Personal Finance

Harris wants to forgive medical debt for millions of Americans

Published

3 months ago

August 21, 2024

Vice President Kamala Harris addresses the Democratic National Convention at the United Center in Chicago on Aug. 19, 2024.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Vice President Kamala Harris wants to forgive medical debt for millions of Americans.

The economic plan Harris rolled out last week notes that the Democratic presidential nominee and her running mate, Minnesota Gov. Tim Walz, would work with states to relieve people of their medical debt and “to help them avoid accumulating such debt in the future, because no one should go bankrupt just because they had the misfortune of becoming sick or hurt.”

Some 15 million Americans have medical bills on their credit reports, according to Consumer Financial Protection Bureau research published in April. People in the U.S. owe at least $220 billion in medical debt, a February KFF analysis found.

“Medical debt affects an enormous number of people, so it’s an issue that resonates with voters,” said Larry Levitt, executive vice president for health policy at KFF.

How medical debt became normal in the U.S.

Indeed, 51% of adults say it is extremely or very important for the federal government to forgive medical debt, compared with 39% who said the same about student loan debt, according to a May poll conducted by the University of Chicago Harris School of Public Policy and The Associated Press-NORC Center for Public Affairs Research. The groups surveyed 1,309 adults.

“Vice President Harris may see student loan forgiveness and medical debt forgiveness as both addressing inequities that prevent people from achieving the American dream,” said higher education expert Mark Kantrowitz.

The Harris campaign did not respond to a request for comment.

Former President Donald Trump hasn’t come out with a medical debt cancellation proposal, but as president he pushed for more price transparency for patients and to curb surprise medical bills.

The Trump administration also tried but failed to repeal the Affordable Care Act. Overturning even portions of that law would lead to more Americans becoming uninsured and higher premium costs for policyholders, according to an estimate by the Congressional Budget office.

Harris differentiates herself with focus on medical debt

By coming out with a medical debt forgiveness plan, Harris may be looking to differentiate herself from President Joe Biden and his student debt efforts, said Braxton Brewington, press secretary for the Debt Collective, an organization that advocates for debt cancellation.

Biden has forgiven more student debt than any other president.

“She has the freedom to move into another space,” Brewington said, adding that Harris would likely continue Biden’s work on student debt, as well.

“I’m sure she’ll do both,” he said.

The American health-care system has long been on Harris’ radar.

As a presidential candidate in 2020, Harris pushed for a version of Medicare For All, a plan she no longer backs as she shifts to the center of her party. But Harris continued to show a concern with health-care costs as vice president, leading a White House effort in June to clear medical bills from Americans’ credit reports.

This focus may come, in part, from her own experience.

In a 2019 interview with late activist Ady Barkan, Harris described the day her mother informed her she had cancer.

“My mother, she said to my sister and me, ‘I want to meet you guys for lunch,’ and she showed up at the restaurant wearing makeup — my mother never wore makeup, and her hair was blow dried,” Harris said, tearing up. “She took our hands, and she’d said she’d been diagnosed with colon cancer.

“That was one of the worst days of my life, truly.”

That families experiencing this “would also have to worry about how to pay the bills,” Harris told Barkan was “just inhumane.”

Harris’s mother, who was a cancer researcher, died in 2009 at 70.

How medical debt could be canceled

Harris’ economic plan didn’t include specific details on how the medical debt jubilee would happen, but experts say an investment by the government would go far.

“Amazingly, medical debt can be bought from collection agencies for a penny on the dollar, a reflection of the fact that so few people can afford to pay their overdue medical bills,” KFF’s Levitt said.

Allison Sesso, president and chief executive officer of Undue Medical Debt, a nonprofit that partners with local governments to cancel people’s medical debts, said the group can usually wipe out around $1,000 of the debt for every $10. It often buys the debt directly from hospitals, Sesso said.

States, counties and cities across the U.S. are already using funds from the American Rescue Plan passed during the Covid pandemic to purchase and eliminate around $7 billion in medical debt for roughly 3 million Americans by the end of 2026. As many as 1 million residents in Arizona could benefit, for example, and 400,000 people in New Jersey, according to the White House.

