With inflation growing 7.9% last month—a rate not seen in the United States since the 1980s—experts worry there may be no end in sight.
But for all the media attention focused on rising gas and grocery prices, the real pain consumers increasingly feel is due to healthcare costs, according to new research released today.
The new report from the Center for the New Middle Class measures the level of financial strain—none, some, or a lot—caused by a range of household costs, as reported by individual consumers. The report compares the strain on Americans with FICO credit scores below 700—known as non-prime consumers—to those with higher scores—known as prime consumers.
In the last quarter of 2021, the number of households reporting that normal expenses were causing a lot of strain on their finances rose sharply, particularly for non-prime Americans.
Utility costs caused financial strain for the most non-prime Americans, but the biggest increase in strain for this group was healthcare, which rose more starkly than any other category of expense.
Overall, 31% of non-prime Americans reported financial strain due to out-of-pocket healthcare costs—a nearly 50% increase between October 2021 and February 2022 compared to the pre-pandemic period. In contrast, 23% of prime Americans reported strain due to healthcare costs, still substantial but just a 3-point increase from before the pandemic.
One-quarter of non-prime Americans said the cost of health insurance was causing them strain—a greater than 50% jump since before the pandemic.
“We’ve known for years that the cost of healthcare squeezes American households, but non-prime Americans in particular are increasingly strained by healthcare costs as overall inflation takes its toll,” said Jonathan Walker, executive director of the Center for the New Middle Class and the report’s author. “The increase in the number of households that are feeling the pinch is concerning.”
The strain of medical bills on middle class Americans isn’t new. But Walker says he was surprised by the sharp increase in the strain associated with healthcare costs.
“I was amazed that inflation in this category would impact consumers so quickly,” he said. “Still, it says a great deal about how fungible household expenses are. When costs go up in other places, your bigger expenses can feel much less manageable.”
Walker questions how much more non-prime Americans can be squeezed because they don’t have the same access to credit that their prime counterparts do, making it more difficult for them to handle unexpected medical expenses.
For millions of Americans struggling to afford healthcare costs, taking on medical debt can feel inevitable. According to the Consumer Financial Protection Bureau, $88 billion in medical debt collections appeared on consumer credit reports in June 2021. Credit Karma, a personal finance company, reports that its members have taken on an additional $1.9 billion in medical debt during the pandemic.
Manu Lakkur, director of product at Credit Karma, offers these suggestions for consumers struggling to absorb their medical bills:
- Know what your health insurance will and won’t cover. If you have health insurance, Lakkur says understanding what’s covered—and what isn’t—can help you guard against surprise bills that may be tough to absorb.
- Ask about what you might be charged. If you don’t have insurance, ask before you get care—if possible—what you’re likely to be charged. That may only give you a ballpark range, Lakkur says, but it can still help you get ahead of the bill.
- Negotiate. Ask for a lower rate, especially if you’re paying out of your own pocket and not going through insurance. Lakkur says there may be special rates for people without insurance. If you don’t have insurance at all, or your insurance won’t cover a particular procedure, Lakkur suggests using resources like Healthcare Bluebook to compare what others are charging in your area.
- Review and hold onto your medical bills. Review your medical bills for mistakes and contact the billing office if you see anything that seems wrong or doesn’t make sense.
- Ask for a payment plan. Hospitals and other healthcare providers increasingly offer financing options and will often allow you to spread your bill out over many months or years, sometimes without interest. Setting up a payment plan can make your bills more manageable, prevent your medical debt from going into collections, and help protect your credit. Some providers now offer “buy-now-pay-later” style financing options.
Most importantly, Lakkur said, ask for help.
“Ignoring one’s health is never the right option, even for those struggling financially,” he said. “Speak up early on in the process if you think you’ll have a hard time covering your healthcare costs. If you proactively raise the concern early on in the process, healthcare providers can help you assess your options.”