The burden of medical debt: How the government is trying to defray it

Medical debt can lead to a vicious cycle of not seeking care for fear of incurring further debt—which might then exacerbate conditions that require extensive further treatment, burdening patients with higher medical bills than they might have had if they sought care earlier.

Easing the burden of medical debt could lead to improved health care outcomes for many Americans. In recent years, local and state governments have taken up the mantle to erase their constituents’ medical debt. The federal government is also engaged in efforts to ease the burden of medical debt on Americans. Below, I’ll break down what efforts are being made and how they might impact patients.

State and local efforts

Over 10% of Illinois residents reported having some medical debt between 2019-2021, and a study from the Society of Hospital Medicine suggests this may have increased with the COVID-19 pandemic. However, the over one million Illinois residents with medical debt can hopefully soon find some relief.

Illinois Governor J.B. Pritzker recently signed into law a bill that aims to erase over a billion dollars in medical debt for Illinois residents. He has also proposed a continuation to erase $4 billion dollars over the course of four years with Undue Medical Debt (UMD), which is part of Cook County’s efforts to erase its local residents’ debts. Illinois residents can begin applying for debt relief on Jan. 1, 2025. The new law allows the state of Illinois to buy debt from collectors or hospitals, often for pennies on the dollar, and then forgive it.

Illinois is not alone in its efforts to relieve its residents’ medical debt: Arizona, New Jersey, Connecticut, Wayne County and Oakland County (Michigan), Orange County (Florida) and Cincinnati, Ohio, as well as other communities, also have programs to erase medical debt, leading to a potential $7 billion dollar erasure of medical debt.

However, for these programs to work, hospitals and collectors need to allow debt relief programs to purchase medical debt. In Charlotte, North Carolina, two hospital systems, Atrium Health and Novant Health, denied UMD’s offer to buy off medical debt. If hospitals refuse to engage, the debt held by the hospitals’ former patients cannot be erased by the organization.

That will not deter these local municipalities and state governments from trying—the return on investment is high for both the politicians’ political careers and for their constituents.

Federal efforts

Federally, there has been momentum in the Biden Administration to support these bipartisan initiatives and work to implement similar initiatives through legislation. Vice President Kamala Harris credits the American Rescue Plan for providing the funds for many state/local programs that are clearing medical debt. She called on other local governments to follow suit. On the physician side, the REDI Act aims to ease the burden of student loan debt by deferring interest till post-residency.

Additionally, the Consumer Federal Protection Bureau recently issued a proposal to remove medical debt from the credit reports of more than 15 million Americans. According to the CFPB, this action would raise these individuals’ credit scores by an average of 20 points and lead to the approval of approximately 22,000 additional mortgages every year.

In May, Sens. Bernie Sanders and Jeff Merkley introduced the Medical Debt Cancellation Act, which aims to eliminate all $220 million dollars in medical debt through grants directly to hospitals and further change the current systems to limit future potential medical debt. On the House side, Reps. Rashida Tlaib and Ro Khanna introduced a similar bill. Currently, the Senate bill is in the Committee on Health, Education, Labor and Pensions and the House bill is in the Committee on Energy and Commerce and the Committee on Financial Services.

While many medical debt relief efforts have been led by Democrats (and Sanders, an Independent), medical debt relief is a widely popular idea. Over 80% of Republicans agree with forgiving medical debt, and 55% of Americans believe it should be done regardless of the cost.

With federal and local governments tackling this issue, it is reasonable to believe some Americans will eventually have their medical debt forgiven. However, it could be a slow process, leading to more delaying of necessary care and increased stress on patients.

Equity

The effect of medical debt on a person’s health outcomes is significant. Evidence suggests that medical debt may worsen existing social determinants of health (SDOH)—thus, alleviating that burden may lead to overall improvement in health quality and not just focused improvements.

The people who are most affected by medical debt are oftentimes those under 65 (likely due to Medicare availability for those over 65), women (due to childbirth expenses) and those in the South (many Southern states did not adopt Medicaid expansion).

Alleviating medical debt is not only an action that improves patient outcomes on a personal level, but also one that works toward a more equitable society. However, medical debt is only a symptom of inequities and inadequate policy. Although Medicare seems to decrease the burden of medical debt on those older than 65, a strong and lasting policy is what is necessary to solve the inequities demonstrated by medical debt. While forgiving debt is not a solution to the underlying conditions that lead to the inequities demonstrated, it is a step that can and should be taken.

What can I do?

Physicians and medical students often feel called to seek to improve the health of our patients both in and outside of the clinic. Physicians can get involved in advocacy and help create policies that will establish a healthier population and a more stable health care infrastructure.

Contact your local lawmakers about creating similar programs to forgive medical debt in your communities—it is widely popular among both major parties. Contact your senators and representatives to support the Medical Debt Cancellation Act as well to change federal policy. You can join the AOA in calling for student loan relief using our Advocacy Action Center here.

While policy and advocacy work are fundamental to what should be done at a structural level, there are smaller daily actions physicians can take to tackle medical debt. Screening for SDOHs during patient interactions while also interacting with local interventions by local organizations can help create a pathway for patients who have significant risk factors. Advocating for your hospital to improve its financial assistance program is another way you can help decrease this burden.

There are plenty of ways we can improve the current condition of health care infrastructure for the benefit of ourselves and our patients. Continuing to tackle medical debt is a small way that our positions of power can be used for positive change.

Related reading:

Making your money grow: A guide for physicians

Roughly 21% of physicians have student debt, report finds