Medical debt affects an enormous number of people, so it’s an issue that resonates with voters.

Larry Levitt

executive vice president for health policy at the Kaiser Family Foundation

Recent research has raised some doubts about the benefits of forgiving medical debt. The relief has no impact on people’s mental health, credit access or financial distress, according to a National Bureau of Economic Research study published in April.

Experts say this may be due in part to the fact that, beginning last year, the major credit reporting companies cleared most medical collections under $500 from people’s records. Those past-due bills are now less likely to affect people’s credit. Harris is now trying to get even more, if not all, medical debts off people’s credit reports.

However, Sesso said Undue Medical Debt hears from people all the time about how canceling their medical debt improved their lives. In extreme cases, unpaid medical bills can lead to wage garnishments and seized assets, she said.

Frequently, people who still owe a hospital or doctor a bill will avoid necessary treatments, she said.

“People don’t go back to the doctor because they feel they’ll be asked for the bill,” Sesso said. “And then the problem gets worse, and the interventions much more expensive.”

Personal Finance

89% of Americans do not consider themselves wealthy, Fidelity finds

Published

1 hour ago

November 19, 2024

Business Finance News

Why so many young adults are still living with their parents

Inflation is cooling and wages are rising. Yet, few Americans — including millionaires — feel confident about their financial standing.

Across all income and asset levels, 89% of Americans said they do not consider themselves wealthy, according to Fidelity Investments’ State of Wealth Mobility study. Fidelity polled 1,900 adults in August.

“Only one-tenth of Americans consider themselves wealthy today — despite many having considerable wealth,” said Rich Compson, head of wealth solutions at Fidelity Investments.

For most Americans, the definition of what it means to be wealthy is relatively modest, with 71% saying being wealthy is simply the ability to not have to live paycheck to paycheck.

Roughly 57% said wealth also entails traveling and taking vacations, while 56% said it’s being able to pass down money to the next generation.

Nearly half — 49% — said feeling wealthy meant the ability to own a home, Fidelity found.

For high-net worth individuals, or those with $1 million or more in savings and investable assets not including real estate or retirement funds, more households associated wealth with traveling and fewer said a major criterion for feeling wealthy was not living paycheck to paycheck.

Surprisingly, the same share — 49% — said being wealthy meant owning a home.

Obstacles to feeling wealthy

Housing affordability has become a major hurdle.

High home prices and higher mortgage rates along with low inventory have put ownership just out of reach for many households.

One “silver lining” is that affordability has improved somewhat since October 2023, when mortgage rates were near 8%, according to a new analysis by Freddie Mac.

Jose Luis Pelaez Inc | Digitalvision | Getty Images

Although vacationing has also gotten more expensive, Americans are still determined to travel.

Travel spending among households continues to outpace its pre-pandemic levels, some reports show.

However, concerns about high prices are playing a larger role in keeping some would-be vacationers home. Those that are travelling have had to adjust their budgets accordingly, spending roughly 10% more compared to 2023, according to another study by Deloitte.

Rising debt is another threat to wealth

At the same time, rising consumer debt has weighed on household balance sheets. Nearly half, 44%, of Americans said credit card debt is the biggest threat to their ability to build wealth, according to a separate report by Edelman Financial Engines.

Americans now owe a record $1.17 trillion on their credit cards, and the average balance per consumer stands at $6,329, up 4.8% year over year, according to the Federal Reserve Bank of New York and TransUnion, respectively.

“High interest rate credit card debt, more than other sorts of debt, is a savings killer, because when you have it, you have to feed the beast. You can’t save, you can’t invest,” Jean Chatzky, personal finance expert and CEO of HerMoney.com, told CNBC in September.

“That stands in the way of people building actual wealth and therefore feeling wealthier,” she said.

What it would take to feel rich

Most people — roughly 65% of those polled — said they would need $1 million in the bank to consider themselves wealthy, although 28% said it would take at least $2 million and 19% put the bar at $5 million or more, Edelman Financial Engines found.

Among current millionaires, 68% said they would need at least $3 million and 40% said feeling wealthy would require $5 million of more.

