Are Hospitals Driving Medical Debt?

Ten percent of Americans owe medical debt. According to a new report, much of that debt is owed to hospitals. What does this tell us about billing practices, financial assistance, and the balance between patients and profits in our current hospital systems?

The people who have the least owe the most

Chances are, you or someone you know holds medical debt. Coast to coast, Americans have been drowning in medical debt, and new research from the Urban Institute identifies hospitals as the primary driver of this debt.

According to the report, nearly 75% of adults with medical debt owe some or all of it to hospitals. Individuals with incomes below the federal poverty line are particularly hard-hit, with up to eighty percent in debt to hospitals. The findings also reveal that hospital debts tend to be higher than non-hospital medical debts, with over a quarter of hospital debts above than $5,000. This is especially concerning given that the majority of Americans cannot afford a $500 emergency, nevermind a $5,000 one. 

“The prevalence of past-due medical debt declines as family income rises.”

-Michael Karpman, Urban Institute

There are other ways

When it comes to addressing medical debt, patient advocates have plenty of ideas. An easy target is health insurance. Patients without insurance struggle significantly with medical debt and expanding health insurance to this population could drastically improve the situation. It’s not a magic bullet, however. This latest research found that over 63.5% of adults with medical debt incurred that debt while they had insurance, indicating that the under-insurance is also a significant problem.

Hospital policies may be the most effective intervention point to deal with the crisis of medical debt. Hospitals have the choice to offer robust financial assistance, set reasonable prices, not sue patients, and pay their fair share in community benefits if they are nonprofit. By adjusting their policies, hospitals have the power to alleviate the long-term financial suffering caused by our broken healthcare system.

Financial barriers to healthcare can trap patients in a vicious cycle: they avoid healthcare to avoid debt, but the lack of care exacerbates their conditions so when they finally get care, they’re in worse health. The debt they incur discourages them from future care, and thus the cycle continues.

“The last thing that hospitals want is for their patients to face financial barriers.”

-Molly Smith of the American Hospital Association in The Dallas Morning News

Social responsibility includes protecting patients from financial harm. We must do better.

As millions of Americans face medical debt, it’s increasingly important for hospitals to give their fair share in financial assistance – especially given the huge tax breaks they receive. But how many hospitals are actually giving back their fair share? Join the Lown Institute on April 11 as we discuss fair share spending, medical debt, and reveal which hospitals give back the most – and least – to their communities.