1 in 5 Americans will have medical bills in collections this year, study shows

Despite recent changes in health care policy, medical debt is on the rise, according to a new study released by NerdWallet. As median income has decreased by $2,300 over the past few years, health care expenses have increased by $1,814 in the same period, the study found.

The study, which used both publicly available data and a new, proprietary poll, is a follow-up to NerdWallet’s 2013 report that found medical debt to be the number one cause of personal bankruptcy.

This year’s edition builds on that, estimating that 1 in 5 American adults—nearly 51 million people—will be contacted by a collection agency about medical debt.

Would that number be lower if consumers could compare prices ahead of time? Survey respondents seem to think so: The study found that 73 percent of consumers believe they would make better health care decisions if they knew costs up front.

Health care price transparency, the notion that you could look up health care prices much like comparison-shopping at the grocery store, is still just a dream for most folks. Even though the Affordable Care Act mandated certain steps forward in this area, health care costs are far from transparent.

Even if transparency were widespread, there are still barriers to receiving quality care at a reasonable price. For example, even if you could compare local hospital charges, the lowest-cost option in your area may still be as much as 54 times as high as the same procedure in a different state. The NerdWallet study found that charges for the 100 most common hospital procedures varied widely between states, with the highest charges in California and New Jersey.

Even if you live in the South, where charges are the lowest, billing errors can increase total medical debt by a significant amount. The study also analyzed Medicare data from 2013 and found that 49 percent of all claims investigated by the Office of the Inspector General (OIG) contained billing errors. Of claims affected by these errors, overpayments by Medicare amounted to 26 percent over the actual cost of the claims.

Each of the 34 hospitals inspected by the OIG in 2013 was ordered to repay erroneous charges. The sample of hospitals was audited only for Medicare compliance, so it may not be representative of error rates across all hospital claims, the study notes.

There’s no reason to believe that those hospitals sampled were alone. Pat Palmer, a medical billing expert who negotiates on behalf of patients, says that “over 80 percent of medical bills sent to us have errors.”

While most of Palmer’s patients have reached dire straits before they come to her, it’s clear that medical billing errors amount to a larger problem. From her more than 20 years of experience, she has one major question: “Why is our system so complicated that regaining health means losing financial well-being?”