Edelman Financial Engines polled more than 3,000 adults over age 30 from June 12 to July 3, including 1,500 affluent Americans with household assets between $500,000 and $3 million.

When it comes to their salary, 58% of all of those surveyed said they would need to earn $100,000 on average to not worry about everyday living expenses, and a quarter said they would need to earn more than $200,000 to feel financially secure.

In most cases, feeling financially secure is not based on how much you earn, but rather a commitment to save more than you spend, maintain a well-diversified portfolio and work with a financial advisor, experts often say.

“Having confidence in being able to invest strategically is what often separates those who feel they are wealthy from those who don’t,” said Fidelity’s Compson. “Improved confidence starts with education and planning.”

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Personal Finance

As market experts talk of ‘animal spirits,’ here’s how to invest now

Published

2 hours ago

November 19, 2024

Business Finance News

A trader wears a Trump hat as he works on the floor of the New York Stock Exchange during the opening bell on Nov. 6, 2024.

Timothy A. Clary | Afp | Getty Images

On Nov. 5, the presidential election handed a decisive victory for President-elect Donald Trump. In the days that followed, the markets soared.

A “Trump trade” led to new index highs for the S&P 500 and Dow Jones Industrial Average, lifted with the help of certain sectors expected to do well under the president-elect’s second term.

As of Monday, the postelection market fervor had started to subside to preelection levels.

Yet, some experts say they are seeing a renewal of so-called animal spirits.

“Animal spirits” is a term first coined by economist John Maynard Keynes and refers to the tendency for human emotion to drive investment gains and losses.

The return of animal spirits sets the stage for more upside in months ahead, says Ed Yardeni

Some experts say animal spirits are a sign of consumer confidence. However, the phenomenon can also be trouble for investors if they take on “excessive risk,” said Brad Klontz, a psychologist and certified financial planner.

“It’s essentially why dead investors outperform living investors, because dead investors are not impacted by their animal spirits,” Klontz said.

Research has shown dead investors’ portfolios tend to outperform, since they are left untouched because they are less likely to be influenced by emotional decisions, such as panic selling or buying.

Investors may be excited or fearful

The recent market runup was not prompted by individual investors chasing the market to a meaningful extent, according to Scott Wren, senior global market strategist at Wells Fargo. Individuals, who were split in their election choices, are also divided in their investment outlook, he said.

“Depending on who your candidate was, you may be excited about the future or fearing the future,” Wren said.

Instead, it has been professional traders and money managers — who couldn’t sit on cash when the S&P 500 index was setting new records every two or three days — who have helped drive the markets higher, he said.

There is also big-picture excitement going into 2025, according to Wren, with expectations for lower taxes, less regulation and reasonable levels of inflation. However, the U.S. economy might have a couple of quarters of slower growth in 2025, he said.

“We’re not going to have a recession,” Wren said. “We think that’s very unlikely.”

‘Nobody is immune’ to investing missteps

Ideally, investors ought to sell stocks when they are priced high and buy when they are low.

But research consistently finds the opposite tends to happen.

Humans are wired to take on a herd mentality and follow the crowd, which guides our decision-making on everything from who we vote for to how we invest, according to Klontz.

“The first thing is to just recognize that nobody is immune from this,” Klontz said.

Now is the perfect time for investors to make sure they have an asset allocation that is appropriate to their personal risk tolerance and financial goals, he said.

“It’s harder to do when the market’s crashed,” Klontz said.

Additionally, it is important to keep in mind that financial advisors, like all humans, are also susceptible to biases. When seeking financial advice, investors should ask questions such as “What would you do as my advisor if the market went down 50%?” Klontz said.

More from FA Playbook:

Here’s a look at other stories impacting the financial advisor business.

Good advisors should have systems in place to keep them from making big mistakes, Klontz said. They may have an investment committee or a predetermined approach for how they will act.

Importantly, investors should also be asking themselves the same question, Klontz said. For example, if the market drops 40%, are you OK with your portfolio dropping from $100,000 to $60,000?

“If the answer is no, then you probably shouldn’t be all in stocks,” Klontz said.

