Unpaid medical bills now total $140B in U.S.
Americans owe nearly twice as much medical debt as was previously known, and the amount owed has become increasingly concentrated in states that do not participate in the Affordable Care Act’s Medicaid expansion program.
New research published in JAMA finds that collection agencies held $140 billion in unpaid medical bills last year. An earlier study, examining debts in 2016, estimated that Americans held $81 billion in medical debt.
This new paper took a more complete look at which patients have outstanding medical debts, including individuals who do not have credit cards or bank accounts. Using 10 percent of all credit reports from the credit rating agency TransUnion, the paper finds that about 18 percent of Americans hold medical debt that is in collections.
The researchers found that, between 2009 and 2020, unpaid medical bills became the largest source of debt that Americans owe collection agencies. Overall debt, both from medical bills and other sources, declined during that period as the economy recovered from the Great Recession.
“If you think about Americans getting phone calls, letters and knocks on the door from debt collectors, more often than not it’s because of the U.S. health care system,” said Neale Mahoney, a health economist at Stanford University and the paper’s lead author.
The $140 billion in debt does not count all medical bills owed to health care providers, because it measures only debts that have been sold to collection agencies. The increasing number of lawsuits that hospitals file against patients to collect debt, which can lead to legal fees or wage garnishments, are not included in the figure. Nor are the medical bills that patients pay with credit cards or have on long-term payment plans. Some of the difference between the new estimate and the older, smaller one may reflect differences in how different credit rating agencies categorize debts.
The new paper does not include data during the coronavirus pandemic, which is not yet available.
The ameliorating effects of Medicaid expansion were not a big surprise to the paper’s authors. Previous research demonstrated how Medicaid coverage can reduce medical debts. In states that have expanded, most low-income adults can get coverage without paying premiums, and with minimal cost sharing. Mechanically, Medicaid tends to eliminate the kinds of medical bills that result in outstanding debts.
But Mahoney said he was shocked to see the widening inequality in medical debt that disparate state decisions appear to have caused. The states that have declined to expand Medicaid — particularly in the South — started out having more medical debt before Obamacare passed, and since other states have expanded Medicaid, the chasm has grown wider.