An Urban Institute study has shown a decrease in the number of individuals with medical debt in collections on their credit reports over the past decade. In 2013, 19.5% of Americans were burdened with medical debt, with that number dropping to 5% in 2023. Despite this decline, the median medical debt in collections has risen from $842 in 2013 to $1,493 in 2023. Efforts by major credit bureaus have contributed to this decrease by removing paid medical debts from credit reports and delaying reporting of unpaid debts.
The change in the percentage of individuals with medical debt in collections varies significantly across states. Southern states such as West Virginia, South Carolina, Oklahoma, Louisiana, and Mississippi have seen substantial reductions in the share of residents with medical debt. Colorado stands out as a state with no medical debt in collections in 2023 after implementing a ban on medical debt in credit reports. Other states with low levels of medical debt include Minnesota, Hawaii, Vermont, and Washington.
The Consumer Financial Protection Bureau has proposed banning medical bills from credit reports, estimating the removal of up to $49 billion in medical debts. Despite the benefits of erasing medical debts from credit reports for debtors, it does not resolve the underlying issue. Individuals with medical debt are more likely to face financial vulnerability in multiple aspects compared to those without medical debt. This includes carrying credit card balances, lacking rainy-day funds, and struggling financially.
Financial Challenges Faced by Individuals with Medical Debt
Research shows that adults with medical debt are more prone to overdraw their checking accounts, be contacted by debt collection agencies, and resort to payday loans or pawn shops. Medical debt can be a significant contributor to bankruptcy, especially when combined with an inability to work. Initiatives like canceling medical debt through federal legislation have aimed to alleviate the burden on individuals, with millions benefiting from debt forgiveness programs.
The forgiveness of medical debt is gaining political popularity, with a majority of adults expressing the importance of addressing this issue. Vice President Kamala Harris has called on states, cities, and hospitals to join the effort of forgiving medical debt. A study found that more individuals prioritize forgiving medical debt over student loan debt, highlighting the widespread concern regarding this financial burden.
For individuals struggling with medical debt, there are steps they can take to alleviate their financial burden. Negotiating with network providers and exploring options for reducing costs, such as finding the best prices for prescriptions, can help in managing medical expenses. Additionally, being proactive in seeking financial assistance and exploring available resources is crucial for those facing medical debt challenges.
By addressing the ongoing issue of medical debt in America, through policy changes, public support, and individual financial management, steps can be taken to reduce the burden on individuals and families. Initiatives that aim to alleviate medical debt and provide relief to those struggling financially are essential in creating a more equitable healthcare system that prioritizes the well-being of all individuals.