About a Quarter of Residents in 18 States Have Medical Debt

Medical debt is a problem for Americans, with as many as a quarter of residents in 18 states having medical debt in collections, according to a new Commonwealth Fund report.

The states with the highest number of residents with medical debt collections are primarily the South, where state uninsured rates are also the highest in the country. However, medical debt is an issue across the country, the June 22nd report highlights.

The report is the “2023 Scorecard on State Health System Performance,” which uses the most recent data to assess how well the healthcare system works in every US state and the District of Columbia. The scorecard considers healthcare access, quality, use of services, costs, health disparities, reproductive care and women’s health, and health outcomes.

Massachusetts, Hawaii, New Hampshire, and Rhode Island scored the highest overall out of all the states. These states are also the top-performing states in terms of healthcare access and affordability, which includes the share of residents with credit bureau records who have medical debt in collections.

The lowest-performing states overall, according to this year’s scorecard, are Arkansas, Texas, Oklahoma, West Virginia, and Mississippi. Texas, Oklahoma, and Mississippi also rank at the bottom for healthcare access and affordability, joining Wyoming and Georgia.

But all states face challenges with historically high rates of premature death stemming from the aftermath of the COVID-19 pandemic, as well as increasing rates of maternal mortality and health inequities in pregnancy-related outcomes, the report states. Rising healthcare costs and a potential increase in the uninsured rate are also plaguing Americans no matter where they live.

Health insurance coverage rates reached record highs in 2021 thanks to several Medicaid expansions — Idaho, Maine, Missouri, Nebraska, Oklahoma, Utah, and Virginia — and pandemic-era policies, including increased federal funding for outreach and enrollment in the Affordable Care Act’s marketplace and continuous enrollment in Medicaid.

However, some pandemic-era policies have expired this year and many Americans still remain uninsured or inadequately covered, the Commonwealth Fund says. An estimated 15 million people may lose Medicaid over the next year because of changes in eligibility and administrative errors as states unwind the continuous enrollment benefit.

Higher uninsured rates, coupled with a substantial amount of people who are underinsured, could exacerbate the medical debt problem in the US.

Nearly a quarter of adults in 2022 had coverage all year but were still underinsured, the Commonwealth Fund reports. Of those adults, 39 percent were paying off medical debt, which is slightly higher than the share of uninsured people with medical debt.

In total, there is about $88 billion of medical debt on consumer credit records, according to the report. The medical debt accounts for over half of all debt-collection entries on credit reports, making it the largest single source of debt. This amount is also underestimated because it does not account for the debt people owe to hospitals and other healthcare providers directly.

Residents in the South are particularly vulnerable to medical debt and collections because of high state uninsured rates and greater out-of-pocket cost exposure in commercial health plans.

Filling the Medicaid coverage gap, permanently expanding enhanced marketplace premium subsidies, and creating a longer period of continuous Medicaid eligibility and an autoenrollment mechanism could offset the burden of medical debt and other healthcare affordability and access issues, the Commonwealth Fund suggests.

Other recommendations in the report include lower deductibles and out-of-pocket costs in marketplace plans, lower healthcare cost growth, and consumer protections from medical debt, such as banning aggressive collection activities and greater scrutiny of medical billing practices at the provider level.

Just this week, New York lawmakers passed a bill to remove medical debt from credit reports. Colorado is currently the only state to have enacted a law prohibiting medical debt from being collected by credit reporting agencies or including it in a credit report.

Major credit reporting agencies will not report medical debt under $500, according to an announcement in April.