Despite efforts to reduce the presence of medical debt in collections on credit reports, many Americans continue to struggle with unpaid balances resulting from healthcare expenses. Research from the Urban Institute reveals that the percentage of individuals with medical debt in collections that appeared on their credit reports has diminished over the past decade. In 2013, the figure stood at 19.5%, but by 2023, it dropped to 5%. This decline can be primarily attributed to the actions taken by major credit bureaus in 2022 and 2023, where they eliminated paid medical debts from credit reports and delayed reporting unpaid debts. Although these changes have led to increased credit scores for debtors, the median medical debt in collections has risen significantly, reaching $1,493 in 2023 from $842 in 2013.
States in the South, such as West Virginia, South Carolina, Oklahoma, Louisiana, and Mississippi, witnessed the most substantial reductions in medical debt in collections between 2021 and 2023. West Virginia saw its share of residents with medical debt in collections plummet from 25.8% to 6.7%, showcasing notable progress. Conversely, Colorado achieved a remarkable milestone by having no medical debt in collections in 2023 after prohibiting credit bureaus from including such debts on credit reports. Additionally, states like Minnesota, Hawaii, Vermont, and Washington demonstrated the lowest levels of medical debt in collections in 2023.
Efforts to eradicate medical debt from credit reports, such as the Consumer Financial Protection Bureau’s proposal to ban medical bills from credit reports, are steps in the right direction. By potentially removing up to $49 billion in medical debts from credit reports, it aims to alleviate the financial burden on debtors. However, experts argue that eliminating medical debts from credit reports addresses the symptom, not the root cause. Research indicates that individuals with medical debt are more financially vulnerable than those without such debt. They are more likely to carry credit card balances, lack a rainy-day fund, struggle financially, and resort to debt collection agencies, pawn shops, or short-term loans.
The impact of medical debt extends beyond financial constraints, with individuals facing various challenges, including overdrawing checking accounts, encountering debt collection agencies, and resorting to alternative financial services. Medical debt can also lead to bankruptcy, particularly when coupled with an inability to work due to health-related constraints. Certain jurisdictions are taking steps to alleviate the burden of medical debt for millions of Americans through legislative measures like the American Rescue Plan Act. The political support for forgiving medical debt is evident, as highlighted in recent polls emphasizing the significance of this issue.
Seeking Financial Relief
For individuals grappling with medical debt, exploring avenues for financial relief is crucial. Negotiating with network providers to lower medical bill charges and comparing prescription costs among different pharmacies can offer some respite. Additionally, individuals should be proactive in seeking financial assistance and exploring affordable healthcare options to mitigate the burden of medical expenses. Medical debt remains a prevalent issue in society, necessitating collective efforts to address the systemic challenges associated with healthcare affordability.