Kayce is not alone. More than half of all bankruptcies in the United States are tied to medical issues. The average family with medical debt owed $18,660 in 2021, which was a 50 percent increase from five years earlier. Medical debt causes patients to delay care, and providers sometimes deny care to patients with medical debt. Unfortunately, having health insurance is no guarantee of financial protection. Two-thirds of adults under 65 with health coverage have problems paying off medical bills or medical debt.
Lawmakers are stepping up to help. For example, Colorado recently banned credit reporting agencies from using medical debt in their credit scores on consumers like Kayce. The Biden administration is on the verge of doing the same.
In the last two years, state and local officials in 17 states have taken a wide variety of actions against medical debt. And this year, at least 17 state legislatures are currently considering similar actions. Their efforts fall into three categories:
Second, states are strengthening financial assistance at hospitals. Federal law requires nonprofit hospitals to offer patients financial assistance planning based on income, but it does not specify how much. California has specified that hospitals must provide financial assistance to patients with incomes up to four times the poverty level. It has also regulated how hospitals should provide patients with information about their charity-care programs. Similarly, Maryland now requires hospitals to provide income-based financial assistance to patients and delays the sale of debt or credit reporting for 180 days.
Finally, states are erasing billions of dollars of patients’ debts. As one consumer advocate put it, “you can’t get blood from a stone.” That is why medical debt collections are usually unsuccessful. They get only a fraction of the original amount of the debt. Some former debt collectors saw that as an opportunity to start a charitable organization called RIP Medical Debt, which buys medical debt from collection agencies and hospitals for a penny on the dollar. Under Democratic Gov. Ned Lamont, Connecticut has launched the first statewide program using RIP Medical Debt. That will abolish $650 million in medical debt, helping about 250,000 residents with incomes under four times the federal poverty level. Arizona has done the same as a follow-up to its statewide ballot initiative on medical debt, which passed decisively in 2022. Last month, Arizona Democratic Gov. Katie Hobbs announced a program to abolish up to $2 billion in medial debt.
Behind all this action is a simple political dynamic. Medical debt has been hitting American families hard. The middle class has the highest rates of medical debt. Seventeen percent of middle-class households ($43,700 to $160,800 in annual income) had medical debt in 2021, compared with 15.3 percent of low-income households and 9.8 percent of those with high incomes.
Although the middle class has higher rates and amounts of medical debt, the burden of debt is heavier for low-income families. The average amount of debt exceeded their annual income from 2017 to 2021 for families in the lowest fifth of income. Even for the highest-income families, those in the top fifth, their medical debt averaged 10 percent of their annual income.
Black and Hispanic Americans are more likely to have medical debt. Their medical debt rates are 22.5 percent and 17.6 percent, compared to 13.4 percent for white Americans. Black and Hispanic Americans are often more vulnerable to medical debt because they have less health-care coverage. About 25 percent of Hispanic and 12.7 percent of Black Americans lack health insurance, while 7.5 percent of white Americans are uninsured.
Fighting medical debt is a sympathetic cause because no one asks for it and no one wants to see it. Two-thirds of Americans support medical debt relief, making it substantially more popular than student debt relief, which has 50 percent support. The medical debt fight is also a rallying cry for broader reforms because it is a symptom of so many problems: Soaring prices that make care unaffordable, inadequate coverage that leaves families financially vulnerable and inequitable access to care that leaves many with bills they cannot pay.
To voters, fighting medical debt is a tangible way to lower their costs. Although inflation is falling, many individuals are still crippled by high costs, especially in health care. State and local officials can do more to limit the damage to people’s lives from medical debt.
David Kendall is the senior fellow for health and fiscal policy at Third Way.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
