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February 9, 2022

Charted: Medical debt in America

Daily Briefing

    Americans' already sizeable medical debt has grown during the pandemic, leaving many people to forgo medical care due to cost. To combat the increasing burden of this debt, several states have enacted new laws aimed at protecting patients from hefty medical bills.

    Infographic: The patient financial journey

    How much medical debt do Americans owe?

    Medical bills are the largest source of debt owed to collection agencies in the United States, according to a study published in JAMA that examined millions of credit reports from TransUnion. In total, the researchers estimated that Americans owed around $140 billion in medical debt in 2020. The study noted that the projection was limited to the debt reported to TransUnion.

    According to a Census Bureau analysis released last April, about 19% of U.S. households have medical debt. Furthermore, a recent survey from Discover Personal Loans found that 53% of individuals with existing medical expenses said the pandemic caused them to take on new medical debt. Americans with medical debt also reported being more anxious about their ability to pay off their health care expenses than getting better (63% vs. 47%, respectively).

    In addition, the survey found that 80% of those with existing medical debt have postponed medical care due to cost during the pandemic. The most commonly deferred care was routine checkups, followed by medication purchases and preventive testing.

    Similarly, many Americans said they put off other financial commitments, such as paying other bills or saving for retirement, due to their medical debt.

    And during the pandemic specifically, survey respondents reported tapping into emergency savings, borrowing money, and paying bills later than usual to cover unexpected expenses.

    Overall, Discover Personal Loans found that almost 75% of Americans with medical debt owe more than $2,000 in medical bills. More people (41%) also reported using their credit card than their health insurance (38%) to pay for their medical care during the pandemic.

    Several states enact new measures to reduce medical debt

    Currently, federal law provides Americans with some protections against medical debt. For example, nonprofit hospitals are required to have financial assistance policies under the Affordable Care Act, and the No Surprises Act, which took effect Jan. 1, aims to protect patients from surprise medical bills.

    However, patient advocates and some state legislators have argued that hospital financial assistance programs can be unclear and daunting, and that federal hospital billing regulations are not enough.

    "There's a lot of room for improvement in the federal regulations," said Mark Rukavina, a program director at Community Catalyst, a nonprofit focused on patient advocacy.

    According to a 2020 report from the National Consumer Law Center, 13 states have mandated that hospitals must offer financial assistance for at least some patients, and some states have allocated government funds to assist patients with medical debt. And in 2021, at least 10 states, including Connecticut, Maine, Maryland, and New Mexico, enacted new laws to help patients avoid large medical bills, the Wall Street Journal reports.

    Several other states, including New York, Vermont, and Washington, are currently considering laws that will improve medical-billing protections for patients. For instance, New York's Senate and Assembly are considering bills that would require hospitals to provide financial assistance to more patients and ban certain debt-collection practices, among other measures.

    "No one should be at risk of having their wages attached or a lien put on their home or their credit rating ruined because of medical debt," said Richard Gottfried (D), chair of the New York State Assembly's health committee.

    For its part, the American Hospital Association (AHA) said hospitals have given patients more than $700 billion in uncompensated care since 2000, as well as other community benefits.

    "The hospital field does more than any part of the health care sector to support patients from all backgrounds, giving treatment regardless of their ability to pay," said Stacey Hughes, an EVP at AHA. (Mathews, Wall Street Journal, 2/7; Plescia, Becker's Hospital CFO Report, 2/7; Business Wire, 12/8/21)


    Advisory Board's take

    Resources to help support the patient financial experience

    These recent reports on medical debt are striking, but not surprising. Given the widening gap in our country between the haves and have-nots, few Americans can cover their medical costs, especially those that are unexpected. In fact, less than 40% of Americans say they could pay for a $1000 emergency expense. Rising health care costs and increasing out-of-pocket obligations have made sticker shock an inevitable experience for too many patients in health care today.

    For health care providers who want to improve the financial experience for their patients, we've curated a list of our resources to help guide your efforts:

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