Medical debt has decreased... for now
Rates of medical debt have moderated in recent years due to a combination of a healthy economy and expanded coverage from the ACA.
Medical debt in the U.S., after declining during the COVID-19 pandemic, is likely to rise again, according to a new report from the Urban Institute. And it will hit hardest among lower-income Americans, at a time when inflation is also rising.
Related: Nearly 1 in 10 Americans carry medical debt
Researchers found that rates of medical debt had moderated in recent years, partly because of a healthy economy, and partly due to expanded coverage from the Affordable Care Act (ACA). With the pandemic, medical debt actually dropped, as many people delayed health care treatment and federal relief bills offered more coverage, along with financial assistance for many households.
A drop in medical debt—more for some than others
The study found that after holding steady in the years before the pandemic, medical debt dropped as the pandemic began. “The shares of adults with medical debt, problems paying medical bills, and medical debt in collections have declined,” the report said. “Between March 2019 and April 2021, the share of nonelderly adults reporting medical debt declined from 23.6% to 16.8% and the share reporting problems paying family medical bills in the past 12 months fell from 17% to 12.2%. The share of adults with credit records who have medical debt in collections fell from 15.3% in February 2020 to 13.9% in August 2021.”
The study found that younger adults had the largest declines in medical debt during the pandemic, with 18–24-year-olds seeing a drop of about 10 percentage points in medical debt. For adults ages 25-to-34 years olds, medical debt declined by a similar margin.
The researchers wrote that differences in insurance coverage between older and younger Americans could play a role in the differing amount of medical debt. “The youngest adults had higher rates of medical debt in collections than the oldest adults (12.5% versus 9.0%), despite adults ages 65 and older having much higher medical expenditures,” the report said. “These age differences partially reflect variation in access to health insurance coverage, including universal coverage though Medicare for elderly adults, and suggest young adults may need more supports to buffer against medical debt.”
An expected rise in medical debt
The study’s authors noted that the federal government enacted a variety of measures to help Americans through the pandemic’s economic downturn, including direct payments via tax credits, a freeze on Medicaid dis-enrollment, and expanding ACA coverage. Most of these measures have not been renewed and will end with unless Congress acts to extend them or make them permanent.
“Without further policy action, the risk of medical debt may increase again as health care use rebounds and the remaining relief measures expire,” the report said.
The study recommended several steps to guard against a rise in medical debt in coming months, including extending enhanced subsidies for ACA plans, lowering cost-sharing requirements on those marketplaces, making ACA marketplace plans available to more Americans with access to employer-based coverage, and increased regulation of hospital financial assistance and debt collection practices.
Read more: