Medical Debt Is Responsible for the Majority of Bankruptcy Claims in the U.S.

NEW YORK (MainStreet) — Despite the preoccupation in the news with credit card debt, it is actually medical debt that is responsible for the majority of bankruptcy claims in the United States.

Specifically, the website NerdWallet.com recently reported that Americans pay three times more in third-party collections from medical debt each year than they pay for bank and credit card debt combined, with 21 billion dollars in medical debt collected from American consumers in 2012. This year alone, roughly 51 million American adults will be contacted by a debt collection agency about medical bills--or approximately one in five. This means more than $1 out of every $3 paid to third-party collectors is for medical debt--roughly three times as large as financial and credit card debt combined.

However, NerdWallet Health’s study indicated that many people who are facing medical debt are being erroneously overcharged. In fact, the group found rampant hospital billing errors with overcharges up to 26%.

Some of these issues were even more pronounced for Medicare patients. In particular, the NerdWallet study highlighted that Medicare Compliance reviews conducted by the Office of the Inspector General found that none of the hospitals they audited fully complied with Medicare billing requirements, with nearly half (49%) of Medicare medical claims containing billing errors.

“The medical system is a minefield for the average consumer,” Christina LaMontange, General Manager of Health at NerdWallet and author of the study, said in a press release. “While expenses mount for households, bills are riddled by a shameful number of…medical errors.”

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