14% of Americans carry 75% of nation's medical debt burden

Approximately 8% of Americans have some medical debt. But certain populations shoulder a significant portion of the nation's total medical debt burden, such as those in poor health, uninsured individuals, and Black Americans, new data from Kaufman Hall revealed.

What's more, the 14% of Americans with medical debt who owe over $10,000 carry nearly three-quarters of the nation's total medical debt burden. However, the nearly 50% of Americans with medical debt who owe less than $2,000 make up just 5% of the nation's total medical debt burden.

In April 2023, the three major credit bureaus -- Equifax, Experian and TransUnion -- jointly announced that any medical debt collection with an initial reported balance of under $500 would be removed from U.S. consumer credit reports.

"We believe that the removal of medical collection debt with an initial reported balance of under $500 from [U.S.] consumer credit reports will have a positive impact on people's personal and financial well-being," the CEOs of the three credit bureaus said at the time.

The reporting changes positively affected consumers who had small amounts of medical debt but did not have an effect on the individuals who bear most of the debt burden.

In June 2024, the Consumer Financial Protection Bureau expanded on these efforts by proposing a rule that would remove medical bills from most credit reports.

Specifically, the proposed rule would remove the exception that currently permits lenders to use information about medical debt to make credit eligibility determinations and ban the repossession of medical devices if individuals are unable to pay the loan.

"Although removal from credit reports offers a reprieve from the knock-on effects of medical debt, policymakers are increasingly experimenting with direct relief," Kaufman Hall noted.

For example, the American Rescue Plan provided $7 billion to states, counties and cities to eliminate medical debt. Additionally, in July 2024, CMS approved North Carolina's medical debt relief incentive program, which allows the state to use its Medicaid program to incentivize hospitals to relieve more than a decade of existing medical debt.

As Americans continue to struggle with medical debt burden, leaders are trying to ease the effects that medical debt can have on credit reports and the overall financial well-being of debtholders.

Jill McKeon has covered healthcare cybersecurity and privacy news since 2021.