HEALTH EQUITY RESEARCH SPOTLIGHT: Medical Debt Makes People Live Sicker, Die Sooner

Owing someone money doesn’t just make a person’s life harder – it might also make it shorter, and it certainly makes it sicker.

That’s the takeaway from a recently published study on health outcomes for people with and without substantial medical debts: The same trip to the hospital that you needed to get well one day could help make you sick over the long haul, if it leaves you with a huge bill to repay.

Debt destabilizes family finances, leaving debtors more vulnerable to housing instability, hunger and other threats to their health and well-being. These burdens aren’t shared equally: The bulk of the country’s total aggregated medical debts is carried by a small number of Black and Brown families. This reality has significant implications for health and racial equity in the United States.

One in five American households carry medical debt and Black and Brown households carry a greater amount relative to income. Low- to moderate-income (LMI) families carry similar medical debt burdens, while higher-income and higher-educated families and individuals – the segment of society most likely to receive comprehensive health insurance through an employer – carry much less medical debt. While average debt was ‘only’ $21,687, half of study participants carried less than $2,000 in debt, and a small percentage of debtors carried the majority of the total debt. NPR’s “Bill of the Month” series highlights how some individuals are saddled with huge debt; for example, a woman in South Carolina received an $18,000 bill for a breast biopsy despite having health insurance. Many of these highly-indebted but insured individuals are victims of predatory insurance plans including short-term medical insurance plans (STM), which have a history of surprising subscribers with high medical bills due to fees, lack of coverage due to pre-existing conditions and unclear out-of-pocket spending caps. New policies from the Biden administration are attempting to curb abuses in this space.

The report’s survey methodology illuminates a problem of astonishing scale. Total aggregated medical debts owed by Americans are estimated to be nearly $200 billion, of which survey respondents in the new paper held a combined $882 million or so.

That’s the shape of the problem. The researchers next asked: What are the consequences? 

The study found that medical debt is associated with an up to three times higher risk of worsening social determinants of health (SDoHs) such as housing instability, inability to pay for utilities and food insecurity. The most likely outcome was housing instability, as heavy indebtedness ups the likelihood of eviction or foreclosure. The effects of eviction not only put individuals’ housing stability at risk but spill over into other areas of life and contribute to declined health, interrupted education, and unstable finances. 

This is a tangible and provable link, not a mere hypothesis. In Maryland, for instance, more than 4,400 homes were hit with liens and nearly 3,300 people declared bankruptcy specifically due to medical debt collections, according to a nine-year analysis by NCRC member organization Economic Action MD

The impact of debt on families of color multiplies other systemic barriers they face to health and wealth. Other studies demonstrate that Black adults disproportionately experience negative SDoHs. The more negative SDoHs a person experiences, the more at-risk they are for negative health outcomes. Black and Brown communities already suffer from various health inequities and medical debt has the potential to worsen their long-term health and shorten lifespans. 

Public health, health equity and racial equity practitioners should therefore advocate for programs alleviating, addressing or preempting the accumulation of medical debt. 

One such solution would be the equitable use of financial assistance in hospitals, with a focus on communities facing inequities. Financial assistance, often called charity care, is discounted medical care hospitals offer to people unable to afford healthcare at market price. While all hospitals are required to have written policies to guide charitable care eligibility, none are required to actually follow their own policies – leading to vast inequities to how those funds are deployed, if they’re used at all. 

The 2023 Fair Share Report from the Lown Institute showed that 77% of nonprofit hospitals spent less on charity care than the value of their tax breaks, even though such tax breaks are predicated upon performing community service.  Nationwide, hospitals got $14.2 billion more in taxpayer subsidies than they spent on the charitable care that the subsidies are meant to support. That’s enough money “to erase the medical debts of 18 million Americans,” according to the report. Hospital systems which commit to increased charity care moving forward have incredible potential to remove the burden of medical debt and improve the well-being of individuals affected by health inequities.

Key changes in federal and state policies would also have a dramatic effect on people prone to medical debt. Government actors should expand policies and structures that reduce the burden of costs to medical consumers who can’t pay, such as debt forgiveness or repayment assistance. There must also be policies that limit the costs of medical procedures overall, such as the mandatory publication and expansion of computerized maintenance management system (CMMS) negotiated prices for all consumers. 

Currently, the most effective debt forgiveness programs come from non-governmental organizations like RIP Medical Debt, which purchases the discounted debt of those most in need and least able to pay, freeing them to pursue financial stability. While expanding safety net insurance coverage (like Medicaid) would help, having health insurance isn’t the totality of the solution. Investments in the other upstream causes of health disparities will be necessary to close the health equity gap. Health systems and governments at all levels should increase their investments addressing SDoHs like food insecurity, employment programs, and affordable workforce housing. 

Some health system actors are already embracing this broadened understanding of what it means to provide health care to a community. Forward-thinking hospitals are already working to combat negative SDoHs in their coverage areas, as representatives from Bon Secours and Boston Medical Center recounted on panels at the 2023 Just Economy Conference. Bon Secours in Baltimore runs programming in economic development, affordable housing and food access in the neighborhoods most affected by health inequity. Meanwhile, Boston Medical Center partners on workforce development initiatives, programs to counter community violence and subsidies for home utility bills for qualified patients. 

Understanding the reverberations medical debt can cause on long-term health, especially for Americans of color, should motivate those of us in the health and racial equity fields to expand and coordinate our work to address this common issue and to advocate for changes in policies and investment models. Otherwise, the problem of health inequity will continue to deepen and hurt those who are already most vulnerable.

Magdalena Mysliwiec was NCRC’s Health Equity Specialist.

Photo via Flickr.

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