costs. "I had them do that at least three or four times. No, I don't have $1,000 or $3,000 laying around that I can throw at medical bills. It may not be the $25,000 it was, but it's still a burden."
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