TL/DR –
Medical debt is the leading cause of bankruptcy in the United States and affects over two in five American adults. To tackle this problem, several states and cities are using public money to purchase and forgive medical debt, with Connecticut, New Jersey, and Pennsylvania all investing millions of dollars for this purpose. However, experts argue that this is a temporary solution and call for broader systemic solutions, including price transparency in healthcare, banning aggressive debt collection tactics, and universal healthcare insurance.
Medical Debt Crisis and Government Efforts to Alleviate Debt
Medical debt is the leading cause of bankruptcy in the United States, where over 40% of adults are burdened by medical bills. Medical debts can hinder individuals from purchasing homes, saving for retirement, or even affording basic necessities. To combat this problem, several states, including Connecticut and New Jersey, are allocating public funds to buy and forgive millions of dollars in medical debt.
Policy Measures to Address Medical Debt Crisis
Pennsylvania’s Democratic Governor, Josh Shapiro, recently proposed a budget that includes $4 million for the relief of medical debt for low-income residents. Shapiro highlighted that the investment can have a significant impact, as hospitals often sell debt for pennies on the dollar. He explained this debt is an economic burden for these households and communities. Gabriela Elizondo-Craig, a project lead at Innovation for Justice, echoed this sentiment, noting these programs can be “truly life-changing”.
Statistics on Medical Debt in America
According to a KFF analysis, Americans owe at least $195 billion in unpaid healthcare bills, with the most affected being Black residents, people with low income, chronic conditions, or those living in Southern states. A recent YouGov poll found that two-thirds of Americans support government relief for medical debt, surpassing the support for relief of other types of debt such as student loans.
Examples of Government Efforts to Ease Medical Debt
New Orleans has recently earmarked $1.3 million from the American Rescue Plan Act to establish a medical debt forgiveness program. New York City has also entered a similar partnership aiming to spend $18 million to erase $2 billion worth of city residents’ medical debt. In addition, Connecticut, New Jersey, and Pennsylvania are exploring partnering with non-profits like RIP Medical Debt, a national non-profit that purchases and forgives medical debts.
Concerns About Medical Debt Relief
Despite the support for such initiatives, some, like Connecticut House Republican leader Rep. Vincent Candelora, express concerns that medical debt relief might overshadow other budget issues. Others emphasize that this is not a permanent solution to the issue of medical debt and encourage broader, longer-term solutions.
Exploring Broader Solutions to Medical Debt
Consumer protections for medical debt at the state level are inconsistent. State-level lawmakers are seeking to increase transparency in pricing, curb aggressive debt collection tactics, and expand eligibility for financial assistance. However, Elizondo-Craig points out that the root cause of the problem is that a part of the population is uninsured or underinsured. Expanding Medicaid under the Affordable Care Act, she suggests, could significantly reduce medical debt.
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