The U.S. Medical Debt Crisis in Incalculable
By Allison Sesso
Executive Director, RIP Medical Debt
About a decade ago Vanessa was working as a nurse in Massachusetts. She was married with a 6-year-old boy and an infant daughter when she needed a surgical procedure and decided to go to the hospital where she worked. That surgery, unfortunately, led to more after many complications were encountered. Over the next few years, she was hospitalized multiple times and even found herself in the ICU.
Vanessa was fully insured this whole time, but her copays were high and kept adding up. She had young children to feed, a mortgage to pay and student loans to contend with. Like millions of financially strapped people in the United States, she struggled to pay these medical debts of necessity on top of her other bills. The collection letters and calls from the same hospital where she worked were humiliating and stressful. Eventually her medical debts were sold to a for-profit debt buyer for continued collection. As a front-line worker taking care of COVID-19 patients, she knew she was one exposure away from incurring even more medical debt.
A recent study published by the Journal of American Medical Association shows that Vanessa is not alone. Nearly eighteen percent of individuals in the US had medical debt in collections in June 2020 — to tune of $140 billion. Medical debt is not just a crisis for the uninsured.
While this number is massive, it’s sadly, only the tipping point. That’s because medical debt (and hospital pricing, for that matter) lacks transparency. Many health care providers and hospitals, for example, do not report medical debt to credit bureaus, which is their discretion, yet the individual still owes the funds and could be subject to legal actions leading to wage garnishment or property liens.
Other medical debts sit on credit cards and can’t be identified as “medical.” One survey estimated that only about sixty percent of people with problems paying medical bills have been contacted by a debt collector (analogous to their debt being reported to credit bureaus), and even then, it is likely that only a fraction of those people’s medical debt has been reported.
Given these factors, the actual medical debt burden in the U.S. is likely much higher, potentially even reaching $1 trillion. That number may seem shocking, but consider that as of 2020 student loan debt in this country reached $1.7 trillion.
This is obviously unacceptable. Medical debt has become an embarrassing, central feature of America’s healthcare financing system. More people in the U.S. today have medical debt (43 million) than live in Canada. For too many, financial wellbeing must be sacrificed to obtain physical health. This great contradiction of our health care system is growing, and it is high time we stopped the insanity.
As the head of a nonprofit that acquires and abolishes medical debts as a means of providing economic relief to individuals, I am routinely appalled at the financial expectations our system places on patients seeking to have their health care needs met.
It is beyond unreasonable to have a system that routinely sets patients up to default on payments. Providers across the country have large portfolios of bad debts that they have no expectation of ever recovering. Yet the individuals who owe them fret over them and often delay or forego the care they need to avoid additional debt.
That same JAMA study also offers a glimpse of hope for how we can start repairing our health care system. For starters, every state must adopt the ACA Medicaid expansion. As the study found, medical debt is higher in states that have yet to take advantage of this important federal funding. According to their findings, “between 2013 and 2020, the states that expanded Medicaid in 2014 experienced a decline in the mean flow of medical debt that was 34.0 percentage points greater than the states that did not expand Medicaid.”
To add insult to injury, many of those same states have halted increased unemployment benefits by arguing that they disincentivize work. You know what else makes work seem less appealing? Having your wages garnished thanks to a lawsuit because you couldn’t pay medical debts following an unavoidable accident or illness.
It would also be helpful for what amounts to subprime insurance policies ended. We can’t allow people to have health insurance plans they can’t afford with high deductibles they will never meet and premiums approaching, or surpassing, the price of rent. It’s analogous to predatory lending — particularly when many patients end up being sued.
We can and need to do better.
In April of last year Vanessa came home to a letter from our organization. One of her past-due medical bills had been completely abolished. She wrote to us, “I’m a registered nurse now and I’m working to help my patients through this horrible virus. It was incredibly nice to see that someone paid off one of my medical debts without me asking or applying for it. You are doing God’s work for sure, thank you!”
We are proud to have been able to help Vanessa, but we shouldn’t have to. We need to take a hard look at the fault lines in our health care financing system and take action to prevent the millions of people like Vanessa from needing the help of an organization like ours in the first place.