Insufficient “rainy day” funds lead to medical debt

As taxpayers work to restore their net worth to pre-recession levels, one of the last areas to be replenished is catastrophic emergency savings.

During the recession, many Americans lost homes, savings and other valuable investments. As those taxpayers work to restore their net worth to pre-recession levels, one of the last areas to be replenished is catastrophic emergency savings. Whether catastrophe funds help cover an insurance deductible or save the day in a personal crisis, they're valuable assets that deserve a great deal of attention. 

Souther California Public Radio (SCPR) recently spoke to Celisa Flores, whose medical condition has caused debt to mount. Like many other individuals, Flores worries that her savings are insufficient to pay for short-term costs associated with complex care. 

"Catastrophically, $5,000 is manageable," Flores, a clinical psychologist, said. "Ten thousand dollars is not manageable, and $15,000 is definitely not manageable."

The majority of insured Americans with medical debt receive their insurance through employer-sponsored plans. Over the last decade, professionals in the U.S. have witnessed a trend in rising deductibles for those plans, leaving more financial responsibility on the employees themselves. 

For individuals with generous rainy day funds this can be surmountable, but many people don't have adequate savings. The SCPR report cited insufficient "piggy bank" savings as a leading reason why Americans can't meet the financial burden of rising deductibles. As a result, those who are unprepared often enter a cycle of debt that's difficult to climb out of. 

This places additional strain on medical administrators, whose caseloads grow and backlogs accrue over time. When care facilities outsource receivables management, they reduce pressure on administrators to track down outstanding payments on more cases than they can manage. This allows them to focus on the most high-priority claims, leading to greater efficiency in medical accounts receivable offices.