However, if you are young enough, a big market drop could be an important opportunity to dollar cost average — or invest a fixed amount of money on a regular basis — and position your money for larger gains when it recovers.

“Most people have a real tough time doing that, which is why advisors can help,” provided they are familiar with behavioral tendencies, Klontz said.

Personal Finance

How to optimize your holiday travel budget on ‘Travel Tuesday’

Published

19 hours ago

November 18, 2024

Business Finance News

Is 'Travel Tuesday' a gimmick or a chance to save on your next trip?

If you still haven’t booked your holiday travel plans, take note: Prices tend to rise the closer you get to the days you’re looking to travel.

To afford holiday trips, about 50% of respondents are cutting back on other expenses while 49% are picking up discounts and deals, according to the 2024 Holiday Travel Outlook by Hopper, a travel site.

Some last-minute holiday travelers are leaning into so-called “Travel Tuesday” — or the Tuesday after Cyber Monday and Black Friday — which falls on Dec. 3 this year.

Search interest for Travel Tuesday rose more than 500% from 2021 to 2023, according to a recent report by McKinsey and Company.

There’s a reason why shoppers are searching for the term.

Last year, 83% more deals were offered on Travel Tuesday versus Cyber Monday and 92% more than Black Friday, according to Hopper data.

Yet, there may be some limitations on the deals available, experts say.

“The challenge for a lot of people is, ‘Do I wait?'” said Sally French, a travel expert at NerdWallet.

For travelers who are set on specific days and places to visit, the answer might be “no.”

“While airlines and online travel agencies are going to offer flight deals on Travel Tuesday, there is no reason to wait,” said Phil Dengler, co-founder of The Vacationer, a travel platform.

How much you benefit from potential discounts on Travel Tuesday will depend on your flexibility, experts say.

“If you have zero flexibility,” said Hayley Berg, economist at Hopper, then “if you see a good deal before Travel Deal Tuesday, feel free to book it.”

How Travel Tuesday works

People wait in line for security checkpoints ahead of the Thanksgiving holiday at O’Hare International Airport in Chicago, Illinois, U.S. November 22, 2023.

Vincent Alban | Reuters

Similar to Black Friday and Cyber Monday sales, Travel Tuesday deals sometimes begin to roll out before the day itself, said Dengler. They might even stretch into the day after.

Nonetheless, you will typically need to book the flight, hotel stay or cruise trip by the end of the day in order to reap the benefits, he said.

As you shop, make sure to read the fine print in case discounts only apply for certain routes and days, Dengler explained.

Retailers often have a limited stock for Black Friday and Cyber Monday doorbusters. With Travel Tuesday, there may be a limited number of airline seats or hotel rooms, NerdWallet’s French said.

“They’re not going to fly two planes on the same route at the same time,” she said.

‘Be ready’ to book

Travel Tuesday might be better suited for deciding when and where you’ll go for an upcoming vacation in 2025, versus a very specific itinerary home over the holidays.

If you are not flexible on the days and destinations you plan to travel to and you find a flight available at a price you’re comfortable with, “book that trip right now,” French said.

“If you wait until Travel Tuesday, then that deal could be gone,” she said. “You don’t want to wait for Travel Tuesday for it to be sold out.”

In some cases, it doesn’t hurt to book ahead and keep browsing for potential price drops, experts say.

You typically have 24 hours from booking to cancel for a full refund as long, as it’s seven days before a flight’s scheduled departure time, Dengler said. Plus, some airlines don’t have change fees for non-basic economy fares, he said.

If those terms are in your favor, “if you see a better deal on Travel Tuesday, simply cancel your current bookings and book the Travel Tuesday offer,” Dengler said.

On the flip side, if you’re less tied to specific dates and places, but have a general sense of where and when you want to travel, then holding off until discount days may be worthwhile.

“We tend to see the deals do get better and better the closer we are to actual Black Friday or actual Travel Tuesday,” French said.

The biggest takeaway for travelers is to start thinking about what you might want to book, Berg said.

“I really encourage travelers to do that exploration now so that on Travel Deal Tuesday, they can be ready to actually book,” she said.