Fewer Adults Faced Medical Debt Challenges During Pandemic

The pandemic may have brought some financial relief to consumers, as the share of adults experiencing medical debt challenges decreased in 2021, an Urban Institute report found.

Researchers used data from the Urban Institute’s Health Reform Monitoring Survey (HRMS) and consumer data from a major credit bureau between 2018 and 2021 to understand how the pandemic impacted medical debt challenges.

Between March 2019 and April 2021, the percentage of adults reporting medical debt and problems paying family medical bills in the past year declined.

Specifically, the share of adults reporting medical debt fell from 23.6 percent in March 2019 to 16.8 percent in April 2021. Similarly, 12.2 percent of adults reported problems paying medical bills in April 2021, compared to 17 percent in March 2019.

In 2018 and 2019, before the pandemic, these trends remained relatively stable, the report noted.

The share of adults with medical debt in collections was falling even before the pandemic, but the decline accelerated after February 2020. In August 2018, 16 percent of adults had medical debt collections on their credit records, compared to 15.3 percent in February 2020. This figure dropped further to 13.9 percent in August 2021.

While the share of adults with medical debt collections decreased during the pandemic, the average medical debt amount remained roughly the same at $774.

Medical debt challenges in 2021 varied by age and race, the report found.

For example, younger adults between the ages 25 and 34 (18 percent) were more likely to have medical debt in collections than adults 65 and older (7.8 percent). Researchers suggested this may reflect variation in health insurance coverage access, as older adults can receive universal coverage through Medicare.

However, younger adults between 18 and 34 saw the most significant reductions in self-reported medical debt in 2021. The share of 18 to 24-year-olds reporting medical debt declined from 21.8 percent to 11.9 percent, while the share of 25 to 34-year-olds fell from 23.9 percent to 14.1 percent.

Meanwhile, the share of older adults reporting medical debt only fell by 5 to 6 percentage points, the report noted.

The share of adults with problems paying medical bills also varied slightly during the pandemic. Adults between ages 45 and 54 were the most likely age group to report problems (13.5 percent), while adults between 18 and 24 were the least likely (10.6 percent).

Adults aged 35 to 44 experienced the most significant reduction in problems paying medical bills, going from 18.5 percent in March 2019 to 11.9 percent in April 2021.

The report also revealed racial inequities in medical debt challenges. Although the share of adults reporting medical debt declined among all races, Black adults were 7 percentage points more likely to report medical debt and problems paying medical bills than White adults in April 2021.

Hispanic/Latino adults were also more likely to report medical debt and problems paying medical bills than their White counterparts in 2021.

While majority-Black and majority-American Indian/Alaska Native communities saw significant declines in the share of adults with medical debt in collections, these communities still had the highest rates of medical debt in collections in August 2021 at 22.7 and 17.7 percent.

Adults in majority-Hispanic/Latino communities had the highest median amount of medical debt in collections of $884. Majority-Black communities ($794) also had higher median amounts of debt in collections than majority-White communities ($743) in 2021.

“These racial and ethnic disparities reflect historical inequities that have reduced wealth, access to health insurance coverage, and economic choices for communities of color,” the report stated.

The overall decline in medical debt challenges during the pandemic was likely due to reduced healthcare utilization, increased Medicaid and marketplace enrollment, and federal financial relief such as stimulus payments and the student loan payment freeze.

Three major credit reporting agencies recently announced plans to remove most medical debt in collections from credit reports, which may help reduce medical debt challenges in post-pandemic times, the report noted.

However, policymakers should consider key actions to further mitigate these challenges, including ensuring provider compliance with the No Surprises Act and regulating hospital financial assistance and debt collection practices.