Insured people now compose majority of debtors to US hospitals

Health insurance is supposed to shield patients from medical debt, but a new analysis shows that insured Americans are increasingly at risk of harm from high medical costs. 

A report from accounting and consulting firm Crowe LLP using proprietary hospital data found that nearly 60% of “bad debt”—charges the hospital writes off after failing to collect—came from patients who were insured. In contrast, only 11% of bad debt in 2018 was from uninsured patients. According to Crowe LLP, 2021 was the first year that “self-pay-after insurance accounts” were the biggest source of bad debt for hospitals.   

Why this big shift? For those who are lucky enough to have insurance, most are still responsible for monthly payments, co-pays, and deductibles, which can add up. And with some high deductibles reaching as high as $1,000, many insured patients just can’t foot the bill. There’s also no easy way to strategize where to seek the most affordable care, as some hospitals are reluctant to follow price transparency regulations. Thus, those with larger bills who are unable to pay just don’t, and hospitals are forced to write off care and take the financial hit.

What can policymakers do to alleviate medical debt?

The study makes it clear that the safety net of health insurance coverage has frayed. As more of the costs of care have become passed onto patients, many are going into debt. 

Policymakers are considering several strategies for reducing the burden of medical debt:

  1. Improve insurance. The current landscape of insurance options needs improvements from many angles. For starters, policymakers are tackling Medicare Advantage care denials, and the 2022 Inflation Reduction Act took action on higher premium subsidies in marketplace plans. Lawmakers in some states are also still pushing for a single-payer system.
  2. Buying and forgiving debt outright. Some large cities around the US are taking the problem of medical debt by partnering with the organization RIP Medical Debt, which buys up medical debt at steep discounts in order to wipe and forgive the debt, no strings attached. In Cook County, Illinois, funds from the American Rescue Plan Act were used to wipe away up to $1 billion in medical debt. This inspired New York to pledge to wipe away $2 billion in medical debt, and Los Angeles county is considering taking action as well.
  3. Require hospitals to expand financial assistance policies. The Crowe LLP report shows that hospitals should not restrict financial assistance to only uninsured patients. While many small, rural hospitals are struggling financially and may not be able to give , there other wealthy hospitals (like the Mayo Clinic) that could be doing more to give assistance to patients who need it, even those who have insurance. 
  4. Tackle high healthcare costs. Even when patients have insurance, high costs of care mean that just a fraction of the total cost can wipe out patients’ savings. Things like ‘facility fees,’ similar to other types of surprise billing, can really add up. Policymakers across Colorado, Indiana, and New York passed legislation last year to address these fees, and the Biden administration has also announced its intention to take action.

This is promising progress. Given an estimated 23 million Americans owe significant medical debt, hospitals and policymakers alike should continue working towards alleviating as much debt as possible. 

We’ll be tackling this issue in our upcoming project compiling hospital billing practices, which will inform patients and policymakers on the hospitals doing the most–and least–to prevent medical debt.