Medical debt fell during pandemic, but that trend could reverse, report says

Despite little change before the pandemic, the number of adults with medical debt, issues paying medical bills and medical debt in collections have declined since the pandemic began. New policies will be needed to sustain the decrease, according to a May 11 report from the Urban Institute. 

Data from 2018 to 2021 was sourced from the Urban Institute's Health Reform Monitoring Survey, a nationally representative survey of adults ages 18-64, and the Urban Institute credit bureau data, a nationally representative panel of unidentified consumer records from a major credit bureau.

The report examined trends for multiple outcomes that reflect different ways in which people struggle to pay medical bills:

  1. Medical debt: The share of nonelderly adults in the HRMS reporting they or their families currently have medical bills that they are paying off over time  
  2. Problems paying family medical bills: The share of nonelderly adults in the HRMS reporting they or their families had problems paying or could not pay medical bills in the past 12 months  
  3. Medical debt in collections: The share of adults ages 18 and older who have one or more medical debt collections tradelines on their credit reports

Six key takeaways:

  1. In April 2021, 16.8 percent of nonelderly adults reported medical debt, down from 23.6 percent in March 2019. Adults reporting problems paying family medical bills in the past 12 months fell from 17 percent to 12.2 percent over the same period.

  2. The share of adults with credit records who have medical debt in collections fell from 15.3 percent in February 2020 to 13.9 percent in August 2021.

  3. In August 2021, adults ages 25-34 had the highest rate of medical debt in collections at 18 percent. Adults ages 65 and older were the least likely to have medical debt in collections (7.8 percent), followed by adults ages 18-24 (11.2 percent).

  4. Adults in all age ranges experienced reductions in both self-reported medical debt and medical debt in collections since the pandemic began. The reduction in self-reported medical debt was greatest among adults ages 18-34.

  5. Black adults reported the highest rate of medical debt in April 2021, at 22.5 percent. This compares with 19.9 percent of Hispanic adults and 15.5 percent of white adults. Black and Hispanic adults were more likely than white adults to have problems paying medical bills (17.1 percent and 15.9 percent versus 10.1 percent).

  6. The share of adults with medical debt in collections in August 2021 was highest in majority-Black communities (22.7 percent), followed by majority-American Indian/Alaska Native communities (17.7 percent) and majority-Hispanic communities (16 percent). Majority-white communities had the lowest share of adults with medical debt in collections (12.6 percent).

The decreasing trend may be because there was reduced healthcare use overall during the pandemic, federal financial relief measures, and growth in Medicaid and ACA marketplace enrollments offset losses of employer-sponsored coverage, according to the report.

Without further policy action, however, medical debt may increase again as healthcare use rebounds and the remaining federal relief measures expire.

Eight policies to sustain the decline:

  1. Close the Medicaid coverage gap in states that have not adopted the ACA Medicaid expansion.

  2. Extend the enhanced marketplace subsidies under the American Rescue Plan Act.

  3. Reducing cost-sharing requirements in marketplace plans.

  4. Make subsidized marketplace plans available to people with access to employer-based coverage.

  5. Ensure compliance with the ban on balance billing under the No Surprises Act.

  6. Strengthen the regulation of hospital financial assistance policies and debt collection practices.

  7. Expand access to public benefits and tax credits.

  8. Establish policies and programs that help families build savings.

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