Over the past decade, there has been a noticeable decline in the share of people with medical debt in collections on their credit reports. A 2023 study by the Urban Institute revealed that in 2013, 19.5% of Americans had medical debt in collections, which dropped to just 5% in 2023. These figures demonstrate a positive trend in reducing the financial burden caused by medical bills on individuals and families.
Interestingly, despite the decrease in the percentage of people with medical debt in collections, the median amount of medical debt has actually increased. In 2013, the median medical debt in collections was $842, whereas in 2023, it rose to $1,493. This rise in the average amount of medical debt signifies that while fewer people may have medical debt in collections, those who do have it owe a larger sum, which can still be a significant financial strain.
The Urban Institute’s research also highlighted regional disparities in the prevalence of medical debt in collections. States in the South, such as West Virginia, South Carolina, and Louisiana, experienced significant reductions in the share of residents with medical debt in collections. On the other hand, Colorado, which banned credit bureaus from including medical debt on credit reports, had no instances of medical debt in collections in 2023. Such regional variations emphasize the importance of implementing targeted policies to address medical debt at the state level.
Challenges Faced by Individuals with Medical Debt
While efforts to remove medical debts from credit reports are beneficial for debtors, they do not address the root causes of financial vulnerability associated with medical debt. Research by KFF revealed that individuals with medical debt are more likely to experience financial stress in other areas of their lives, such as carrying credit card balances, lacking emergency savings, and struggling financially. The intersection of medical debt with other forms of financial insecurity underscores the need for comprehensive solutions to support individuals facing medical debt burdens.
Impact on Financial Well-being
Adults with medical debt face a range of challenges beyond just the debt itself. They are more likely to engage in behaviors indicative of financial distress, such as overdrawn checking accounts, contact by debt collectors, and reliance on short-term loans. The accumulation of various forms of debt can further exacerbate the financial strain on individuals and families, raising concerns about their long-term financial stability.
Policy Responses and Relief Measures
In response to the growing issue of medical debt, policymakers have proposed various measures to provide relief to affected individuals. The Consumer Financial Protection Bureau has suggested banning medical bills from credit reports, which could eliminate billions of dollars in medical debt. Additionally, the American Rescue Plan Act includes provisions to cancel billions in medical debt for millions of Americans, signaling a recognition of the urgency to address this pressing issue.
For individuals struggling with medical debt, there are practical steps they can take to alleviate their financial burdens. Negotiating with healthcare providers for lower bills and exploring prescription cost-saving options are effective strategies to reduce healthcare expenses. By actively seeking financial relief and exploring cost-saving opportunities, individuals can take proactive steps to manage their medical debt and improve their financial well-being.
Medical debt remains a significant financial challenge for many individuals and families, despite recent improvements in reducing its prevalence. Addressing the root causes of medical debt, providing targeted relief measures, and empowering individuals to manage their financial obligations are essential steps towards mitigating the impact of medical debt on financial well-being. By implementing comprehensive solutions and supporting affected individuals, policymakers and stakeholders can work towards a more equitable and financially secure healthcare system.