PAST DUE: How medical debt is harming Americans and the solutions we need now

How big is the problem of medical debt? How are our finances and health being affected? And what policy solutions are on the table to help stem the tide?

The Lown Institute’s white paper, Past Due: How medical debt is harming Americans and the solutions we need now, provides an overview of research on prevalence, impact, and drivers of medical debt, as well as an evaluation of potential policies including everything from low-hanging fruit to systemic reforms.

Medical debt is common and costly

At least 8% and as many as 41% of American adults are estimated to have medical debt, according to studies in recent years. The amount of medical debt owed is significant, with about half of Americans with debt owing $2,000 or more. The total amount of medical debt in the U.S. was at least $88 billion and as high as $220 billion in 2021. While research shows a gradual downward trend in medical debt in recent years, rates of medical debt are still alarmingly high, undermining the financial security of tens of millions of Americans.

Most Americans with medical debt are white, employed, and have insurance

Given the demographic makeup of the U.S., survey data suggests that the “typical” American with medical debt is a middle-aged, white, working-class woman in the South who has health insurance. However, certain groups of Americans make up a smaller proportion of the population but have a higher risk of medical debt. Studies show that Black, Hispanic, and Native Americans, uninsured Americans, and adults living with a disability have elevated rates of medical debt.

Medical debt is linked to financial insecurity and worse health

Medical debt is associated with a range of adverse financial and health outcomes, including food or housing insecurity, personal bankruptcy, increased credit card debt, delayed access to care, anxiety, and overall mortality. More research on whether or not these outcomes are caused by medical debt is needed.

Insurance coverage, high prices, and billing practices are key drivers of debt

Research on the causes of medical debt has identified numerous drivers, including:

Inadequate insurance coverage with expensive cost sharing features such as high deductibles and copays;
Lack of insurance coverage (particularly non-expansion of Medicaid)
High prices for medical care, particularly for hospital care, emergency medical services, prescription drugs, and lab tests;
Provider billing practices such as financial assistance availability and accessibility, financial assistance policy implementation, confusing bills, and difficult appeal processes; and
Broader social and economic forces such as wage stagnation, income and wealth inequality, healthcare consolidation and financialization, and fraying of the social safety net.

Both targeted and system-wide solutions are needed to reduce the financial burden of healthcare

Policy experts, researchers, and community advocates have proposed a wide array of policies to mitigate the negative impacts of medical debt, including:

Expanding health insurance coverage through single-payer or other universal coverage models, Medicaid expansion and protection of existing Medicaid coverage, a public insurance option, premium subsidies, and employer and individual mandates;
Addressing systemic issues in healthcare that drive high out-of-pocket costs through policies such as price transparency, cost sharing limits, price controls, and payment models that incentivize value over volume.
Hospital-focused regulations, such as financial assistance standards, requirements for patient screening for assistance, reporting requirements, and limits on collection actions;
Insurance-focused regulations, such as restrictions on automatic claim denials, easier appeal processes, and minimum benefit requirements;
Non-regulatory preventive solutions, such as industry best practices and consumer-focused information;
Downstream solutions, such as medical debt relief and removing medical debt from credit reports.

Working group members

The Lown Institute brought together over a dozen researchers, patient advocates, and policy experts to compile existing research on medical debt into a resource for policymakers and others interested in this topic.

Chuck Bell, Consumer Reports
Elisabeth R. Benjamin, Community Service Society of New York
Adam Fox, Colorado Consumer Health Initiative
Judith Garber, Lown Institute
Chris Goodman, University of South Carolina School of Medicine Columbia
Berneta Haynes, National Consumer Law Center
Patricia Kelmar, U.S. PIRG
Neale Mahoney, Stanford University
Quỳnh Chi Nguyễn, Community Catalyst
Eli Rushbanks, Dollar For
Vikas Saini, Lown Institute
Noelle Serino, Lown Institute
Marceline White, Economic Action Maryland Fund

This project was made possible through support from Arnold Ventures.