Past Due: Easing Medical Debt

Imagine that you’re dealing with cancer and huge medical bills keep piling up. Or that you are recovering from a hospitalization and you’re now being sued for outstanding bills and dodging debt collectors. Or that you were injured in a car accident and ended up in an ambulance that wasn’t covered by insurance and now you owe large sums of money. Maybe these debts are forcing you to consider selling your home or moving in with relatives to save on rent.

It’s not hard to imagine these scenarios because they happen regularly in the United States.

As RIP Medical Debt (a nonprofit that has helped eliminate more than $6.7 billion of medical debt for more than 3.6 million families yet has barely scratched the surface of the problem) puts it, “Medical debt is a uniquely American injustice.”

It’s true:

• Medical debt is the most common reason for bankruptcy in the United States.
• Estimates vary, but a survey found that 41% of working-age Americans have problems with medical bills or are paying off medical debt.
• A recent analysis found that people in the United States owe approximately $195 billion in medical debt.
• That same analysis showed that an estimated 23 million Americans — nearly 1 in 10 adults — have “significant medical debt” of more than $250.
• Americans who have a disability are more than twice as likely to have significant medical debt than those without a disability.
• The U.S. Census Bureau estimates that 28% of Black households carry medical debt, compared with 17% of non-Hispanic white households.

We are seeing some steps to address medical debt nationally. Starting this summer, the three major credit reporting agencies will expunge medical debt from many consumers’ credit reports — if it’s paid off or if it’s less than a year old. Starting next year, medical collection accounts of less than $500 will also be excluded from credit reports. That’s a good start, but those measures will only affect about 70% of medical debt — meaning that many Americans who are saddled with high medical bills will continue to have ruinous credit scores.

As part of a broader set of measures to “protect consumers and lessen the burden of medical debt on American families,” the White House just announced it will build on those private-sector efforts and eliminate medical debt as a factor for underwriting in all federal agencies’ credit programs. The Biden administration has also pledged to address predatory and aggressive billing and collections practices; make it easier for veterans to get their VA medical debt forgiven; and provide more educational resources to help patients understand their rights.

Here in New York State, medical debt burdens patients. In 2020, 6% of New Yorkers were put into collections over medical bills — with double that rate for people of color in parts of the State (this interactive map from the Urban Institute shows the substantial variation of medical debt across New York State by geography and race). In the most extreme cases, New Yorkers face lawsuits and property liens or wage garnishments because of medical debt. More than 52,000 lawsuits were filed against patients by New York hospitals between 2015 and 2020. Low-income communities and communities of color outside of New York City have been particularly hard hit by unfair billing practices.

Thanks in part to advocacy efforts like the Community Service Society’s End Medical Debt campaign, New York State is taking action to address medical debt. The statute of limitations for medical debt lawsuits was reduced from six years to three years; a loophole in the State’s surprise bill law was closed (although some gaps still remain) to cover emergency services; and interest rates that may be charged on any consumer debt were reduced from 9% to 2%. Legislation that would prevent hospitals from placing liens on patients’ homes or garnish their wages recently passed in the Assembly, but remains pending in the State Senate. More still needs to be done to make it easier for eligible patients to know about and receive hospital financial assistance in New York.

Even in a sharply divided country, easing medical debt is a ripe topic on which to find common ground. It’s not a partisan or ideological issue. I don’t know anyone, regardless of their politics, who believes that getting sick and needing health care should be financially ruinous for patients and their families. It’s an economic and moral stain on our system, and patients deserve more protections for their physical, mental, and financial health.