While the share of people with medical debt in collections reported on credit reports has decreased over the past decade, the median balance of such debts has increased significantly. Research conducted by the Urban Institute found that in 2013, 19.5% of Americans had medical debt in collections, a number that dropped to 5% by 2023. However, despite this decrease, the median amount of medical debt owed has risen from $842 in 2013 to $1,493 in 2023. This implies that while fewer people are having their medical debts reported, those with outstanding balances are facing larger financial strains.

The Urban Institute’s research also highlighted distinct geographical variations in the prevalence of medical debt in collections. States in the South, such as West Virginia, South Carolina, Oklahoma, Louisiana, and Mississippi, experienced significant reductions in the share of residents with medical debt in collections between 2021 and 2023. Conversely, states like Colorado saw no medical debt in collections in 2023 after implementing a ban on including such debts in credit reports. This indicates that policy interventions at the state level can have a significant impact on mitigating medical debt burdens on consumers.

The Consumer Financial Protection Bureau’s proposal to ban medical bills from credit reports has the potential to alleviate up to $49 billion in medical debts. However, experts argue that erasing medical debts from credit reports is not enough to address the broader issue of financial vulnerability among individuals with medical debt. Recent research from the KFF highlights that adults with medical debt are more likely to face financial challenges, such as carrying credit card balances, lacking rainy-day funds, and struggling to make ends meet. This underscores the need for comprehensive policy reforms to tackle the root causes of medical debt.

Individuals burdened with medical debt not only face challenges in accessing credit and housing but also experience higher levels of financial stress. KFF’s analysis revealed that adults with medical debt are more likely to engage in risky financial behaviors, such as overdrawing checking accounts, using debt collection services, or resorting to predatory lending mechanisms. Furthermore, medical debt is a significant contributor to personal bankruptcy, particularly when combined with factors like income loss or disability. Policy measures like the American Rescue Plan Act have sought to address this issue by canceling billions of dollars in medical debt, providing relief to millions of affected Americans.

For individuals grappling with medical debt, there are practical steps that can be taken to alleviate financial burdens. According to experts, negotiating with healthcare providers for lower bills and exploring prescription cost-saving options are effective strategies to reduce medical expenses. Shopping around for affordable pharmacy prices and exploring mail-order prescription plans can help individuals lower their out-of-pocket costs. However, systemic reforms that address the underlying affordability of healthcare services are crucial to prevent individuals from falling into medical debt traps in the first place.

While there have been positive trends in reducing the reporting of medical debt on credit reports, the increasing median balances and financial vulnerabilities faced by affected individuals underscore the urgent need for comprehensive policy interventions to address the root causes of medical debt. By implementing reforms at the state and federal levels and promoting financial literacy among consumers, it is possible to mitigate the adverse impact of medical debt on individuals and families.

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