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Healthcare

Addressing Medical Debt in the United States

Introduction

Medical debt remains one of the most pervasive financial challenges facing Americans today. According to a 2022 analysis by KFF, an estimated 23 million adults in the United States (about 9% of the adult population) currently owe medical debt. Approximately 11 million individuals have bills exceeding $2,000, and more than 3 million report owing $10,000 or more in unpaid medical expenses (KFF, 2022). Among low-income adults—those living below 200% of the federal poverty level—the share with substantial medical debt can surpass 20%. This burden forces many to choose between covering basic needs such as housing and food or paying for medical bills, thereby contributing to financial insecurity and reduced access to necessary care.

Medical debt is widespread and has cascading effects on personal finances and overall health outcomes. High-deductible insurance plans require significant out-of-pocket spending before coverage applies, a feature that disproportionately harms low-income or chronically ill individuals who cannot easily absorb such costs (Families USA, 2020). As a result, many forgo or delay needed health services, which can worsen existing conditions. In addition, large segments of the population remain underinsured or altogether uninsured—both groups being particularly susceptible to catastrophic out-of-pocket expenses (Collins, Gunja, & Aboulafia, 2020). While crowdfunding campaigns and direct fundraising efforts have helped certain households, these stopgap measures do little to address the systemic drivers of rising healthcare prices and insurance gaps (McClanahan, 2019).

The Burden of Medical Debt in the United States

Unpaid medical bills are among the leading causes of personal debt and have been linked to a substantial proportion of consumer bankruptcies. KFF’s 2022 report found that individuals carrying medical debt often cut back on other essentials, with over half reporting reduced spending on items such as food, clothing, or utilities in order to make payments on outstanding medical bills (KFF, 2022). Additionally, a significant share of people with medical debt report delaying or foregoing further medical treatment due to worries about accumulating more debt, thereby exacerbating health disparities and long-term costs.

These burdens fall disproportionately on vulnerable populations. For instance, those earning below 200% of the federal poverty level are more than twice as likely to hold medical debt compared to individuals with higher incomes (KFF, 2022). Racial and ethnic disparities also persist, with certain minority communities reporting higher rates of medical debt and a lower likelihood of receiving adequate financial assistance from hospitals. Furthermore, confusion about complex billing practices often hinders patients from identifying errors, negotiating charges, or even applying for existing charity care programs (American Hospital Association [AHA], 2019). The cumulative effect is a cycle wherein individuals and families face mounting bills, damaged credit, and reduced access to needed medical services.

 

Personal Impact of Medical Bankruptcy 

Jeni Peters, a single mother and mental health counselor in South Dakota, manages a tight budget while raising two daughters and additional foster children. Two years ago, she was diagnosed with stage 2 breast cancer, which required multiple surgeries, radiation, and chemotherapy. Despite having insurance, she accumulated more than $30,000 in medical debt. In the midst of her treatment—including one collection call received just after her double mastectomy—Peters worked extra hours to maintain her insurance coverage and pay down bills. While a few friends contributed money to help reduce her debt, the mounting costs pushed her credit score below 600. She now balances the emotional and financial strain of her medical expenses with her ongoing responsibility to provide for her children.

According to one study, people diagnosed with cancer are 71% more likely than those without the disease to have bills sent to collections or to have a credit account closed due to nonpayment. As a result, many cancer patients and their families must make difficult trade-offs. A recent KFF survey found that two-thirds of U.S. adults who have taken on health care debt—and either have cancer themselves or a family member with the disease—have reduced spending on essentials like food, clothing, or other household items. Meanwhile, one in four reported declaring bankruptcy or losing their home. Researchers also note that the added financial pressure may undermine patients’ recovery and, in some cases, even shorten their lives.

Current Policy Interventions

Hospitals and nonprofit organizations employ numerous strategies to alleviate the severity of medical debt. The Affordable Care Act (ACA) imposes requirements on nonprofit hospitals to maintain transparent charity care policies, limiting the extent to which they can deploy aggressive collection tactics when patients might qualify for free or reduced-cost care (Internal Revenue Service [IRS], 2021). Many hospitals now integrate financial counselors or patient navigators into emergency departments and outpatient clinics to streamline enrollment in Medicaid, marketplace plans, or the hospitals’ own charity programs (AHA, 2019).

