Testimony of Emily Stewart on the Economic Impact of the Growing Burden of Medical Debt

  ·  Health Policy Hub   ·   Emily Stewart

Photo credit: Community Catalyst

When a person’s medical bills exceed what they can pay, they are saddled with medical debt.

Who has medical debt? To start, the uninsured. More than one-third of people with no insurance have medical debt. Many of them are living in states that have not expanded Medicaid. People in these states also have a greater number of accounts being sent to collection when compared to residents of Medicaid expansion states. Additionally, 22 percent of insured people have outstanding medical bills.

This means just about anyone is at risk of incurring medical debt, especially as insurance deductibles, copayments and coinsurance increase year after year.

Medical debt problems result from inadequate insurance, complicated insurance claim procedures and opaque billing and collection systems.

How do people hold debt? We know that medical debt comes in various forms: money owed directly to hospitals and providers; bills owed providers that that are being pursued by third-party collection agencies; payments for care that has been charged to credit cards; loans from companies that specialize in financing medical debt; and medical accounts that have been purchased by debt buyers. Unfortunately, we do not know precisely the amount of debt in these different categories.

Who owns medical debt? Who holds the debt can make a huge difference in whether a person’s medical bill problem is alleviated or aggravated. Many hospitals and providers offer extended payment plans, with no interest, directly to their patients. Non-profit hospitals are obligated to provide charity care or financial assistance, but many people are unaware of these programs. The Washington State Office of the Attorney General recently filed lawsuits against two Washington hospitals alleging that employees were trained using scripts that gave patients the impression that they were expected to pay for their care, failing to notify them that they were eligible for financial assistance.

A non-citizen patient with work authorization, became ill with COVID-19 complications, was rushed to the emergency room and billed $11,798. The hospital denied the patient any financial assistance even though state law should have permitted the patient a full discount, and federal assistance programs were in place for COVID-19-related services. The patient paid over $1,000 out-of-pocket over a few months out of fear that the bill would impact his immigration status and ability to buy a home.

A pregnant patient was told the cost to deliver a baby was $10,000, but she was never informed of financial assistance or Medicaid options. Instead, she planned to sell her personal belongings until a family member got involved and helped her apply for Medicaid. She later received a bill for an ultrasound. A nurse told her it should be covered, but the unpaid bill showed up on a credit check three years later, which severely damaged her ability to buy a house.

Is the debt even owed? Medical debt can ruin an individual’s credit rating. Research from the Consumer Financial Protection Bureau (CFPB) found that 58 percent of collection accounts on credit reports are medical bills. These accounts are reported by third-party collection agencies; they often lack accurate or updated information from the original health care provider. While the CFPB estimates that $88 billion in medical collections sit on consumer credit reports, other estimates range from $81 billion to $140 billion.

One complainant stated “that agency had me served with court papers… for medical bills. They had already been paid in full by my insurance company.” Another said the collector “garnished my husband’s check for almost $300 for bills we did NOT owe!”

What are debt collection practices? Third party collection agencies, acting on behalf of hospitals and other providers, often pursue lawsuits. Legal actions include garnishing wages, putting liens on patients’ homes and bank accounts, and even issuing civil arrest warrants for people who do not comply with repayment terms.

In the early days of the pandemic, they garnished the wages of one patient making roughly $850 a month for a $9,000 bill resulting from an emergency visit due to food poisoning that had occurred two years before.

Early on in the pandemic in 2020, one family was surprised that their debit card was declined while purchasing groceries. They later learned that their bank account was locked due to medical debt owed to a hospital.

One Kansas family incurred $70,000 in bills from their son’s leukemia treatment and the mother’s seizures related to Lyme disease. After the father missed a court appearance about these bills, and was unable pay bail set at $500, he was sent to jail.

An Idaho woman, who was unaware that she owed $950 from care received years before, only learned of it when deputies arrived at her door. “They handcuffed me and took me down to the jail to put me in booking.”