Past-Due Medical Debt Impacts Over 1 in 7 Adults

More than one in seven nonelderly adults live in families with past-due medical debt, according to the Urban Institute in a new report.

The report also finds that medical debt particularly impacts low-income families. Nearly two-thirds of adults affected by past-due medical debt have incomes below 250 percent of the federal poverty line, the Urban Institute gleaned from June 2022 data from its Health Reform Monitoring Survey (HRMS).

More of the past-due medical debt is owed to hospitals, with nearly three-quarters of affected adults owing at least some debt to hospitals. More specifically, 28 percent of affected adults owed to hospitals only and 45 percent owed to hospitals and some other providers.

Adults with past-due medical debt to hospitals tended to owe more compared to those with non-hospital medical debt, the report also shows. Additionally, about 61 percent of adults with past-due medical bills to hospitals reported that a collection agency contacted them about the debt.

Under federal law, non-profit hospitals must establish financial assistance policies and provide charity care to eligible patients before attempting to collect patient financial responsibility. However, non-profit hospitals set their own charity care eligibility requirements and many patients who likely qualify per hospital policies do not receive charity care, the Urban Institute points out.

Furthermore, for-profit and public hospitals are not subject to federal laws about medical financial assistance. These hospitals can implement their own strategies for collecting patient financial responsibility, including using a collection agency, filing lawsuits against patients, and even garnishing their wages.

State lawmakers have recently gone after aggressive medical debt collection tactics. New York, for example, modified civil practice law last year to prohibit healthcare providers from placing liens on an individual’s primary residence or garnishing wages to collect medical debt.

The Biden Administration has also acknowledged the problem of medical debt and promised to protect consumers through several reforms, including requesting data from more than 2,000 providers to evaluate medical bill collection practices and financial assistance offerings.

The report from the Urban Institute finds that few adults experience the more aggressive medical debt collection tactics hospitals can use to get their money. Only about 5 percent of adults with hospital debt said a hospital filed a lawsuit against them, while 4 percent said hospitals had garnished their wages and 2 percent said hospitals had seized funds from a bank account.

More adults with past-due hospital debt (36 percent) said they worked out a payment plan. Meanwhile, about one-fifth of adults with past-due hospital bills received discounted care.

Adults with incomes below 250 percent of the federal poverty line were just as likely as those with higher incomes to experience hospital debt collection actions and to have gotten discounted care, the Urban Institute reports.

Many healthcare organizations are trying to make it easier for patients to pay their portion of the bill. Some organizations offer financial assistance programs and payment plans to ease the burden of patient financial responsibility, while others have implemented technology to make bill payment more intuitive and convenient for patients.

However, lack of insurance and low income are among the factors hindering the effectiveness of some collection strategies. Research also shows that adults with past-due medical bills are at elevated risk of skipping medical care in the future.

“The concentration of past-due medical debt among families with low incomes and the large share who owe a portion of that debt to hospitals suggests that expanded access to hospital charity care and stronger consumer protections could complement coverage expansions and other efforts to mitigate the impact of unaffordable medical bills,” the Urban Institute writes in the report.