Beyond hospital-based efforts, specialized nonprofits such as RIP Medical Debt purchase bundles of unpaid medical bills at a fraction of their value and forgive them outright, thus eliminating the obligation for patients. In 2023, RIP Medical Debt reported having abolished more than $8 billion in medical debt for over 5.4 million individuals nationwide (RIP Medical Debt, n.d.). These efforts focused on low-income families—frequently those below 200% of the federal poverty level—who stand to benefit most from debt relief (Galvin, 2019). In 2024, MacKenzie Scott’s donation enabled the organization to expand its relief efforts to $15 billion, nearly doubling its impact from the previous year. This notable increase underscores the urgent and growing need for medical debt relief in the United States (The Associated Press, 2024).

Community collaborations also address the underlying causes of medical debt by targeting social determinants of health and expanding preventive care. Hospitals conducting Community Health Needs Assessments (CHNAs) increasingly partner with local service agencies to improve access to nutrition, housing, and other supports that can indirectly reduce health costs (Rosenbaum, 2016; Nonprofit Finance Fund & American Hospital Association, 2017). Meanwhile, legal advocacy groups such as the National Consumer Law Center (NCLC) advocate for consumer protections that include caps on interest rates, fairer billing requirements, and stricter enforcement against predatory collection practices (NCLC, n.d.). Investigative journalism by outlets like NPR and Kaiser Health News has exposed instances where hospitals fail to inform patients about available charity care or mislead them about billing, thus spurring calls for stronger regulatory oversight (NPR & Kaiser Health News, 2021).

Employers and labor unions have also taken steps to reduce medical debt by capping out-of-pocket costs in negotiated health plans and establishing emergency assistance funds. For example, union health trusts sometimes offer reduced co-pays or fully covered in-network hospital services, mitigating the risk of catastrophic debt accumulation among members (AFL-CIO, n.d.; Families USA, 2020). Although these measures vary widely across states and union contracts, they contribute to broader efforts to protect workers from the adverse financial impacts of unexpected medical bills.

+Recommendations

Expand and Standardize Charity Care Eligibility

  • Broaden the income thresholds (e.g., up to 300% or 400% of the federal poverty level) under which nonprofit hospitals must provide free or discounted care.
  • Require simplified, transparent application processes, accompanied by standardized outreach protocols that inform patients about their options.

Strengthen Consumer Protections in Billing and Collections

  • Enact federal or state legislation to cap interest rates on medical debt, prohibit wage garnishment for low-income individuals, and ensure that patients are aware of their legal rights.
  • Mandate clear, itemized billing disclosures that facilitate patient understanding of charges, thereby reducing confusion and disputes.

Foster Debt Relief Partnerships

  • Encourage collaborations between hospitals, local governments, and nonprofits (e.g., RIP Medical Debt) to systematically purchase and retire debt portfolios for qualifying low-income patients.
  • Provide public grants or tax incentives to support these initiatives, facilitating the large-scale elimination of debt for vulnerable households.

Promote Insurance Coverage and Enrollment Assistance

  • Allocate increased funding for navigators and consumer assistants to help individuals enroll in Medicaid or marketplace plans.
  • Streamline eligibility verification to minimize bureaucratic barriers, especially in regions with high rates of uninsured and underinsured populations.

Enhance Community Health Needs Assessments (CHNAs)

  • Require nonprofit hospitals to incorporate measurable goals for reducing medical debt within their CHNAs, including action plans that address preventive care, chronic disease management, and social determinants of health.
  • Develop accountability metrics to gauge progress, such as publicly reported charity care utilization and patient satisfaction with billing practices.

Effective implementation of these recommendations can help reduce immediate financial pressures while addressing medical debt's structural drivers. By expanding financial assistance, reinforcing consumer protections, and encouraging systematic partnerships for debt relief, policymakers can move toward a more equitable healthcare landscape where fewer Americans are forced to choose between basic necessities and paying for necessary medical care.






References



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