State and local governments are acting to unburden millions in medical debt but federal action is still needed
Every week at RIP Medical Debt, we hear stories from our beneficiaries about the harm of medical debt and their inability to make ends meet. The stories are thematically similar – stress, limited resources and fear of accessing healthcare.
The out-of-pocket costs weigh heavily on individuals and families. As Camille in Michigan told us:
“The income I receive...makes it impossible to pay out-of-pocket for the subsequent medical bills. It’s been a continuous financial struggle for so many years and especially in current times.... I wish there were more people and places taking the time to understand how negatively an otherwise small debt can impact someone.”
RIP Medical Debt abolished just over $1500 for Camille. Camille is not alone; beneficiaries consistently report how medical debt results in financial tradeoffs, fear of accessing health services for chronic health concerns and the mental health harm of medical debt. Keep in mind that the average individual health plan through an employer now has a more than $1,500 deductible; 1 in 3 people enrolled in a high-deductible health plan report delaying care due to cost. Our beneficiary data reinforce these findings.
In 2022, the national uninsured rate hit an all-time low with 92% of U.S. residents being insured. But despite that milestone, medical debt is still a crisis for everyday people. Research backs up Camille’s story of the burden and stress of out-of-pocket costs and the high cost of healthcare.
A study led by researchers David Himmelstein, et al. reveals the increasing cost burden for people with insurance. Their research spotlights the higher likelihood of accruing medical debt if an individual has a high-deductible plan or is enrolled in a Medicare Advantage plan. Further, the results reaffirm that being uninsured or living in a state that has not yet expanded Medicaid increases the likelihood of carrying medical debt.
The study highlights medical debt as a social determinant of health; having medical debt increases the odds of being food or housing insecure. Deciding what bills to pay and what basic needs to skip is a stressful exercise, leading people to forgo or delay healthcare. Tradeoffs can lead to worsened health conditions, financial insecurity and mental health conditions. An analysis of the National Health Interview Survey (NHIS) clearly shows the toll medical bills take on people. Researchers describe this as ‘medical financial hardship’ composed of three domains: medical debt, distress and coping behaviors. They conclude that while over half of uninsured people experience one or more domains of medical financial hardship, a quarter of the insured share in this experience, noting that health insurance with high-cost sharing is insufficient to protect people from the harm of medical debt.
As decision-makers navigate healthcare affordability, they must prioritize out-of-pocket costs. These high costs are crushing households, particularly low- and moderate-income people who have fewer resources to buffer them from unreasonable cost-sharing. Unfortunately, policy change is slow, complicated by technical and political hurdles.
That is why RIP Medical Debt is committed to both telling the story of medical debt to activate stakeholders to address the root causes of medical debt and also provide an immediate solution for patients. Over the last year, over 30 local governments have reached out to us to abolish medical debt; they see this as an opportunity to help their own residents who are financially struggling. RIP Medical Debt offers a simple solution; we buy medical debt with donated dollars and abolish it for patients. We do this in two ways: 1) purchase medical debt from the debt market and 2) purchase medical debt directly from hospitals and providers. Our fundraising team is building a grassroots movement to end medical debt where everyone can be a philanthropist – for every $1, we can, on average, abolish $100 of medical debt. Patients receive letters letting them know they are free and clear of their medical debt. This immediate relief for patients can be life-changing, offering people a fresh start, reducing their stress, and hopefully, prompting people to access the healthcare they need.
To date, we have started work with cities/counties in three states. Counties are leveraging American Relief Plan Act (ARPA) funds and local funds to abolish debt for residents. Instead of raising funds through donors, ARPA dollars are used to buy available medical debt for pennies on the dollar. In Cook County, Illinois—the first county to champion an abolishment strategy—a website helps residents understand the program and how they could benefit. Thousands of letters have landed in mailboxes across Cook County with many more to come. In Toledo and Lucas County, Ohio, our work is just beginning to cancel more than $200 million for residents, and other cities are taking steps to abolish debt for their residents. In New Orleans, Louisiana, the city council has earmarked over $1 million to abolish medical debt. Earlier this year, a White House brief highlighted the use of ARPA funds for the purpose of medical debt abolishment as an example of strategies to reduce medical debt.
A handful of states are pursuing debt abolishment as a way to address the larger issue of healthcare affordability. For example, in New Jersey, the governor included it in the budget as did Connecticut. There is pending legislation in Pennsylvania to abolish medical debt, and the District of Columbia announced its intention to fund medical debt abolishment.
Many governments are responding to their constituents’ concerns about mounting unpaid medical bills that they cannot afford. While improvements in health insurance affordability have increased access to millions thanks to the Inflation Reduction Act (IRA), health insurance out-of-pocket costs still leave people at risk of medical debt. More action is needed to protect people from those cost-sharing requirements. Local governments are stepping up to abolish the weight of unpaid medical bills as a first step in a much bigger agenda to make healthcare affordable for everyone everywhere.
But local stakeholders cannot solve medical debt. As more barriers are erected to access preventive services and reproductive healthcare, lowering out-of-pocket expenses for people has never been more important. Congress and the Biden Administration must identify ways to help people manage stubborn inflation and economic uncertainty and address the fears of medical debt by lowering out-of-pocket costs. Insurance expansions are needed and important but decisionmakers must ensure that insurance is truly protecting people from debt.
Eva Marie Stahl is the Director of Public Policy at RIP Medical Debt. Eva oversees development and implementation of RIP Medical Debt’s policy work. RIP Medical Debt is a member of the Lower Out-of-Pockets NOW Coalition and serves on it’s steering committee.
FSA
Management Companies use deceitful and hard ball tactics to avoid paying out/off FSA funds.
Op _ _ m is horrible.
We need to address the cause of the medical debt. “The answer to our health care crisis is clear. We propose a publicly financed, non-profit single-payer national health program that would fully cover medical care for all Americans.” Physicians for a National Health Program, PNHP.