Study: Medical debt outstrips other types of personal debt, reaching $140B

debt, costs, money,

debt, costs, money,

Americans owed around $140 billion in unpaid medical expenses last year, making it the largest source of debt in collections, a new study shows.

In 2009, mean medical debt was $119 less than nonmedical debt; whereas by 2020 medical debt exceeded nonmedical debt by $39. Though total debt decreased overall during the decade, medical debt became a bigger part of it, said Neale Mahoney, a professor of economics at Stanford University and study author, in a phone interview.

Last June, an estimated 17.8% of individuals had medical debt, and the mean amount was $429. When extrapolated to the entire U.S. population, researchers found medical debt could be as high as $140 billion, which is far more than previous estimates that placed medical debt at around $81 billion in 2016, reported The New York Times.

“Our goal was to count every dollar and cent on credit reports [related to medical debt], so our top-line number of $140 billion was substantially larger than previous estimates,” Mahoney said.

Published in the Journal of the American Medical Association, the study includes data on medical debt in collections that was obtained from a nationally representative sample of consumer credit reports between January 2009 and June 2020. Thus, the study reflects debt amassed prior to the Covid-19 pandemic.

Average medical debt was highest in the South ($616) and lowest in the Northeast ($167), the study shows.

The reason for this could come down to differing policies.

States that expanded Medicaid in 2014 saw the mean amount of medical debt drop by 44% as opposed to those that did not — many of which are in the South — where mean medical debt was reduced by only 10%.

“What you see is this divergence between those [non-expansion] states in the South and states elsewhere,” Mahoney said. “In the South, the poor communities that had the highest levels of medical debt [are seeing those levels increase further], while they are falling in other places. So, it’s really a story of diverging paths.”

The study findings are important for both payers and providers, he added. As patients become increasingly responsible for medical expenses, the fact that so many are unable to make payments means that they must try to slow the rise of healthcare costs and reduce the burden on patients.

In fact, medical debt can be classified as a social determinant of health, an editorial that accompanied the study argues.

Medical debt and associated financial hardship are likely to be linked with adverse health effects. For example, medical debt may prevent patients from seeking or receiving needed care, the authors wrote. Not only that, but personal debt, of which medical debt is a large part, has been associated with poor mental health.

“Medical debt and the burden it poses on families and communities serve as yet another reminder of how social determinants of health…reinforce and perpetuate inequities in health and inequities in economic promise and prosperity,” they concluded.

Photo: artisteer, GettyImages