This Medical Issue is Causing Generational Poverty


generational debt

For years, medical debt in the United States was estimated to be around $81 billion, but a July 2021 study discovered that the number is much higher. Americans owe at least $140 billion in medical debt, which doesn’t include debt added to credit cards or payment plans. 

“When you think about financial distress — debt collectors calling and knocking on doors of households — our research shows that more than half the time now, it is about medical debt,” said Neale Mahoney, an economist at the Stanford School of Humanities and Sciences and co-author of the 2021 study. “That’s a pretty stunning and uniquely American phenomenon.” 

Medical debt can impact anyone — and it never goes away  

The medical debt crisis is driven by “the twin problems of inflated hospital prices and harsh debt collection practices,” writes Erin C. Fuse Brown in The Appeal. As a result, in the last decade, medical debt has risen to become the largest source of debt in collections. As of 2020, Americans owed more in medical debt than they did in all other sources of personal debt combined. 

Health emergencies like life-saving medical procedures and chronic diseases are unpredictable and costly. Even if you have health insurance, you can still incur medical debt. A recent New York Times article featured two grief-stricken parents who, after their baby died in the hospital, wound up with a $257,000 surprise medical bill—despite having “good” health insurance. “For them, it’s just business, but for us it means constantly going through the trauma of reliving our daughter’s death,” said the father. “It means facing threats of financial ruin.” 

Even when someone dies, medical debt doesn’t go away. This leaves many heirs or spouses saddled with the unpaid medical debt of their loved ones. Medical debt balloons, damaging credit and racking up interest, creating economic instability for patients. And this pattern of debt can snowball to subsequent generations.  

Medical debt breeds distrust in the medical system 

The debt collection industry functions with debt collection agencies buying and selling unpaid medical debts, hounding ill and often traumatized patients and their families for payment, exacerbating stress and hardship. When payers and hospital systems participate in punitive wage or asset garnishment through the court system, in order to recoup unpaid medical bills, the patient-provider relationship is strained and sometimes irreversibly damaged.  

For patients, medical debt often comes at the worst possible time—during times of illness or after intensive medical procedures. Medical debt causes additional stress and often results in a delay in future medical care. When families are trapped with this debt, they not only delay treatment, but they avoid medical visits, fail to meet their care plans, or fill necessary prescriptions, and can end up even sicker than before. Sixty-four percent of Americans surveyed in a 2020 poll said they worry about being unable to afford medical bills, and a majority have either forgone or delayed necessary health care because they were afraid of the cost. 

2019 survey of patients with employer-sponsored health insurance found that: 

  • One in five patients (19%) reported that someone in their household had been contacted by a collection agency in the past year due to medical bills 
  • Nine percent reported having declared personal bankruptcy due to medical bills  
  • 51 percent reported someone in their household having skipped or delayed medical care or prescription drugs in the past year, due to costs 

Vulnerable populations are more prone to medical debt 

People from historically marginalized communities are more likely to be sued by debt collectors, according to a Pro Publica analysis, which found that the rate of debt-related court judgments was twice as high in predominantly Black neighborhoods than in white neighborhoods. “Generations of discrimination have left Black families with grossly fewer resources to draw on when they come under financial pressure,” Paul Kiel and Annie Waldman report—so the cycle of debt continues. 

Patients with chronic health conditions face particularly heavy financial burdens, with higher odds of having out-of-pocket costs and medical debt, a result of the rise in treatment costs and increased patient cost-sharing. And overwhelmingly, low-income families are disproportionately impacted by medical debt. The July 2021 study found that Americans living in lower-income zip codes face higher rates of medical debt. Low-income families are also more prone to experiencing chronic health conditions. 

A broad range of solutions to address medical debt 

A broad range of solutions is needed to address medical debt, from the federal level all the way down to the provider level. Upping Affordable Care Act subsidies, for example, would increase healthcare access and reduce medical debt by allowing members to purchase more affordable insurance.  

A key solution is to expand Medicaid across all states. The bulk of the outstanding medical debt is clustered in low-income communities in the South, which correlates with states that did not expand Medicaid in 2014. In contrast, states that did expand Medicaid in 2014 “saw a 45 percent decline in the mean flow of medical debt collections.”  

The current debt-collection system is unnecessarily punitive and damaging, especially for vulnerable patients. Payers and providers should consider implementing alternative systems, including:  

  • Standardizing eligibility for payment plans, sliding scale provisions, and reduced bill payment options 
  • Ensuring that system-wide billing and debt collection practices are equitable, reasonable, and fair 
  • Working with community-based organizations (CBOs) to offer patients support with health insurance applications, budgeting, financial assistance, and other services 
  • Partner with medical debt forgiveness programs, such as the nonprofit RIP Medical Debt, instead of selling unpaid debts to debt collection agencies  

Medical debt is a financial burden and a contributing social determinant of health, which payers and providers would be wise to address in order to build trust with patients. 

At Healthify, powered by WellSky, we’re on a mission to ensure that no one’s health is hindered by their need. We provide end-to-end solutions to address social determinants of health by building relationships with healthcare organizations and community-based organizations. Learn more about our solutions and how we can support your SDoH initiatives.  

Topics: social determinants of health health disparities SDoH data sdoh health equity

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