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People Forced To Choose Between Medical, Home Payments

Ruzanna Harutyunyan's picture

The Wall Street Journal on Tuesday examined how the U.S. "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." According to the Journal, "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" costly medical procedures, while others "are forgoing health care in order to keep from losing their homes."

According to the Journal, it is difficult to determine how many people are being forced to choose between making medical payments or mortgage payments. However, Freddie Mac says medical issues seem to be an increasingly common reason some of its 12 million mortgage holders are falling behind on payments. Illness was the cause of 15% of Freddie Mac's delinquencies in the first half of 2008. According to the Journal, although the percentage of delinquencies due to illness is down, the overall number is up because a larger number of people are late on their mortgage payments.

Consumer advocates urge patients not to refinance a mortgage or use home-equity loans to pay outstanding medical bills because of the risk of foreclosure, according to the Journal. In order to put on a lien on a patient's home, medical providers typically must obtain a court order, and generally they do not get paid until after the home has been refinanced or sold. Still, hospitals often are reluctant to use strategies to obtain payments that could force patients from their homes, in part because of the fear of bad publicity, according to Chi Chi Wu, a staff attorney at the National Consumer Law Center (Rubenstein, Wall Street Journal, 11/25).

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Assisted Living

The "housing crisis has kept thousands of older Americans who need support and care from moving into retirement communities or assisted-living centers, effectively stranding them in their own homes," the New York Times reports. Unable to sell their homes in the declining market, many elderly U.S. residents cannot afford to buy into retirement homes that require a $100,000 to $500,000 up front payment to move in. "It is part of the hidden problem of the recession," Larry Minnix, president of the American Association of Homes and Services for the Aging, said, adding, "Every neighborhood, every family's got them."

According to the National Investment Center for the Seniors Housing and Care Industry, occupancy rates for independent and assisted living facilities decreased by 2% during the year ending in mid-2008, although facilities in some "hard-hit areas" such as Florida have vacancy rates as high as 20% or 30%. Facilities, seeing depopulated waiting lists and rising vacancy rates, have hired real estate agents to assist prospective residents in selling their homes. Others have developed programs with banks to "provide bridge loans to homeowners, or are discounting apartments and offering low-interest loans," according to the Times.

Minnix said, "It remains to be seen whether we have a short-term stress, or whether we're facing a crisis," adding, "We're into brand new territory here. It is deeper and potentially broader" (Healy, New York Times, 11/22).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.