Rising Medical Debt Pervasive Across Society’s Most Vulnerable

Medical debt remains most prevalent in the South.

$140 billion: that’s the amount of debt associated with past-due medical bills reported for 2020. While the reality of medical debt is nothing new to the industry, its distribution further emphasizes society’s racial, ethnic, and cultural disparities. Specifically:

• 28 percent of Black households  17 percent% of white households have medical debt;
• 52 percent of the LGBTQIA community have trouble paying medical bills;
• 67 percent of this group use their entire savings for healthcare expenses;
• 25 percent of individuals with medical debt in collection are people of color; and
• 33 percent of persons have delayed care are due to cost.

Medical debt remains most prevalent in the South, particularly across the 12 states that have not adopted Medicaid expansion: Alabama, Florida, Georgia, Kansas, Mississippi, North Carolina, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming. One can’t help but note that new medical debt dropped by roughly 44 percent in the other 39 expansion states.

Yet the way organizations manage past-due medical and balancing billing varies. Implicit bias plagues how readily payment options or programs are provided to patients, whether payment plans or the opportunity for charity application. Polls reveal interesting disparities in hospitals that provided free or low-cost care for the lowest-income patients; less than 50 percent of Black respondents verbalized awareness of these programs, versus 79 percent of white respondents. This yields harsh implications for patients, especially when a balance is put in the hands of collection agents. A series of actions can occur:

• Surprise payment deductions to garnishing of wages;
• Charging high interest of 10 percent on balances, impeding payment; and
• Some states put liens on patients’ homes or sue patients, a popular course of action in communities of color.
  • In Maryland, state hospitals were three times more likely to sue patients in low-income areas.

Despite federal and state laws passed to protect consumers from surprise medical bills and balance billing, collections agents continue going after these sums. California, Colorado, Maryland, and New Mexico have implemented strict laws to protect patients and their families. Maryland’s recent legislation will keep hospitals from placing liens on patients’ homes or garnishing wages for persons who qualify for charity care. Colorado legislation standardizes how healthcare providers screen patients for financial assistance and adds restrictions on collection practices. In New Mexico, persons at under 200 percent of the poverty level are protected from collection agencies, and California will raise the income ceiling for charity care eligibility.

Roughly 57 percent of hospitals are non-profits, meaning if patients make under a certain amount of money, the facility should legally forgive their medical bills. This amount is usually attributed to bad debt, though, as this percentage has risen dramatically. Most hospitals claim a bad-debt percentage of 1-5 percent, though over 21 percent report between 5-10 percent, $10 million or more. Clearly, healthcare is a business, and bills should be paid, though revenue capture is a delicate balancing act; it should heed the laws protecting the neediest populations.

Our Monitor Mondays Listeners’ Survey asked our listeners to estimate their organization’s annual bad debt percentage; the surprising results are viewable here.

Programming Note: Listen to Ellen Fink-Samnick’s live reporting on the social determinants of health Mondays on Monitor Mondays, 10 Eastern.