The downward spiral of medical debt

Medical debt has become a crisis in the United States, with half of US adults reporting medical debt over the past five years. Among those with debt, one quarter owe more than $5,000, which can be devastating given that most Americans do not have enough savings to cover a $1,000 emergency.

What are the risk factors for medical debt in America, and what is the impact on families? A recent study in JAMA Network Open analyzes survey data to answer these questions.

Risk factors and consequences for medical debt

In this study, professor in the CUNY School of Public Health at Hunter College Dr. David Himmelstein and colleagues examined the factors associated with acquiring medical debt, which gives us clues as to potential causes of debt. They found that individuals that had a new hospitalization were nearly three times as likely to go into medical debt later in the same year. A new disability, loss of insurance coverage, and $2,000 in new out-of-pocket costs were also associated with a greater likelihood of going into medical debt.

The authors also examined the consequences of acquiring medical debt. Individuals who acquired medical debt from 2017 to 2019 were more than twice as likely to be evicted, and more than twice as likely to have declined in their ability to pay for food, housing, and utilities, compared to those who did not acquire medical debt.

This research shows how medical debt can create a downward spiral for families. For example, someone who is hospitalized unexpectedly is more likely to have medical debt, which makes it more likely they will lose their housing or be food insecure, which themselves are risk factors for declining health and potentially more medical debt.

Insurance coverage and medical debt

How can we disrupt the pattern of medical debt and declining health? Ensuring that everyone has health insurance is essential, as the study authors found that uninsured Americans were more likely to have medical debt, and the typical amount of debt was higher on average for those without insurance.

However, it’s not enough just to have health insurance — the insurance must actually shield beneficiaries from high out-of-pocket costs. The study results show that about one in eight Americans with a high-deductible private insurance plan had medical debt in 2017-2019, a higher rate than the national average. A deeper look at medical debt by insurance type, adjusted for patient characteristics and health status, shows that those with Medicaid and military insurance — types of insurance that have low amounts of cost-sharing — were more protected against medical debt than Medicare. And those in Medicaid expansion states were about 25% less likely to have medical debt compared to those in non-expansion states.

Individuals with Medicare Advantage were slightly more likely to have medical debt than those with traditional Medicare, demonstrating a downside to this increasingly popular Medicare alternative. The authors attribute this difference to the fact that some Medicare Advantage plans have low premiums but put beneficiaries at risk for high out-of-pocket costs for care delivered out of network.

What can hospitals do?

As the cost of healthcare for families has increased substantially over the past decade, minimal growth in wages and higher-deductible health plans leave more Americans at risk of medical debt. Socially responsible hospitals should be taking action to mitigate medical debt in their communities, such as:

  • Creating a robust financial assistance policy that covers patients with high deductibles as well as the uninsured;
  • Publicizing their financial assistance policy to make sure as many people as possible can utilize it;
  • Committing to not suing patients or sending their medical debts to collections, actions which exacerbate the crisis of medical debt;
  • Advocating for Medicaid expansion in their state (not block the legislation);
  • Paying their fair share in financial assistance and direct community benefit; and
  • Reducing egregious price markups and facility fees.

Which hospitals are giving the most in financial assistance to their patients to reduce their medical debt? See the Lown Institute Hospitals Index to find out!