The Persistent Injustice of Medical Debt
Medical debt has been a persistent and pervasive scourge in this country, sometimes described as a “uniquely American injustice.” Where else in the world does getting sick and needing care translate to possible financial ruin? I’ve written about it previously, but it’s an issue that merits continued attention.
Just this week, a new report from Third Way shows that medical debt wallops middle-class Americans disproportionately. Nearly 17 million middle-class families — almost one-quarter of them — had medical bills that they were unable to pay in full in 2020. Middle-class people who are Black and Hispanic are hit especially hard: nearly 38% of Black and 25% of Hispanic middle-class Americans surveyed had medical debt, compared with 20% of their white peers.
And this spring, a report from the Consumer Financial Protection Bureau highlighted the problem of medical debt among older Americans. It found that nearly 4 million adults ages 65 and older had unpaid medical bills, even though 98% of them had health insurance coverage. The total amount of unpaid medical bills reported by older adults increased by 20% between 2019 and 2020, from $44.8 billion to $53.8 billion.
New York State is a leader on preventing and mitigating the impact of medical debt. Last year, Governor Hochul signed two key measures into law: one that prohibits the extreme billing practice of placing liens on patients’ homes and garnishing wages, and another that bans hospital facility fees for preventive care and requires advance notice to consumers for instances in which fees will be charged. Earlier, New York enacted policies to lower interest rates on past-due medical bills, reduce the statute of limitations on medical debt, and close a surprise billing loophole. New York has also passed measures to prevent people from going into medical debt in the first place, aiming to make it easier for patients to apply for financial assistance for medical bills.
The measures New York has taken are making a difference: an Urban Institute report (funded by the New York Health Foundation) found that, as of February 2022, about 6% of New Yorkers had medical debt in collections on their credit records, compared with 13% nationally.
Yet, we can and must do better. 740,000 New Yorkers still have medical debt on their credit reports. The burdens of medical debt are unequally distributed by geography and race/ethnicity. For example, the median amount of debt ranged from $371 on Long Island to $687 in the Mohawk Valley. In the Capital District, communities of color had a median debt amount of $899, two times higher than the median for predominantly white communities ($448).
A change in credit reporting practices nationally this past spring removes medical debt collections under $500 from credit reports. That’s an important step toward easing the impact of medical bills on consumers. But here in New York, that same Urban Institute analysis found that nearly half of adults with medical debt owed $500 or more. That means potentially hundreds of thousands of New Yorkers won’t be helped by the federal change.
We can fix this. In June, the State legislature acted to prohibit health care providers from reporting medical debt of any amount to a consumer reporting agency. The legislation awaits the Governor’s signature. If she signs it, New York will be the second state in the nation, after Colorado, to enact such a consumer protection.
We also need to do more to make health care more affordable, so people aren’t going into debt to begin with. Changing credit reporting protocols is important, but even better is to tackle the root of the problem. Expanding eligibility for financial assistance for health care, ensuring that more New Yorkers have adequate health insurance coverage, and lowering co-pays and deductibles are ways that New York could continue to address medical debt.
As always, our policies are only as effective as their implementation. New York must continue to do right by the patients who need relief from medical debt.
