Financial Literacy Not Necessarily an Indicator of Medical Debt, Which Has Fallen

Two recent reports from the Urban Institute examined trends in the proportion of adults with medical debt, and whether such trends related to the citizens' confidence in their own financial literacy. Although a drop has been seen in the number of those carrying long-term financial burdens from their medical treatment, there is no easy explanation or solution for what is still a very prevalent issue.

The first report, "Past Due Medical Debt Among Nonelderly Adults, 2012-15," assessed the incidence of past-due medical debt for both insured and non-insured adults at the national and state level. In both 2012 and 2015, respondents were asked whether they currently had any unpaid healthcare bills that were past due, as well as about their health insurance status and sociodemographic characteristics.

From 2012 to 2015, the proportion of adults reporting they had past-due medical debt fell in every state and Census region, and decreased nationally from 29.6% to 23.8%. Generally, the largest declines in past-due bills were observed among those with household incomes less than $50,000. The South and the Midwest, which had higher levels of past-due medical debt at the 2012 baseline, saw more significant reductions in the shares of residents reporting such debt than the Northeast, but by 2015 the South still had a higher proportion of adults with debt (27.8%) than the Northeast (20.9%) or the West (20.1%).

Despite these improvements, the results indicated that significant disparities in unpaid medical debt persist. The proportion of adults with past-due medical debt varied widely by state, as the highest rate of 37.4% in Mississippi was more than 6 times higher than the lowest rate of 5.9% in Hawaii. In 2015, 30.5% of uninsured adults said they had past-due medical bills, compared with 22.8% of adults who were insured.

This last finding indicates that “health insurance coverage did not guarantee that adults would pay all their medical bills on time,” the authors wrote, as insured adults may still be exposed to medical costs through cost sharing, out-of-network bills, or high deductibles and co-payments. Their recommendations for reducing the national burden of medical debt included expanding insurance coverage, promoting preventive care, and increasing consumer awareness of financial and health insurance concepts.

That last tactic was examined in greater detail by another data brief that examined whether financial knowledge is related to past-due medical bills. Researchers asked participants questions to evaluate their financial knowledge and asked them to rate their own financial literacy, as well as whether they had ever received formal financial education, and analyzed the responses in conjunction with their likelihood of reporting past-due medical debt.

As predicted, financial literacy was significantly associated with past-due medical debt. Respondents who answered none or 1 of the 5 financial knowledge questions correctly were 7 percentage points more likely to have such debt than those who answered 4 or 5 right. About a quarter of the participants who ranked their own financial knowledge highly (at a level of 6 or 7 out of 7) had past-due healthcare bills, compared to 34.6% of those with self-reported low knowledge who gave themselves a 1 or 2 out of 7.

Despite this link, the researchers found that increased financial education was not a panacea for the problem of past-due medical debt. The respondents who had received formal financial education or had taken state-mandated financial classes in high school were actually slightly more likely to report having past-due medical bills, though these differences were not always statistically significant.

The researchers suggested that financial education classes may not effectively focus on medical debt or provoke behavioral changes, leaving patients inadequately equipped to respond to real-life situations. Instead, they wrote, “The best times to explain and reinforce topics relating to medical debt could be during doctor visits (eg, by talking with billing departments) or employers’ benefit enrollment periods.”

Together, the 2 studies indicate that past-due medical debt is a persistent problem with no easy fixes. While there have been improvements in recent years as more adults have gained health insurance coverage, future research and policy initiatives will need to focus on lessening the burden of high medical bills for all Americans.

A version of this story originally appears in the American Journal of Managed Care.