Facing a Choice Between Home And Health Care
Housing Rout Cuts Off Source of Funds to Pay Medical Bills; Chemo, and Then Foreclosure
Wall Street Journal
November 25, 2008
The housing market's collapse is forcing a growing number of Americans sitting on large medical bills to choose between paying the mortgage and paying the doctor.
People have long resorted to borrowing against their homes to pay for medical care in times of illness or after an accident. But with home values plummeting and interest rates on adjustable mortgages ratcheting higher, some indebted patients are at risk of losing their homes in order to pay for surgery, cancer treatment, drugs and other big-ticket medical expenses. Other patients are forgoing health care in order to keep from losing their homes.
Adding to the pressure is the weak economy, which has lost more than 1.2 million jobs so far this year. For many people, being laid off also means a loss of health insurance. Replacing that coverage on your own can be expensive, or may be difficult to obtain for people with pre-existing health conditions.
Where to Find Help
Groups that work with patients who have big medical bills:
Groups that help consumers with housing problems:
The U.S. Department of Housing and Urban Development sponsors housing counseling agencies
And for information on public and private insurance programs available in each state:
Some "medically needy" programs allow patients with big bills to qualify for Medicaid
John Buckenroth of
Now, Mr. Buckenroth still owes about $20,000 for medical treatments, including an operation that his wife needed. The debt became harder to repay after monthly payments on their new adjustable mortgage reset at a higher interest rate. After falling behind on those payments, the family last week received a foreclosure notice, two days after Mr. Buckenroth started chemotherapy again.
"I'm scared to death," Mr. Buckenroth says. "I didn't know I was going to get brain cancer and not be able to work. You never know that."
Just how many people are being forced to choose between home and health care is hard to tell. Freddie Mac, the big government-sponsored home-loan investor, says illness appears to be a growing reason homeowners with some of the company's 12 million mortgages are falling behind in payments. Illness was the chief cause for 15% of Freddie Mac's delinquencies in the first half of this year, behind such reasons as loss of income and too much debt. Although that percentage is down from previous years, the actual numbers are higher because more people are delinquent on their loans.
Nationwide, more than 9% of mortgages on one- to four-family homes were a month or more overdue or were in foreclosure in the second quarter, according to the Mortgage Bankers Association. That compared with about 6.5% a year before and was the highest level since the association began such surveys 39 years ago.
Medical Debt Arrears
"Health-care costs are creating financial problems that lead to housing problems," says Mark Rukavina, executive director of the Access Project, a Boston-based research and advocacy group on medical debt. A biennial survey last year by the Commonwealth Fund, a nonpartisan research group, found that 41% of about 2,600 working-age adults had fallen behind on medical bills, up from 34% in 2005.
The Cost of Care
Consumer advocates generally urge patients not to refinance a mortgage or use home-equity loans to pay outstanding medical bills because of the risk of losing their homes to foreclosure. In contrast, medical providers typically must obtain a court judgment to put a lien on a patient's home, and they generally still won't get paid until the home is refinanced or sold.
Sometimes patients feel pressured. Kim Carpenter, of
For Bowen Richards, a self-employed electrician in
Selling a House
Mr. Richards put his house up for sale five months ago, but has had no takers. He is trying not to think about his medical debt. "I've been keeping up with my mortgage, my electric and my telephone, and then trying to get around so I can try to find work," he says.
Hospitals are often reluctant to take steps that would force
patients from their homes, in part out of concern for bad
publicity, says Chi Chi Wu, a staff attorney at the
Hospitals are generally more willing than banks to forgive debts or set low-payment terms. But for people who are having trouble making housing payments because of medical bills, it is sometimes possible to persuade home lenders to modify terms of the loan, especially if you provide adequate documentation of your medical bills, housing advocates say.
"I spend a lot of my time these days
working on medical debt and access to health care, because
that's what people need if they want to stay in housing," says
Jane Walsh, a community organizer at Making Connections
Louisville, a community advocacy group in
Susan Harris, 46, of
No More to Mortgage
But Ms. Harris still had $26,000 in hospital bills that Medicaid didn't cover, and she continued to build up additional debt because of out-of-pocket expenses. Last year, she refinanced her home and spent $28,000 on medical bills. Last week she had another operation to remove the cancer from her lung.
"I will once again be cancer free, but over my head in debt," she said prior to the procedure. "There's no more money in my house to mortgage it again."
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