An epidemic of medical debt is devastating American families as health insurers ratchet up out-of-pocket demands

In 2006, the Commonwealth Fund, one of the country’s prominent health-care foundations, published an important study with the ominous title, “Squeezed: Why Rising Exposure to Health Care Costs Threatens the Health and Financial Well-Being of American Families.” It’s a headline as true today as it was 17 years ago.  

Four years after that study was published, the Affordable Care Act was passed, expanding health insurance and promising “affordable” coverage for more Americans. 

But something happened on the way to insurance nirvana. The health-insurance industry consolidated into a few giant companies with a ton of market clout and required their insured customers to pay more out-of-pocket for their care, relieving insurers of that financial obligation and turning the country’s basic insurance arrangement on its head. 

It is now common for families to shoulder as much as $19,000 to $20,000 a year in medical expenses before their insurance pays a dime, in effect leaving them uninsured for perhaps most of the year. Even if they do receive payments, those insurance checks often are too skimpy to cover the bills.  

To understand how we got here, it’s instructive to consider the early days of managed care some 20 years ago, when insurers and employers needed to “encourage” workers to join their new health maintenance organizations (HMOs). They offered generous benefits with low or no deductibles, coinsurance, or copays to entice them into the new scheme. Helen Darling, who at the time headed the influential lobbying group the Washington Business Group on Health, revealed in a 2002 PBS NewsHour interview, that “the American people who are in health plans got accustomed to a much more comprehensive health benefit package at very little out of pocket cost.”

That had to change, the health-insurance industry decided, by forcing people who got sick to have “more skin in the game,” as the architects of the new order described their mission. In other words, insured people would have to pay more for their care instead of having insurers assume those costs as they had been doing. It was believed in insurance circles that patients were getting too much care, which was eating into profits and causing the country’s health-care expenditures to explode. The appetite for care had to be curbed.  

Darling told the NewsHour that employees were likely to see more cost-sharing in the form of coinsurance and copays, noting that some would call the change “old wine in a new bottle.” By 2011 Darling, who had become head of the National Business Group on Health, was “quite frank” about the changes that now required consumers to pay a percentage of a bill, instead of a copay of $25 or $50. Moving from copays to coinsurance amounted to “a more subtle way to increase what the consumer pays,” she acknowledged, noting that “we are clearly seeing a march toward a more aggressive consumerist system.”

Americans are now experiencing the inevitable fallout from such an aggressive “consumerist” system – serious medical debt that threatens the health and financial well-being of millions of U.S. adults.  

Last year KFF Health News published a stunning multi-part investigation called “Diagnosis: Debt,” which exposed the financial plight of America’s debt-ridden families, revealing that 100 million people, including 41% of adults in the United States, are “beset by a health system that is systematically pushing people into debt on a mass scale.” Much of that debt, KFF reported, is hidden in credit-card balances, loans from family, or payment plans to hospitals and doctors. 

That bleak assessment is not likely to get brighter. In the last five years, more than half of U.S. adults said they slid into debt because of medical or dental bills. Even grimmer is the news that 20% of people with any amount of debt expect to be in hock to the medical industry for the rest of their lives. “We have a health care system almost perfectly designed to create debt,” one California doctor told KFF reporters. 

This year more damning evidence surfaced, this time from The Washington Post, which published, “An Epidemic of Chronic Illness is Killing Us Too Soon.” As the story reveals, the mortality crisis developed over decades, “an extreme manifestation of an underlying deterioration of health and a failure of the health system to respond.” Those findings undoubtedly relate to the increasing medical indebtedness plaguing the country and the policies that have discouraged or flat-out barred Americans from getting the care they’ve needed.

“Medical debt is an epidemic in our country,” says Marshall Allen, a former journalist for ProPublica who has carved out a sideline helping Americans navigate their medical indebtedness. “It’s absolutely a crisis in the U.S. and is totally unjustified. We now see deductibles of $5,000 and $10,000.  People are being exploited for their sickness by insurance companies and hospitals.” A report published in 2022 by the federal Consumer Financial Protection Bureau revealed how unjust medical debt can be, noting that “Uninsured and out-of-network patients are often charged prices much higher than what in-network insurers pay even though the uninsured may have little ability to pay. Prices charged to uninsured and out-of-network patients sometimes significantly exceed providers’ costs.”

 The Consumer Financial Protection Bureau’s indictment of the health insurance system echoes the findings of a well-known book published some 60 years ago in the early days of the consumer movement called “The Poor Pay More,” which revealed how the poorest Americans pay a “poverty penalty,” often being charged much more for goods and services than those with more money.         

As we head into another insurance open enrollment season, it doesn’t appear much will change. For perspective, I circled back to Richard Master, the CEO of MCS Industries, which makes picture frames in Easton, Pennsylvania. I’ve spoken before with Master about the persistent rise in the costs of insuring his 119 employees. Over the last 10 years, he told me, the total cost has doubled from $503 a month for a single worker in 2013 to $1,036 this year, and family premiums have risen from $1,460 to $3,028 a month. Overall medical costs will be up 10% next year.  “Where is the money going? Hospital costs are going up 6 to 7% a year,” he says. “They’ve consolidated into health-care systems. A great majority of doctors are employed by these systems that don’t compete on price. We really haven’t taken on the health system and the consolidation and have allowed the creation of these big health-care monoliths.”

A recent study by the Commonwealth Fund revealed that high out-of-pocket costs are particularly troublesome for employed adults between the ages of 50 and 64, a time when medical costs tend to rise. The Fund found, for example, that 54% of older adults with low incomes and nearly one-third with moderate incomes were underinsured, meaning they had high out-of-pocket costs and/or deductibles relative to their incomes. Is it surprising that nearly half of those with low incomes skipped or delayed needed care because of the cost?

Three years ago, Cathy Mahaffey, CEO of the Common Ground Healthcare Cooperative in Brookfield, Wisconsin, one of the three health co-ops authorized by the Affordable Care Act that is still in business, said affordability was a serious issue: “We are headed in the wrong direction,” she said then. This year, Mahaffey says little, if anything, has changed: “The Affordable Care Act did nothing to address the cost. We are still spending enormous amounts on health care, and that has not changed.

“There is a lot of finger-pointing, but we don’t look at the real solutions. There haven’t been any. When are we going to say ‘enough is enough’?”

Trudy Lieberman, a past president of the Association of Health Care Journalists, has had a long career in journalism, specializing in health care in recent years.  She has written for many publications including Consumer Reports, Columbia Journalism Review, The Nation, Harper's Magazine, and the Center for Health Journalism.  She has won many awards for her work including two National Magazine Awards, several National Press Club Awards, and a James Beard Award.